A REVIEW OF THE REVENUE PERFORMANCE OF MAJOR 2020cdn2.blocksassets.com/assets/dransfield/dransfield-documents/... · 4 AUSTRALIA AT A GLANCE 2012 This is the sixteenth edition of

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A REVIEW OF THE REVENUE PERFORMANCE OF MAJOR

AUSTRALIAN HOTEL MARKETS WITH FORECASTS TO

2020

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PERTH

2011 15.1%

2012 10.7%

HOBART

2011 3.1%

2012 2.2%

ADELAIDE

2011 -2.2%

2012 3.5%

DARWIN (*)

2011 1.2%

2012 10.9%

GOLD COAST

2011 -2.7%

2012 4.5%

BRISBANE

2011 7.6%

2012 7.1%

CAIRNS

2011 2.9%

2012 4.9%

SYDNEY

2011 7.1%

2012 2.9%

MELBOURNE

2011 2.8%

2012 2.0%

CANBERRA

2011 2.3%

2012 3.9%

AUSTRALIA RevPAR (*)

2011 4.6% Act

2012 3.8% F’Cast

CONTENTS

About Dransfield 3

Australia at a Glance 4

City Summaries 7

Forecasting Reliability 8

Market Trends 9

Background to Forecasts Arrivals & Departures Supply Demand

10

Adelaide 14

Brisbane 16

Cairns 18

Canberra 20

Darwin 22

Gold Coast 24

Hobart 26

Melbourne 28

Perth 30

Sydney 32

Changes to ABS Classifications 34

Glossary 35

Methodology 36

HOTEL FUTURES 2012

RevPAR Growth 2011/2012

Cover Photos: Circle on Cavill, Blackman Hotel, Pullman Quay Grand Sydney Harbour, Bay of Fires

(*) affected by adjusted boundaries

3 www.dransfield.com.au

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DISCLAIMER This document contains both qualitative and quantitative statements concerning the future performance of hotel and property markets, which may or may not prove to be correct. Dransfield & Co Pty Ltd does not make any

representation or warranty, express or implied that such statements will prove correct, or that estimates or forecasts contained in this document will be achieved. The projections contained in this document are estimates and

represent only one possible result, depending on the assumptions made. Potential users of these forecasts should satisfy themselves as to the current market conditions. Individual hotel performance may differ to market

averages. Due to the difficulty in predicting future events, the assumptions we have used may not hold true. Dransfield accepts no responsibility for any action taken or any failure to act, in reliance upon the information

contained in this document. No liability for negligence or otherwise is accepted by Dransfield directly or indirectly in relation to the material contained in this document.

Hotel Futures 2012 was compiled by Dean Dransfield, Scot McLaughlin, Grace Lam and Raq Pustetto © December 2012

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AUSTRALIA AT A GLANCE 2012 This is the sixteenth edition of Hotel Futures. We report on major Australian hotel markets during 2011 with forecasts to 2020

2011 in Review

Hotel revenue increased by 4.6% slightly below our 5.3% forecast RevPAR growth throughout the year was quite stable The June Quarter performed the strongest with 6.8% growth The December quarter was the weakest with growth of 3.4%

Six of the ten cities met or exceeded forecasts, this excludes Sydney which still experienced strong growth well above inflation Perth (15.1%), Brisbane (7.6%) and Sydney (7.1%) were the strongest

performing markets Gold Coast (-2.7%) and Adelaide (-2.2%) were the only markets to

experience a decline

June Year to Date 2012

In the 1st half of 2012 Australian hotels recorded RevPAR growth of 4.5% against full year expectations of 6.1% Perth was the standout performer with growth of 17.9% followed by

Darwin (12.7%) and Brisbane (8%) The major East Coast markets of the Sydney Tourism Region and

Melbourne experienced limited growth with 1.2% and 0.5% respectively, dragging the national average

Rate growth of 3.1% coupled with minimal supply growth (1.5%) were the key drivers behind the [ TTO] performance.

International visitors for the June 2012 quarter increased by 3.3% on last years figures and follows a 4.1% increase in the March quarter.

Domestic Visitor nights in the June 2012 quarter experienced a 7.7% increase on the prior corresponding period, following an even stronger March quarter, which grew by 11.8%

2012 Outlook

RevPAR for 2012 is forecast to grow by a healthy 3.8% being tempered somewhat by the underperformance of Sydney and Melbourne.

