Tourism and Hotel Market Outlook

Half yearly update 2013

July 2013

Contents

Key developments The macroeconomic context The outlook for Australias tourism sector Hotel market outlook

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Key developments

Mixed economic signals for the tourism sector Concerns over the ability of the Australian economy to maintain growth as the mining construction boom peaks have combined with weaker economic news from overseas to generate a degree of economic uncertainty for tourism operators. However, the easing of the Australian dollar has been a welcome development.  The latest Mastercard-TTF sentiment survey indicates that international industry sentiment remains relatively stable. Notably, however, 50% of those surveyed saw the Australian dollar as having a high impact on their business, highlighting the potential upside of the local currency easing. Growth in international visitor arrivals continues to impress International visitor arrivals grew 4.9% over the year to March while international visitor nights grew 7.2%, signicantly outpacing average growth of the last decade. W  hile this growth has been largely led by the emerging Asian economies, particularly China which accounted for more than a third of total growth in visitor arrivals, there has also been a sustained pick up in visitor arrivals from the US. Increasing length of stay by Japanese visitors was also a keycontributor to visitor night growth. The outlook for international visitors remains robust D  espite a marginally weaker economic outlook, Deloitte Access Economics continues to project solid growth in international visitor arrivals and nights over the next three years, with arrivals forecast to grow by 4.5% p.a. and nights by 4.9% p.a. W  hile the outlook for growth in Chinese visitors has moderated slightly, China is expected to remain the single largest contributor to growth, with visitor nights forecast to grow by 6.7% p.a. over the next three years. Overall, Asia is projected to account for two thirds of forecast growth in international visitornights. In an encouraging sign for the nations larger regional tourism destinations, recent trends have revealed Chinese travellers venturing beyond our capital cities in increasing numbers. In fact, the Gold Coast and Tropical North Queensland are now frequented more commonly by Chinese leisure visitors than by international leisure travellers generally. The domestic visitor market continues to expand After a decade of weak or negative growth, the domestic tourism market rebounded strongly in the rst half of 2012. While this rapid rate of growth has not been maintained, the domestic market has continued to expand, with visitor nights increasing 2.2% over the year to March 2013.

Strengthening leisure market forecast to be the key driver of domestic growth Corporate travel has been the predominant driver of domestic tourism growth over the last decade. However a softer domestic economic outlook and signs of a continued pick-up in holiday travel indicate the leisure segment playing a more prominent role in driving domestic tourism over the next few years particularly if the Australian dollar continues to recede. H  oliday visitor nights grew 11.6% in the March quarter and by 3.7% over the year to March. This represents the fastest rate of growth since before the GFC and considerably narrowed the gap with outbound leisure travel, which grew by 4.6% over the same period. O  verall, Deloitte Access Economics forecasts domestic visitor nights to grow at an average rate of 1.6% p.a. over the next three years. Hotel occupancy rates in Brisbane and Perth ease while smaller markets record strong growth I n a clear sign that travel associated with the mining sector is slowing, the last two quarters saw a softening in occupancy rates in Brisbane and Perth with average occupancies for the year to May 2013 around 2% lower than the previous year. However, growth in domestic holiday travel has been good news for destinations such as the Gold Coast where occupancy rates continue to improve, while Tropical North Queensland has benetted from strong growth in international visitornights. A softer domestic economic outlook is moderating growth forecasts for several major hotel markets Growth in occupancies and room rates in markets associated with mining-related corporate travel, such as Brisbane and Perth, is forecast to be more subdued, as the resource-related construction boom reaches its peak. At the same time, the weakening of the Australian dollar is forecast to provide further support for room rates and occupancies in leisure-oriented markets. Nevertheless, and despite a strengthening investment pipeline, demand is forecast to outstrip supply and, accordingly, occupancy rates are forecast to grow 2% and room rates by 3.5% p.a. nationally over the three years to December 2015.

Tourism and Hotel Market Outlook - Half yearly update 2013

The macroeconomic context

The Australian dollar falls below parity Having remained broadly at or above parity with the US dollar since early 2011, the Australian dollar lost signicant ground in May. By the end of May, the Australian dollar had fallen to US$0.96, while the Trade Weighted Index (TWI), which measures the strength of Australias currency against its trading partners, fell from 78.2 on the 1st of May to 74.0 by the end of the month. At the time of writing the Australian dollar had fallen to US$0.92 and the TWI had fallen to 71.2. The decline in the Australian dollar against its major trading partners was partly precipitated by the Reserve Banks decision in May to reduce the ofcial cash rate to 2.75%, while an announcement by the Federal Reserve of a possible tapering of its quantitative easing strategy has caused a more recent drop against the US dollar. The decline in the Australian dollar is good news for local tourism operators. Previous Deloitte Access Economics research for Tourism Australia found that the value of the Australian dollar has a relatively modest impact on the decision to visit Australia. However, it has a more pronounced impact on the level of spending undertaken by visitors once they arrive, which is likely to be of greater importance for many tourism operators. The moderation of the Australian dollar is also likely to further slow growth in outbound travel by Australians as the pricecompetitiveness of local destinations improves. Despite the pace of the recent moderation, the longer term outlook for the local currency remains relatively unchanged with the Australian dollar projected to remain at US$0.80 from 2018-19.

