Australian Hotel Market Maintains Positive Outlook Despite Domestic Visitor Declines

The Australian hotel market is expected to maintain a positive long-term outlook through 2025 and beyond, despite recent declines in domestic visitor nights and ongoing supply challenges in certain cities, with international arrivals and RevPAR growth providing key support.

Overview of the Australian Hotel Market Outlook

The latest report from Horwath HTL provides an analysis of ten key city hotel markets in Australia, projecting performance through December 2025 and offering insights into future growth. The assessment draws on economic forecasts from Deloitte Access Economics, historical hotel data from STR, and tourism statistics from Tourism Research Australia (TRA), with adjustments made by Horwath HTL. The report considers both domestic and international tourism trends, as well as hotel performance indicators such as occupancy, average daily rate (ADR), and revenue per available room (RevPAR).

Domestic Visitor Trends and Forecasts

As of September 2025, domestic visitor nights in Australia reached 285 million, with projections indicating about 378 million for the full year ending December 2025. This represents a decline of approximately 4.2 million nights, or a 1.2% decrease, compared to revised 2024 figures. This follows previous declines of 1.3% in 2023 and 0.8% in 2024. The ongoing reduction in domestic visitor nights suggests a continuing trend of softer domestic travel demand, which may be influenced by broader economic factors or changing travel preferences.

International Arrivals and Market Recovery

International short-term visitor arrivals to Australia increased by 7.9% up to November 2025 compared to the same period in 2024. The growth was particularly strong in the second half of the year, with the September quarter up 12.6% year-on-year, and October and November recording increases of 9.3% and 19.5% respectively. Horwath HTL estimates that total international arrivals for 2025 will reach 8.98 million, about 95% of 2019 levels. While this marks a significant recovery, it remains below the TRA’s earlier forecast of 9.24 million arrivals for 2025.

Hotel Market Performance Across Key Cities

Most Australian hotel markets ended 2025 with strong performance, particularly in the second half of the year and during the December quarter. ADR growth was notable in the final quarter, though matching this level of growth in 2026 may be challenging. All 11 markets covered in the report are expected to see positive growth, but cities like Adelaide and Melbourne face supply challenges that are slowing their return to pre-pandemic occupancy levels. Sydney maintains its position as the leading market for hotel investment, while Perth continues to outperform forecasts, driven by increases in both occupancy and ADR.

RevPAR Growth and Market Variations

Despite weaker-than-expected tourism data, only the Sunshine Coast recorded negative RevPAR growth in 2025, largely due to the impact of Tropical Cyclone Alfred and ongoing renovation work. Perth, Hobart, and Brisbane saw strong RevPAR growth, with Hobart’s gains driven by improved occupancy and Brisbane’s by sustained ADR growth, despite some signs of weakening demand.

Looking ahead to 2030, RevPAR growth across the 11 markets is expected to range from 1.7% in Adelaide (due to supply pressures) to 4.7% in the Gold Coast (which is expected to recover strongly after Cyclone Alfred). The outlook for ADR growth is for moderation in most markets over the next five years, though the higher base established in 2025 means the absolute ADR outlook has improved.

Long-Term Outlook and Risks

The overall outlook for the Australian hotel sector remains positive in the long term, supported by ongoing recovery in international arrivals and resilient RevPAR growth. However, short-term risks persist, including economic uncertainties and imbalances between hotel supply and demand in certain markets. Leisure-driven markets may face seasonal constraints on occupancy growth, with ADR remaining a key driver of revenue.

In summary, while the sector faces some ongoing challenges, the fundamentals for long-term growth in Australia’s hotel markets remain intact.