This forecast represents a downgrade from the 6.1% expected in our previous edition of Hotel Futures.

The 2012 outlook anticipates recovery in some of the smaller markets, and more importantly, growth in all markets.

The lower forecast is a result of weaker than expected rate growth Downgrades in supply forecasts to 1.9% have been met with a slightly

lesser downgrade in demand to 2.4% Occupancies remain a very healthy 76.7% Supply and demand rates are excluding adjustments made, related to

changes in abs Boundaries

Australian Major City Hotel Markets

Location Actual Actual Forecast Short Medium Long

RevPAR RevPAR Δ RevPAR Δ 2012 2012-2014 2012-2020

Adelaide $106.32 -2.2% -3.2% 3.5% 1.5% 3.3%

Brisbane $135.90 7.6% 7.6% 7.1% 5.2% 2.9%

Cairns $67.46 2.9% 4.0% 4.9% 6.4% 4.9%

Canberra $117.18 2.3% 0.6% 3.9% 3.0% 3.2%

Darw in $100.57 1.2% -0.2% 10.9% 7.1% 3.1%

Gold Coast $87.73 -2.7% -1.1% 4.5% 6.4% 4.7%

Hobart $95.39 3.1% -2.8% 2.2% 2.7% 2.6%

Melbourne $135.87 2.8% 4.0% 2.0% 4.9% 4.2%

Perth $153.20 15.1% 10.2% 10.7% 6.2% 3.1%

Sydney $160.99 7.1% 10.7% 2.9% 5.8% 3.6%

Total Market $124.40 4.6% 5.3% 3.8% 5.2% 3.8%

Forecast Average RevPAR Growth2011


Supply Demand

Year Rooms* % % ARR % RevPAR % Occ

Chng Chng Chng Chng

2000 76,760 5.1% 6.4% $122.78 4.2% $82.73 5.5% 67.4%

2001 78,206 1.9% 1.5% $117.35 -4.4% $78.79 -4.8% 67.1%

2002 77,123 -1.4% 0.5% $116.46 -0.8% $79.66 1.1% 68.4%

2003 77,643 0.7% 3.1% $120.48 3.5% $84.41 6.0% 70.1%

2004 79,457 2.3% 6.6% $123.32 2.4% $89.98 6.6% 73.0%

2005 80,670 1.5% 2.9% $130.74 6.0% $96.71 7.5% 74.0%

2006 81,575 1.1% 3.3% $140.47 7.4% $106.10 9.7% 75.5%

2007 82,088 0.6% 2.9% $149.90 6.7% $115.80 9.1% 77.3%

2008 84,374 2.8% 0.1% $158.80 5.9% $119.51 3.2% 75.3%

2009 85,466 1.3% -1.2% $151.70 -4.5% $111.37 -6.8% 73.4%

2010 86,036 0.7% 4.9% $155.44 2.5% $118.87 6.7% 76.5%

2011 87,079 1.2% 1.1% $162.86 4.8% $124.40 4.6% 76.4%

3.9% 4.3% 2.4% 2.9% 69.2%

Avg 2002-2011 1.1% 2.4% 3.4% 4.8% 74.0%

Avg 2009-2011 1.1% 1.6% 0.9% 1.5% 75.4%

2012 87,203 0.1% 0.5% $168.49 3.5% $129.18 3.8% 76.7%

2013 89,207 2.3% 3.3% $177.18 5.2% $137.19 6.2% 77.4%

2014 92,269 3.4% 4.0% $185.95 5.0% $144.77 5.5% 77.9%

Avg 2012 - 2014 2.0% 2.6% 4.5% 5.2% 77.3%

2015 95,694 3.7% 3.8% $193.84 4.2% $151.03 4.3% 77.9%

2016 99,949 4.4% 4.4% $198.80 2.6% $154.90 2.6% 77.9%

2017 104,438 4.5% 3.7% $203.52 2.4% $157.35 1.6% 77.3%

2018 106,987 2.4% 3.2% $209.32 2.9% $162.98 3.6% 77.9%

2019 108,972 1.9% 2.0% $215.92 3.2% $168.32 3.3% 78.0%

2020 110,786 1.7% 2.1% $222.73 3.2% $174.33 3.6% 78.3%

Avg 2015 - 2020 3.1% 3.2% 3.1% 3.1% 77.9%

2.7% 3.0% 3.5% 3.8% 77.7%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)