The global outlook The moderation of the Australian currency relative to the US dollar has been driven in part by an improved outlook for the US economy. The most recent gures from the US show that real GDP grew by 0.6% in the March quarter up from the 0.1% recorded in the December quarter. Overthe year to March, US real GDP grew by 1.8%. Moreover, the US housing market continues to strengthen, with the S&P Case Shiller 20-City Composite Home Price Index rising by 10.9% over the year to March2013 and housing approvals rising almost 21% since May2012. Encouraging gures have also appeared from the US labour market, with the unemployment rate falling to 7.5% in April (though it edged up to 7.6% in May). However, looking beyond the headline data reveals a labour market which remains soft. This is especially evident in the employment to population ratio (capturingboth unemployment and workforce participation), which remains essentially unchanged from the depths reached in late 2009. This data suggests that the falling unemployment rate has mainly been due to individuals dropping out of the labour force rather than strong employment growth. These emerging signs of recovery along with recent improvements in consumer condence suggest that, although scal consolidation will limit the speed of the nations economic recovery, the US is better placed than previously to handle the impact of $85 billion in budget cuts associated with the sequester and a 2% increase in payroll tax. By comparison, the outlook for Chinese growth is slightlyweaker than forecast six months ago with growth falling from 7.9% over the year to December 2012 to 7.7% over the year to March 2013. Growth continues to be supported by infrastructure spending and housing construction with recent growth in real estate prices prompting renewed concerns about the potential for a housing price bubble in China. Growth in both consumer spending and industrial production were not as strong as anticipated in the March quarter. Over the longer term, China will need to rebalance its growth towards higher wages and increased consumer spending, which is likely to imply a slower but more balanced growth trajectory. The OECD Economic Outlook forecasts Chinese growth to remain at 7.8% in 2013, before rising to 8.4% in 2014 on the back of an acceleration of global trade.

In Europe, scal austerity has continued to hamper growth with unemployment in the region climbing further. While austerity measures have increased the level of political instability in some member states, the European Central Banks actions in purchasing government bonds has reduced the risk of a severe collapse over the last eighteen months. The OECD expects growth in the euro area of 0.6% in 2013 before recovering to 1.1% in 2014. Bycomparison, the outlook is slightly stronger for Japan as monetary easing has led to a depreciation of the yen since November 2012, although the OECD is forecasting growth of only 1.6% in 2013. On the whole, the global outlook remains broadly similar to six months ago, with more promising signs of recovery in the US being counterbalanced by a slightly softer outlook for Chinas economy and continued weakness in the Eurozone.

The domestic outlook In Australia, concerns have been growing about the capacity of the non-mining sectors to sustain growth once the resource-related construction boom peaks. The economy grew by 0.6% in the March quarter to be up by 2.5% over the year, but growth was largely driven by an improvement in net exports. A decline in new engineering construction in the quarter has prompted increasing concerns that the mining construction boom has begun to peak. While Deloitte Access Economics expects resource-related construction to plateau for some time before receding, alternative sources of growth must be forthcoming if an economic slowdown is to be avoided. While there is evidence that housing construction and the retail sector are beginning to grow, the recovery in both sectors has been relatively mild to date. Residential construction activity grew by only 2.1% over the year to March, while retail expenditure grew by 3.1% over the year to April. The decision by the Reserve Bank to cut interest rates to a record low of 2.75% in May should act to further stimulate the housing and retail sectors. At the same time, while the decision by the Federal government to delay a return to budget surplus to 2015-16 has been welcomed, indicators suggest business condence has weakened in recent months due to concerns about the impending peak in construction activity in the resources sector. The OECD Economic Outlook is projecting Australian GDP growth to remain moderate at 2.6% in 2013, in line with the Reserve Bank forecasts, before picking up to 3.2% in 2014. Deloitte Access Economics latest macroeconomic forecasts will be released as part of the Business Outlook publication in mid-July.

Tourism and Hotel Market Outlook - Half yearly update 2013

The outlook for Australias tourism sector

Overview After a sharp rebound in the rst half of 2012, domestic visitor nights continued to expand in the December and March quarters, albeit at a more modest pace. -- Domestic visitor trips grew by 1.8% and domestic visitor nights by 2.2% over the year to March 2013. -- This was largely driven by strong performance in the holiday and business segments which recorded growth of 3.7% and 6.4% respectively. -- The strength of the domestic holiday market has been most evident in Melbourne, Hobart, the Gold Coast and the Sunshine Coast, as well as Brisbane and Perth where it has helped to offset a softening in corporate travel over the lasttwelve months. Mixed economic conditions are projected to moderate the rate of growth in domestic visitor activity over the outlook period. -- The weaker economic outlook will see a slowing in the growth of corporate travel. At the same time, the decline in the value of the Australian dollar will contribute to leisure travel playing a more prominent role in driving growth in the domestic market. -- Deloitte Access Economics forecasts domestic visitor nights to grow at an average rate of 1.6%p.a. over the next three years. The weakening of the Australian dollar is also forecast to augment a further slowing in the growth of outbound travel by Australians, which by end-2015 is projected to have eased to 3% p.a. Growth in international visitor arrivals has continued to outpace its average of the last decade. -- International visitor arrivals grew by 4.9% over the year to March 2013, while international visitor nights grew by 7.2%. -- Growth continues to be driven by the emerging Asian economies, although visitor arrivals from the US have also picked up. -- While arrivals from Japan and the UK have been at, those who came to Australia chose to stay longer. Deloitte Access Economics forecasts point to the international market continuing to grow strongly, although the rate of growth in visitor nights is projected to return closer to trend. -- International visitor nights are projected to grow at an average annual rate of 4.9% p.a. over the next three years. -- This growth will continue to be driven by the emerging economies of Asia with growth in visitor nights forecast to average 8.6% for India and 6.7% for China over the next three years. Theforecast for China is a slight moderation on last quarter reecting a more uncertain outlook for Chinese growth going forward. -- The growth in Chinese visitor arrivals over the next three years is forecast to continue to be driven by leisure visitors. While Chinese leisure travellers stay in Australia for relatively short periods of time, they have high daily expenditure levels and are more likely to visit regional leisure destinations such as the Gold Coast and TropicalNorth Queensland. Domestic visitors After the sharp rebound in domestic visitor activity in the rst half of 2012, visitor activity continued to grow in the December and March quarters, albeit at a more moderate rate. Over the year to March 2013, domestic visitor trips grew by 1.8% while domestic visitor nights grew by 2.2%, to be broadly in line with our longer term forecasts. In the March quarter, visitor nights grew by 4.3% compared to the year prior and domestic visitor trips grew by 0.8%. As has been the case for some time, growth in domestic visitor nights was supported by solid growth in corporate travel. However, in an encouraging sign for the sector, the holiday sector also grew strongly in the December and March quarters. Holiday visitor nights grew 6.7% in the December quarter and 11.6% in March relative to the December and March quarters of 2012. The growth in domestic holiday visitor nights has led to a substantial increase in demand for key leisure destinations. Chart 3.1 shows the six major tourist destinations that experienced the highest growth in domestic holiday visitor nights in the year to March2013. The light blue column shows the growth invisitor nights for each destination while the light green column illustrates the growth in visitor trips.

