Melbourne Hospitality Scene: Room for Growth

Victoria, Australia, is currently experiencing record visitor highs and tourism expenditure due to both effective marketing campaigns and diverse tourism offerings. According to the National and International Visitor Surveys, total tourism expenditure increased by 8.6% in the year ending September 2018, along with an increase of 8.2% in the total number of visitors to Victoria. All in all, this makes Melbourne attractive to many hospitality investors.

For the year ending March 2019, Melbourne saw solid growth in international tourism spending of 7.9%, outperforming Australia’s state capital cities average by 1.8% and leading Sydney by 0.2%.

Moreover, based on data from hospitalitynet.org, Melbourne enjoyed an increase in demand for hospitality services of 2.3% and a rise in average daily rates (ADR) of 0.5%, mostly due the US v Australia basketball game in August. Regardless, Melbourne clearly has further room to grow given the current public transportation policies Victoria has been working on.

Recently, many major infrastructure projects have been approved, including construction of the Melbourne Airport Rail Link and high capacity metro trains. Both are expected to increase the accessibility of more parts of the city as well as providing greater comfort and convenience for visitors.

Hotelintel.co recently had the chance to sit down with some of Melbourne’s leading hoteliers to get their thoughts on the city’s hospitality market. When asked what factors have being contributing to the growth in Melbourne’s tourism, Jenna Smith, General Manager at AVANI Central Melbourne Residences explained that “Tourism Victoria has launched a campaign focusing on the winter months for Melbourne, moving events such as White Night, exhibitions like Terracotta Warriors, and the Winter Wonderlands around the city. All these events help drive people to the city for the colder months. For AVANI Central Melbourne, we see mostly international tourists, especially Chinese people.”

Does this mean there is still room for growth in Melbourne? Jenna notes that “expansion is starting to happen more in the outer suburbs now, and there is a huge increase in supply within the CBD.” She goes on to add that the recent increase in investment might make it difficult for new investors to enter the market. However, Girish Jhunjhnuwala of Ovolo Group is positive about new investments in the city. “In my opinion, if you’re bringing something new to the market, doing things differently and giving guests something new or something different – not just a replica of the thousands of other hotel rooms in the city – then there’s always space for you,” he said.

However, both Jenna and Girish would agree that foreign investors looking into Melbourne face many challenges ahead. “While Melbourne has so many vibrant, exciting pockets all over the city, it’s relatively spread out, and although there’s a great public transport system, guests often look just to stay in the CBD, so finding a good location can be an issue. For foreign investors I would say the challenge is knowing the market – Melbourne is certainly a cool city and it has a very distinct culture, so any brand that enters needs to understand this culture. Even a concept that worked in Sydney or in Brisbane may not work as well in Melbourne,” said Girish.

Lastly, we asked our hoteliers their secret to standing out in the industry. Jenna Pointed out that her own strengths lay in providing apartments which met travelers’ needs. “Being apartments, we are very much suited to family travelers, being able to cook meals within your accommodation rather than eating out every meal. We have a huge Chinese base, we are very close to the markets, and it is very common for Chinese to all sit together and share meals.” Michael Thomas of Pullman Albert Park added that his property “is the largest hotel event venue in the region. Because it is outside the CBD and has extensive car park facilities. large conference organizers prefer to book us.”

From both the latest numbers provided by the National and International Visitor Survey and the insights offered by our local experts on the ground, it is clear that Melbourne is an attractive market with strong potential or investors, despite the challenges presented by its unique culture and geography.