Western Sydney Hotel Market Faces Supply Constraints as Demand Rises

Western Sydney’s hotel market is experiencing increased demand driven by population growth, new infrastructure, and major events, but the supply of hotel rooms remains limited, according to a new CBRE and Business Western Sydney report.

Overview of the Western Sydney Hotel Market

A recent report by CBRE and Business Western Sydney highlights that Western Sydney’s hotel sector is positioned for significant growth. This growth is attributed to an expanding population, new transport projects, and the development of major events infrastructure. Despite these positive drivers, the report finds that hotel room supply is not keeping pace with demand, even with several new projects underway in Parramatta and other areas.

The report, based on comprehensive modelling, indicates that demand for hotel accommodation is diversifying across corporate, aviation, and leisure segments. However, the current and proposed hotel developments remain insufficient to meet the region’s long-term requirements.

Infrastructure and Population Growth

Western Sydney is undergoing major changes with the imminent opening of the Western Sydney International Airport and the completion of the M12 Motorway. These projects are expected to transform travel patterns and improve accessibility to the region. Over the next 20 years, Western Sydney is projected to welcome an additional one million residents, further increasing the need for hotel accommodation.

CBRE’s Head of Hotels Research, Ally Gibson, stated that the region will require approximately 11,500 additional hotel rooms as it continues to develop. Gibson noted that infrastructure investments such as the airport, the Sydney Metro network expansion, and the M12 Motorway are supporting a structural shift in employment, accessibility, and visitation, which in turn is driving sustained growth in hotel demand.

Hotel Supply and Development Challenges

Despite the growing demand, new hotel supply in Western Sydney remains limited. Development feasibility challenges are cited as a key reason for the slow pace of new hotel construction. This has created favorable conditions for operators and investors who can enter the market early, according to the report.

David Borger, Executive Director of Business Western Sydney, emphasized that new infrastructure is bringing more people into the region for business, conferences, events, and leisure activities. He pointed out that hotels play a central role in supporting these activities, but stressed that supply must keep up with demand to fully capitalize on the region’s growth opportunities.

Hotel Performance and Market Trends

The report shows that Western Sydney’s hotel market is experiencing stable occupancy levels and sustained rate growth. In 2025, hotel occupancy was reported at 75%, with an Average Daily Rate (ADR) of $218, resulting in Revenue Per Available Room (RevPAR) of $163. RevPAR increased by 7% over the year, which is comparable to Australia’s major gateway markets and only slightly below the Sydney CBD.

Major events are identified as a significant driver of hotel performance in the region. Western Sydney is emerging as an event-led accommodation corridor, supported by venues such as Accor Stadium and CommBank Stadium, and by a growing pipeline of cultural, leisure, and transport infrastructure.

During major events, hotel occupancy in Western Sydney has exceeded 95%, and rate growth has outpaced the Sydney average, resulting in record RevPAR during peak periods.

Outlook for the Western Sydney Hotel Sector

Looking ahead, improved connectivity is expected to reinforce Western Sydney’s position as a high-yield accommodation hub. The ability for visitors to stay locally for events, combined with reduced travel times to the wider Sydney market, is likely to strengthen the region’s appeal as both a tourism and major events destination.

The report concludes that while Western Sydney is well-placed for growth, addressing the current supply constraints will be critical to meeting future demand and supporting the region’s development as an integrated metropolitan economy.