Growth in business visitor nights

While holiday visitor nights grew exceptionally strongly in Melbourne, this was largely driven by an increase in average length of stay the number of holiday visitor trips in fact grew only 2.1%. By comparison, growth in holiday visitor nights was accompanied by solid growth in visitor trips for the Gold Coast, Sunshine Coast, Hobart and Perth. In the case of Hobart the growth in visitor trips substantially exceeded growth in visitor nights. Chart 3.1: Destinations with highest growth in domestic holiday nights*
35% 30% Growth in holiday visitor nights 25% 20% 15% 10% 5% 0% Melbourne Gold Coast Visitor nights Brisbane Sunshine Coast Hobart Perth Visitor trips

Chart 3.2: Year-on-year growth in domestic business visitor nights in Perth and Brisbane*
80% 60%
40% 20% 0% -20%

-40%
-60% Mar-10 Sep-10 Brisbane Mar-11 Sep-11 Perth Mar-12 Sep-12 Mar-13

*Growth for each quarter is relative to the corresponding quarter in the previous year. Source: TRA, Deloitte Access Economics.

Overall, these gures suggest a signicant cooling in demand for business travel, consistent with resourcerelated construction reaching its peak. However, from a historical perspective, business travel to both Perth and Brisbane remains at relatively elevated levels. As shown in Chart 3.3, business visitor nights in both markets are still above the prevailing level of three years ago. Chart 3.3: Rolling annual business visitor nights over time for Perth and Brisbane
4
Business visitor nights (million)

*Growth over the year to March 2013. Source: TRA, Deloitte Access Economics.

The growth in holiday nights was not evident in all locations. Domestic holiday visitor nights were relatively unchanged over the year to March in Sydney, Canberra and Tropical North Queensland (although the latter received a sharp inux in international visitors over the year to March) and holiday visitor nights declined by more than 10% in bothAdelaide and Darwin. Business nights grew by 6.4% over the year to March nationally, but declined by more than 20% in Brisbane and Perth. While business visitor nights are by far the most volatile segment of the domestic market, business visitor nights in Brisbane and Perth have fallen consistently in recent quarters. Chart 3.2 shows the growth in business visitor nights in Perth and Brisbane by quarter. Although the gures indicate that business visitor nights are highly volatile, growth in business visitor nights was negative between March and December 2012 and in Perth between June 2012 and March 2013.

0 Mar-05

Mar-07 Brisbane

Mar-09 Perth

Mar-11

Mar-13

Source: TRA, Deloitte Access Economics.

Tourism and Hotel Market Outlook Q4/2012

Deloitte Access Economics forecasts domestic visitor nights to grow by an average of 1.6% p.a. and domestic visitor trips to grow by 1.7% p.a. over the next three years
The other major development in the domestic tourism market has been a decline in growth in domestic day trips in the March quarter. Having grown rapidly in the rst three quarters of 2012, domestic day trips were at in the December quarter and fell by 7.6% in the March quarter 2013 relative to the March quarter 2012. Nevertheless, the strength of growth in previous quarters has meant that domestic day trips still grew by 2.5% over the year to March 2013 with the annualised level of domestic day trips remaining close to record highs.

Looking forward, Deloitte Access Economics forecasts domestic visitor nights to grow by an average of 1.6% p.a. and domestic visitor trips to grow by 1.7% p.a. over the next three years. This is moderately lower than the growth rate recorded over the year to March, reecting a softening domestic economic outlook and its impact on domestic corporate travel. Coupled with the depreciation of the Australian dollar, moderating local economic conditions are expected to see the composition of this growth shift gradually toward theleisure segment.
Outbound travel by Australians The latest gures for outbound departures show them growing by 5.1% over the 12 months to April 2013. Overall, the growth in outbound departures appears to have stabilised at around 5%, well below the double digit growth rates recorded in 2010 and 2011 but still indicating a relatively healthy rate of growth. Outbound holiday trips grew by 5.7% while international trips to visit friends and relatives grew by6.9%. Business trips fell by 0.1% over the 12 months toApril 2013. The gap in growth rates between the outbound leisure market and the domestic leisure market has fallen over the last twelve months. Over the year to March 2012, outbound holiday trips increased by 14.2% while domestic holiday trips grew by just 2%. By comparison over the year to March 2013 outbound holiday trips grew by 4.6% and domestic holiday trips grew by 3.2%.

The moderation of the Australian dollar, coupled withsubdued economic conditions locally, is forecast to lead to a further slowing in the pace of outbound travel by Australians. Indeed, growth in outbound travel is forecast to moderate to around 3% p.a. over the next three years. As evidenced over the past 12months, at least part of this slowing is likely to be transferred across to the domestic leisure market in the form of more Australians holidaying at home. Of course, should the Australian dollar depreciate more sharply than anticipated, so too will the paceofoutbound travel.
International visitors The international visitor market grew strongly over the last three quarters. International visitor arrivals increased by 4.9% over the year to March 2013 and international visitor nights increased by 7.2%. This pace of growth is well above the average of the last decade, during which international visitor arrivals grew by 2.7% and international visitor nights grew by 5.9%. As in previous quarters, growth has been driven predominantly by the emerging Asian economies, particularly China. Over the year to March 2013, visitors from China grew by 17.4% while visitors from Malaysia and Singapore grew by 12.4% and 12.5% respectively. Arrivals from Hong Kong grew by 7.8% while arrivals from India grew by 7.3%. The strength of these gures reects the extent of the growth in the middle class in Asia and its impact on the demand for international travel. While some of the strongest growth in arrivals has come from Asia, overall market growth has also been supported by visitors from the US. International visitors from the US grew by 6.7% while visitor nights grew by 8.0% over the year to March 2013 as the local economy gathers momentum. Visitor arrivals from Japan grew by a more moderate 2.5% while arrivals from the UK fell by 3.5%. However, visitors from both these markets opted to extend their length of stay, with Japanese visitor nights growing by 25.4% and UK visitor nights growing by 10.4%. The increased length of stay occurred across all Japanese visitor segments, while in the UK it was more pronounced among those visiting friends and relatives.

Looking forward, Deloitte Access Economics forecastsinternational arrivals continuing to grow over time on the back of growth in Asias middle class. Currentforecasts indicate international visitor arrivals growing by 4.5% p.a. on average over the next three years and international visitor nights by 4.9% p.a. Theseforecasts are broadly similar to those of our Q1release, with the strength of recent visitor demand being counterbalanced by increased uncertainty about the pace of economic growth in the Chinese economy.
The largest contributor to the growth in visitor nights over the next three years is forecast to be China followed by India and the UK. Visitor nights from India are projected to grow by 8.6% p.a. on average over the next three years, while visitor nights from China are projected to grow, on average, by 6.7% p.a. Average growth in visitor nights in excess of 7% p.a. is also forecast for Indonesia and Thailand, albeit from a lower base. Other countries with forecast average growth rates between 4% and 6% include Korea, Singapore, Taiwan, Hong Kong and Malaysia. Asia is once again anticipated to provide the primary source of growth in visitor nights, accounting for close to two thirds of the growth in visitor nights over the next three years. Outside of Asia, growth from the US and UK is more modest at 3.4% p.a., although this remains signicant given the UK market accounts for 7.4% of total growth in total visitor nights to Australia. Chart3.4 below shows the forecast growth in visitor nights over the next three years for Australias seven largest source countries for international visitor nights. Chart 3.4: Growth in visitor nights from major source countries
40
International visitor nights (millions)

The moderation of the Australian dollar will also have an impact on international visitor expenditure. As international trips are often planned some time in advance, research by Deloitte Access Economics shows that currency uctuations tend to have a larger impact on expenditure than the decision to travel. Chart 3.5 shows international visitor expenditure per trip for Australias ve largest tourism markets in terms of visitor nights and for all international visitors. The blue columns show average expenditure for all tourists from a given source while the green columns indicate expenditure per trip by holiday visitors (whoconstitute the largest component of theinternational visitor market). While Chinese visitors exhibit the largest expenditure per visitor of all source countries, this is largely driven by the higher expenditure of international students. By comparison, Chinese holiday visitors spend slightly less than the international holiday visitors as a whole. Holiday visitors from the UK and South Korea had the highest per-visitor expenditure of Australias ve largest tourism markets, reecting their longer average length of stay. South Korean visitors had an average length of stay of 57 nights while UK visitors had an average length of stay of 46 nights. By contrast, New Zealand holiday visitors stayed for only 14 nights on average. Chart 3.5: International visitor expenditure
6000 Expenditure per visitor ($) 5000 4000 3000 2000

1000
0 China UK Total NZ Holiday visitors Korea US All visitors

35 30 25
20 15

Source: ABS OAD, TRA, Deloitte Access Economics.

10
5 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 China UK New Zealand Korea USA Japan India

Source: OAD, TRA, Deloitte Access Economics.

Holiday visitors and students, who collectively comprise 57% of total international visitor nights, tend to be the most sensitive to uctuations in the exchange rate and thus are likely to be the sectors that grow most quickly in response to a decline in exchange rates. Deloitte Access Economics forecasts that as the Australian dollar moderates over the next three years, expenditure by international holiday visitors will grow by 8% p.a. in real terms.

Tourism and Hotel Market Outlook - Half yearly update 2013

However, if the exchange rate were to depreciate more quickly than anticipated, this would be expected to result in a signicant increase in international visitor expenditure. The results of research undertaken by Deloitte Access Economics indicate that a further 10% depreciation of the Australian dollar would lead to a 4% increase in overall international visitor expenditure and a 6.6% increase in expenditure by international leisure travellers. Performance by state The trends in domestic business and holiday travel to particular destinations have in turn impacted the performance of individual state markets. As Chart 3.7 shows, strong growth in domestic visitor nights was recorded for Victoria, Western Australia and Tasmania, reecting the strong growth in holiday visitor nights over the year to March 2013 for Melbourne, Perth and Hobart. Domestic visitor nights in NSW and Queensland were relatively unchanged. In the case of Queensland, while holiday visitor nights improved on the Gold Coast, Brisbane and the Sunshine Coast, this was offset by a broader decline in business visitor nights and those visiting friends and relatives. Domestic visitor nights declined in South Australia, reecting the fall in demandfor holiday visitor nights in Adelaide.

Chart 3.6: Growth in visitor nights by state*

20% 15% 10% Growth 5% 0%

-5%
-10% NSW VIC Domestic QLD International SA WA TAS

*Growth for the year to March 2013. Source: ABS OAD, TRA, Deloitte Access Economics.

At the same time, South Australia recorded the strongest growth in international visitor nights, although both Queensland and Western Australia also experienced double digit growth. The performance of South Australia was driven by an improvement of more than 20% in international holiday visitor nights and a 17.4% improvement in the visitor nights for those visiting friends and relatives with particularly strong growth in visitor nights for those from Hong Kong, Singapore and the UK. Solid growth in international visitor nights also occurred in Victoria and Tasmania. The weakest growth in international visitor nights was in NSW where visitor nights only grew by 2% over the year to March. While this in parts reects weaker growth in the international student market, growth in international holiday nights in NSW grew by only 0.6%. Given the strong growth experienced elsewhere in the country these gures indicate that NSW has received a relatively small proportion of the growth in international holiday visitor nights relative to other states.

Shifting patterns ofcorporate and leisure travel are impacting the performance of regional tourism sectors and hotelmarkets

Focus on...
The Chinese leisure market It is well recognised that much of the recent growth in international visitor arrivals to Australia has been driven by the emerging economies of Asia; China in particular. Over the last two years, Chinese visitors have accounted for 49% of the growth in international visitor numbers and 16% of the growth in international visitor nights. The growth in Chinese visitor numbers has been largely driven by the leisure market, reecting the rapid bourgeoning of the Chinese middle class. In fact, holiday visitors accounted for 73% of the growth in Chinese visitor arrivals over the last two years and 58% of growth over the last ve years. The share of visitors who are holiday travellers has risen from 46% to 52% over the last ve years. However, Chinese holiday visitors tend to stay in Australia for relatively short periods of time. Onaverage, Chinese holiday visitors stayed for 11.1 nights in the year to March 2013, compared to 27.4 nights for international holiday visitors as a whole. As a result, holiday visitors accounted for just 30% of the growth in Chinese visitor nights over the last two years. Overall, holiday visitors currently account for around 10% of total visitor nights, with students stillaccounting for around half. Despite their relatively short stay, the overall expenditure of Chinese visitors was only slightly lower than other international visitors, due to an average daily spend of $212 compared to $99 for the average international holiday visitor. Looking forward, Deloitte Access Economics forecasts Chinese holiday makers continuing to provide a signicant source of visitor arrivals, accounting for 70% of the growth in the Chinese visitor arrivals over the period to 2020 and over 40% of the total increase in non-student visitor nights. In terms of the dispersion of Chinese visitors across Australia, this increase will lead to a gradual shift in visitation patterns towards holiday destinations. Figure 3.1 shows that while Chinese tourists as a whole are far more likely to visit Sydney and Melbourne and less likely to visit regional destinations, Chinese holiday visitors actually spend a similar share of their time outside the capital cities as other international visitors. In particular, Chinese holiday visitors spent 15.2% of their total visitor nights on the Gold Coast and 7.9% in Tropical North Queensland. By comparison all international holiday visitors spent only 5.4% of their nights on the Gold Coast and 6% in Tropical North Queensland. The popularity of these destinations with Chinese travellers is likely to partly reect not only their innate appeal but the expansion of low cost carriers from Asia to the Gold Coast and Tropical North Queensland, including the introduction of services by China Southern to Cairns. The growth in Chinese holiday visitor nights on the Gold Coast and Tropical North Queensland over the last three years is shown in Chart 3.8 below.

Chart 3.7: Share of international visitor nights bydestination

40% 35% Share of visitor nights 30%

Chart 3.8: Rolling annual Chinese holiday visitor nights on the Gold Coast and Tropical North Queensland
500 450
Holiday visitor nights (000)

25% 20% 15%

400 350 300 250

200 150 100

10% 5%
0 Sydney Melbourne Other Other capital cities destinations Chinese holiday visitors All visitors Brisbane

50
0 Mar-10 Mar-11 Gold Coast Mar-12 Tropical North Queensland Mar-13

Chinese visitors

Note: Data is for the year to March 2013. International students were not included in the analysis. Source: TRA 2013, DeloitteAccessEconomics

Source: TRA 2013, Deloitte Access Economics

Tourism and Hotel Market Outlook - Half yearly update 2013

The Chinese leisure market (continued) Since 2008, there has been a shift in total Chinese visitor nights (excluding students) towards smaller cities and regional destinations. For example, the share of visitor nights in Sydney and Melbourne has fallen from 73.1% to 62.8%, with the share of visitor nights in Brisbane, other capital cities and other regional destinations growing by 4.8%, 2.5%and3.1%, respectively. Based on current visitation patterns, Deloitte Access Economics forecasts that the growth in the Chinese holiday visitor market to 2020 will lead to a substantial increase in demand for these destinations. Theforecast growth in the Chinese holiday visitor market alone will lead to: 278,000 additional annual visitor nights on the GoldCoast (equivalent to 7.3% of total international leisure visitor nights in the year to March); 145,000 additional annual visitor nights in Tropical North Queensland (equivalent to 3.5% of total international leisure visitor nights in the year toMarch); and 1.2 million additional visitor nights in Sydney, Melbourne and Brisbane (equivalent to 3.2% of total international leisure visitor nights in the year toMarch). This is likely to considerably hasten the recovery in tourist activity and occupancy rates in destinations such as the Gold Coast and Tropical North Queensland which saw a sharp decline during the GFC (and in Tropical North Queenslands case, over adecade). However, there is signicant scope for further gains if Chinese holiday visitors can be encouraged to extend their stay. For example, increasing the average length of stay by 3 nights would lead to another 120,000 visitor nights on the Gold Coast and 62,000 visitor nights in Tropical North Queensland. As Deloitte Access Economics has previously noted, the size of the China opportunity is unprecedented. If its growth trajectory were to follow a similar path to its neighbour Japan, then in little more than two decades time, the number of Chinese visitors to Australia could parallel todays entire international tourism market. The economic benets for the regions successful in luring the Chinese traveller would be signicant.

The growth in Chinese visitor numbers has been largely driven by the leisure market, reflecting the rapid bourgeoning of the Chinese middle class. Infact, holiday visitors accounted for 73% of the growth in Chinese visitor arrivals over the last two years and 58% of growth over the last five years

10

Hotel market outlook

Australia The rst half of 2013 has seen the national accommodation market remain broadly on par with its 2012 performance, with occupancy rates averaging 66.0% for the year to May and room rates growing 2.6% p.a. While the national picture is a relatively stable one, there has been a signicant divergence in performance across the countrys accommodationmarkets. Occupancy rates improved in the Gold Coast and Melbourne as a result of increased domestic holiday visitor nights, while occupancies grew in Tropical North Queensland on the back of increased international visitor arrivals. There was also a noticeable improvement in occupancy rates in Darwin. However, occupancy rates eased in a number of major capital city markets with occupancy rates falling by 2% in Brisbane and 2.3% in Perth over the year to May 2013, reecting a softening in the growth of corporate travel. At the same time, weakness in the domestic leisure segment contributed to a fall in occupancy ratesin Adelaide. The outlook for accommodation demand remains broadly similar to last quarter, with the softer outlook for corporate travel being largely counterbalanced by the positive impact of the weakening Australian dollar. Deloitte Access Economics three year outlook for room nights sold effectively demand is for growth of 2.3% p.a. However, the outlook for room nights available effectively supply also continues to strengthen as a result of a number of developments being announced in Brisbane, Adelaide, Canberra and several regional areas. Room nights available are forecast to grow by 1.2% p.a. over the three years to December 2015, an increase of 0.3% p.a. on our Q1 release, but still considerably slower than forecast demand. Chart 4.1: Hotel outlook, Australia
75% $200

Much of the forecast development is 3 and 4 star hotels and serviced apartments with the cost of 5 star hotel developments remaining more difcult to justify fordevelopers. In total, 65 projects were identied in the supply pipeline across Australia at varying stages of development. This number was similar to the 66 developments recorded last quarter with recent hotel openings being replaced by new developments. The current pipeline represents a signicant expansion on the 45 developments recorded at the beginning of lastyear. Overall, with demand continuing to grow at close to twice the pace of supply, national occupancy rates are forecast to reach 67.9% by the year to December 2015. This is a slight moderation on the 68.1% forecast in our Q1 release, reecting a relatively stronger supply outlook to last quarter. Room rates grew moderately in the rst ve months of 2013, growing by 2.6% over the year to May 2013 to $150. The forecast for growth in room rates for the three years to December 2015 has also been revised slightly downwards from our Q1 release, with room rates projected to grow at an average annual rate of 3.5% over the three years to December 2012, reaching $165 in the year to December 2015. Average yield per room (Revenue Per Available Room RevPAR) was $99 per room in the year to May 2012 and is forecast to increase by 4.6% per annum over the three years to December 2015 to $112. Sydney After easing between June 2011 and December 2012, demand for accommodation in Sydney picked up marginally in the rst ve months of 2013. This has resulted in occupancy rates improving slightly to 84.8% over the year to May 2013 from the 84.7% recorded over the year to December 2012. While occupancy rates in Sydney have been relatively at, room rates have continued to grow steadily, improving 3.5% to $196 over the year to May 2013, while RevPAR grew 3.1% to$167 over the year to May. Overall, demand for accommodation in Sydney remains softer than two years ago when occupancy rates peaked at 86.3%. This softness largely reects a decline in corporate travel, with corporate visitor nights in Sydney falling by 14.4% over the year to March 2013, contributing to an 8.1% decline in domestic visitornights.

70%

$160

65%

$120

60%

$80

55%

$40

50%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Tourism and Hotel Market Outlook - Half yearly update 2013

11

The decline in domestic visitor nights was offset to some degree by a 1.7% increase in international visitor nights, as international visitors account for just over 50% of total nights in paid accommodation in the inner Sydney region. The domestic business and leisure segments each account for approximately 20% of total paid visitor nights in inner Sydney. Looking forward, occupancy rates for Sydney are forecast to improve as international visitor arrivals continue to grow. Sydney remains Australias major gateway for international visitors, with 47% of visitors arriving in Australia via Sydney and 27% of total international visitor nights being spent in Sydney. By the year to December 2015, occupancy rates are forecast to reach 86.4%. While there are a number of large developments in the pipeline for Sydney (such as the Four Points Sheraton and new Convention and Exhibition Centre hotel), most of the new capacity will not become available until2015. Two small new accommodation developments opened in Sydney in the month of June Adina Apartments in Bondi and the 1888 hotel in Pyrmont although both contain fewer than 120 rooms. Outside of the CBD, the larger 318 room RydgesSydney Airport hotel opened in May. The outlook for room rates is slightly more moderate than our Q1 release with growth forecast to average 3.6% over the three years to December 2015, taking room rates to $216 by the year to December 2015. RevPAR is forecast to grow by 4.4% p.a. over the three years to December 2015, reaching $187 in the year to December 2015.

Melbourne In contrast to the other major capital cities, occupancy rates have been pushed higher in Melbourne over recent months, picking up from 81% in the year to December 2012 to 81.9% over the year to May 2013. The Melbourne hotel market has been especially tight in recent months with occupancy rates remaining above 82% in February, March and April (although occupancies fell marginally in May). This rise in occupancy rates was partly driven by the strong increase in holiday visitor nights over the year to March, illustrated in Chart 3.1, as well as the closing of the Sebel Melbourne in February. Deloitte Access Economics forecasts occupancy rates climbing steadily to 84.1% by the end of December 2015. This is a marginal upward revision on the forecasts of our Q1 release, reecting the strength of demand in the March quarter and the expected impact of a moderation in the Australian dollar over time. Melbourne is likely to only see a small increase in supply over the next three years with the major planned hotel opening being the Oaks on William Street which should open its door on the 15th of July. However, given the number of residential apartment developments currently under way in Melbourne, there is scope for the supply of serviced apartments to respond to market conditions over time. This outlook is expected to result in relatively healthy growth in room rates and yields for Melbourne over the period to December 2015. Room rates are forecast to grow at an average rate of 4.0% p.a. over the three year period to December 2015, reaching $201 in the year to December 2015. Room rates averaged $181 over the year to May 2013. The improvement in forecast occupancy rates is forecast to lead RevPAR to grow by 5.4% p.a. to reach $169 by the year to December 2015 from $147 currently.

Chart 4.2: Hotel outlook, Sydney

95% 90% 85% 80% 75% 70% 65% 60%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

Chart 4.3: Hotel outlook, Melbourne

$280 $240 $200 $160 $120 $80 $40 $0

90% 85% 80% 75% 70% 65% 60%

Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$240 $200 $160 $120 $80 $40 $0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

12

Brisbane The decline in visitor nights by corporate travellers over the last year has seen occupancy rates soften in the Brisbane market. After sustaining an average rate of 81% over the year to March 2012, average occupancies eased to 79.3% over the year to March 2013 and have softened marginally further since, edging below 79% over the year to May. Looking forward, a signicant amount of additional supply is projected to enter the Brisbane market over the next two years ahead of the G20 conference in November 2014. The new Tryp by Wyndham hotel development was announced in May and Quest has announced proposed developments at Upper Mount Gravatt and Woolloongabba, while the rst stage of the Meriton Serviced Apartments on Herschel Street opened in June. The Gambaro restaurant has also announced plans to open a 68 room hotel in 2014. As a result of the forecast increase in supply over the next two years and the recent softening in business travel, occupancy rates for Brisbane are expected to remain relatively stable over the next two years, reaching 80.1% in the year to December 2015. Thisoutlook is a downward revision on our Q1 release,reecting the weakening corporate travel andastrengthening supply outlook. The outlook for room rates and RevPAR for Brisbane has also moderated. Over the three year period to December 2015, room rates are forecast to grow by 4.1% p.a. to reach $198. The moderating growth outlook being driven both by additions to the stock of rooms and a softer outlook for corporate travel. RevPARis expected to grow by 4.0% p.a. over the three year period to December 2015, climbing to $159 by the year to December 2015.

Perth A decline in domestic corporate travel saw Perths occupancy rates for the year to March 2013 fall to 83.8%, the lowest level since the year to June 2011. More recent data from April and May indicate that Perths occupancy rates are stabilising at this level with average occupancy rates for the year to May being 83.8%. As the resource-related construction boom in WesternAustralia peaks, the demand for business travel to Perth will continue to soften. Domestic business travel accounts for 30.6% of total visitor nights in paid accommodation in Perth, with international and domestic business travel combined accounting for 43.6% of visitornights. However, the decline in business visitor nights has been partly offset by the leisure segment, with the volume of domestic holiday and international visitor nights which account for 32.4% of the hotel market growing solidly over the last 12 months. Occupancy rates in Perth are expected to remain relatively stable over the next two years as growth in holiday visitor nights helps to offset a more modest outlook for corporate travel, before easing slightly to 83.5% over the year to December 2015 as resource-related construction declines and additional supply enters the market. In addition to Crown Towers and the proposed hotel development at FESA House, Holiday Inn Express indicated in May that it plans to open a 224room hotel in Perth in 2015. Weakening corporate travel and the recent cancellation of several major resource projects has meant that the outlook for growth in room rates in Perth has moderated notably. Over the three years to December 2015, room rates are forecast to grow at 6.2% p.a. still the nations fastest, but considerably slower than the pace of recent years. Room rates are expected to remain the highest in the country, rising from $200 currently to $239 by the year to December 2015. RevPAR is forecast to grow by 5.6% over the three years to December 2015, reaching $199 in the year to December 2015.

Chart 4.4: Hotel outlook, Brisbane

90% 85% 80% 75% 70% 65% 60% 55%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

Chart 4.5: Hotel outlook, Perth

$280 $240 $200 $160 $120 $80 $40 $0

95% 90% 85% 80% 75% 70% 65% 60% 55%

Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$320 $280 $240 $200 $160 $120 $80 $40 $0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Tourism and Hotel Market Outlook - Half yearly update 2013

13

Adelaide Occupancy rates in Adelaide have remained steady over the last two years at approximately 75%. Looking forward, occupancy rates are forecast to edge up only marginally, reaching 75.3% in the year to December 2015. As well as weak demand side conditions, the moderate outlook for Adelaide is partly a reection of an expected expansion in the supply of hotel rooms in the city. Thisyear has seen the opening of 117 rooms at Quest on Franklin which will be complemented by another Quest property on King William Street next year, along with three other Adelaide hotel developments which are planned to open by the end of 2014. Room rates have been relatively at in Adelaide since the GFC and are expected to grow moderately over the three years to December 2015, averaging 2.4% p.a. over the period to December 2015. The combination of at occupancy rates and only modest growth in room rates has resulted in projected average annual RevPAR growth rate of 2.3% p.a. over the three year period to December 2015.

Canberra Canberra has seen a decline in occupancy rates over the last two years, with occupancies falling to 69.2% for the year to May 2013 as Canberras scal pressures have weighed on travel to the nations capital. Supply is forecast to expand in the second half of the year with the announcement earlier this year that Adobe Woden would open a 153 room hotel on the site of the former Commonwealth Department of Health and Ageing ofces in August. As a result, the growth in occupancy rates is expected to be milder than was forecast in our Q1 release with occupancy rates remaining relatively steady in the short term before growing to reach 72.1% for the year to December 2015. Reecting the recent decline in average occupancies, room rates were relatively steady in Canberra over the rst ve months of the year. Room rates are projected to grow at a modest 2.9% p.a. over the three year period to December 2015, rising to $179. The positive growth outlook for both occupancy and room rates has resulted in projected RevPAR growth of 3.8% p.a. over the three years to December 2015.

Chart 4.6: Hotel outlook, Adelaide

85% $200

Chart 4.7: Hotel outlook, Canberra

80% $200

80%

$160

75%

$160

75%

$120

70%

$120

70%

$80

65%

$80

65%

$40

60%

$40

60%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$0

55%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

14

Darwin The average occupancy rate in Darwin has been growing steadily since September 2011 with occupancies for the year to May 2013 reaching 78.5%. Looking forward, occupancy rates in Darwin are projected to continue to grow for the remainder of 2013, before moderating in 2014 and 2015 as new hotel developments increase the supply of rooms on the market. The new H Hotel, with 196 rooms has opened recently, while Ausco Modular and Quest Berrimah are both expected to open by the end of 2014. The occupancy rate for the year to December 2015 is projected to be 78.1%, slightly lower than the year to May 2013. Room rates have been growing rapidly over the last 18 months with room rates for the year to May 2013 growing 10.7% to $159. This growth is expected moderate as new supply enters the market, with room rates forecast to grow by 4.2% p.a. over the three years to December 2015 to reach $177. RevPAR has also grown rapidly over the last two years, with RevPAR for the year to May 2013 growing to $125. RevPAR is expected to grow at 4.3% p.a. over the three years to December 2015.

Gold Coast Occupancy rates on the Gold Coast have grown strongly over the past 18 months, reecting a surge in domestic holiday visitors. Occupancy rates for the year to March 2013 reached 71.0%, a 4% increase to March 2012. Demand for accommodation is highly seasonal on the Gold Coast and while occupancy rates fell in April and May they were broadly on par with last year, averaging 71.1% over the year to May. Deloitte Access Economics projects that occupancy rates will continue to grow through 2013 and then stabilise at around 72% by theend of 2015. In contrast to occupancy rates, and reecting the signicant capacity that remains in the market, room rates on the Gold Coast have grown relatively slowly over the past two years. Consistent with recent trends, room rate growth is projected to average 3.5% p.a. over the three years to December 2015, while continued growth in occupancies is forecast to see RevPAR grow at an average rate of 4.5% p.a. over the same period.

Chart 4.8: Hotel outlook, Darwin

100% 90% 80% 70% 60% 50% 40%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

Chart 4.9: Hotel outlook, Gold Coast

$240 $200 $160
70% $120 80% $200

75%

$160

$120
65% $80

$80 $40 $0
60% $40

55%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Tourism and Hotel Market Outlook - Half yearly update 2013

15

The average occupancy rate in the Tropical North Queensland region has been improving steadily since the end of 2010, reaching 61.2% in the year to March 2013
Tropical North Queensland The average occupancy rate in the Tropical North Queensland region has been improving steadily since the end of 2010, reaching 61.2% in the year to March 2013. This recovery has been driven by a strong pick up in international visitor nights for the region which grew by over 20% over the year to March. As with the Gold Coast, occupancy rates in Tropical North Queensland are highly seasonal but fell slightly in April and May relative to last year, with occupancy rates averaging 60.9% over the year toMay2013. Deloitte Access Economics forecasts continued growth in occupancy rates in Tropical North Queensland, with average occupancies projected to increase to 65.6% by the year to December 2015, reecting the expected growth in international visitor nights Asian leisure travellers in particular over the next three years. Room rates have been relatively steady over the past two years with, like Gold Coast, a signicant amount of capacity remaining in the market. Looking forward, however, room rates are forecast trend upwards, growing at an average annual rate of 4.2% p.a. The strong growth in occupancy rate and room rates mean that RevPAR is expected to grow at an average annual rate of 7% over the three years to December2015. Chart 4.10: Hotel outlook, Tropical North Queensland
85% 80% 75% 70% 65% 60% 55% 50% 45% 40%
Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

$180 $160 $140 $120 $100 $80 $60 $40 $20 $0

Room Occ% trend (LHS)

Room Rate trend (RHS)

RevPAR trend (RHS)

Source: Deloitte Access Economics based on: ABS Small Area Accommodation data and STR Global

Deloitte Access Economics Tourism and Hotel Market Outlook Half yearly update 2013 reports on the performance of Australias tourism and hotel accommodation sector, based on data published by the Australian Bureau of Statistics (ABS) and extrapolated through information from Tourism Research Australia (TRA) and other sources. Forecasts to December 2015 are presented, based on projections generated from our in-house tourism forecasting model and hotel accommodation sector model. These projections draw on Deloitte Access Economics macroeconomic forecasts, as reported in our quarterly Business Outlook publication. 16

Deloitte is recognised as one of the leading global advisors to the tourism, hospitality and leisure industry, with a practice of more than 2000 professionals

Limitation of our work General use restriction This report is not intended to and should not be used or relied upon by anyone else and we accept no duty of care to any other person or entity. The report has been prepared for the purpose of providing an outlook on hotel industry performance in Australia. You should not refer to or use our name or the advice for any otherpurpose. Deloitte is recognised as one of the leading global advisors to the Tourism, Hospitality and Leisure industry, with a practice of more than 2000 professionals. InAustralia, our multidisciplinary group of industry specialists have a deep knowledge of the market issues and business challenges faced by the industry. Your industry, our expertise Our dedicated practice provides a wide range of services to nanciers, property owners, investment fund managers, private investors, developers, operators, government departments, professional and business groups and tourism intermediaries. We offer a full range of services to address key industry issues associated with economic conditions, regulatory change, competition, emerging market sectors, technological advancements, mergers & acquisitions, and changing needs ofinvestors. Deloitte Access Economics specialises in providing economic modelling and public policy advice to the tourism industry, with extensive experience in forecasting and projections, econometric analysis, economic impact studies across both government and the private sector. To subscribe to Deloitte Access Economics publications visit : www.deloitte.com.au/economics

Tourism and Hotel Market Outlook - Half yearly update 2013

17

Contact us For further information on how we can support your business needs, please contact one of our Tourism, Hospitality and Leisure specialists:

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