AUSTRALIA AT A GLANCE 2012

MEDIUM TERM OUTLOOK TO 2014

RevPAR growth 5.2% down slightly from 5.4% in 2011 Downgrade in the 2012 forecast, 2012 offset by stronger 2013/14

Supply growth of 2.6% (excluding adjustments) down from 2.7% Demand growth of 3.2% up from 3% (excluding adjustments) Rate growth slightly down however improved performance following

the downgrade experienced in 2012

LONG TERM OUTLOOK TO 2020

Australian market forecast to grow at an average of 3.8% and above 3.4% prior expectations Dip through 2016 and 2017 is not as great as previously forecast

due to delayed supply Demand expectations have increased Supply expectations are reduced

In general supply has been delayed by 12 months. The peak of the development cycle now expected through 2016-2017

Cairns (4.9%) and the Gold Coast (4.7%) are the highest growth markets long term , but both coming off a low base

Perth growth expected to normalise through the medium to long term

CONCLUSION

The Australian hotel market remains on course to consistently deliver growth above CPI

The nature of future supply (market response vs. actual projects) is such that the market can respond to performance through the medium term to ensure continued stable and positive performance

Development activity is set to build over the coming four years, after 11 years of sub 3% annual growth

The next supply peak is expected through 2016-2017 Continued growth in visitor numbers from key markets underpins

achieving long term demand

TOTAL AUSTRALIAN MAJOR CITIES (WEIGHTED) – HMGSA (UPDATE)

Series Break


AUSTRALIA AT A GLANCE 2011 National revPAR for 2011 increased by 4.6%, slightly below our 5.3% forecast, as market conditions and sentiment softened slightly in the second half of the year.

OCCUPANCY – ACTUAL & % CHANGE 2011

ARR – ACTUAL & % CHANGE 2011

RevPAR – ACTUAL & % CHANGE 2011

SUPPLY AND DEMAND % CHANGE 2011

- 0.1


CITY SUMMARIES

City 3 Year RevPAR

Outlook Comment Key Driver

Adelaide 1.5% Upgraded performance in the short term however an influx of medium term supply will temper hotel performance

Demand Driven Supply

Brisbane 5.2% Strong short term supports additional supply with good demand drivers to absorb

Rate

Cairns & Port Douglas

6.4% The recovery continues with good medium term prospects Rate

Canberra 3.0% Stronger rate growth and sustained higher occupancy expectations underpin a RevPAR growth upgrade

General Market Improvement

Darwin 7.1% Strong outperformance in 2012, improved demand Rate

Gold Coast 6.4% Strong demand growth, reduced supply fuelling a medium term upgrade

Demand

Hobart 2.7% Moderate upgrade as all key indicators improve slightly General Market Improvement

Melbourne 4.9% Medium term RevPAR growth of 4.9%, tempered by some supply, soft 2012 leads to a minor downgrade

Rate

Perth 6.2% Strong uplift in forecasts with increased demand and rate and unchanged supply expectations

Rate, supported by increased supply

Sydney 5.8% Downgraded in the short term due to soft 2012 demand but expected to recover through the forecast period to 2020

Rate

Australia 5.2% Strong growth tempered by softer performance on 2012 Rate


FORECASTING RELIABILITY

Hotel Futures RevPAR Forecast History for 2011 - Australia

Hotel Futures RevPAR Forecast History for 2015 - Australia

Forecasting hotel performance in Australia can be reliable

2011 Forecasts and Actual Performance

2011 actual revenue performance was consistent with expectations held over the previous five years despite the GFC

In 2007 we predicted Australian capital city RevPAR would be $128 in 2011

Despite the GFC actual revPAR was only 3% below that expectation

The expectation changed little over the 5 years

The market response to supply corrected for the change in circumstances.

Actual supply in 2011 was 87,000 rooms

In 2007 101,000 rooms were anticipated for 2011

The market responded by cancelling projects a conditions deteriorated

2015 Forecast

Our 2015 expectations have consistently improved over time despite the GFC. Current expectations have reduced risk due to proximity

In 2007 we predicted Australian capital city revPAR would be $135.80

The Australian Hotel Market weathered the GFC much better than most of the world, although our forecasts were somewhat tempered through 2009-2010

Our 2011 forecast included a stronger upgrade than prior years as the market came through the GFC with limited new supply and continued strong demand

Our 2012 forecasts are for Australian capital city revPAR of $145.10

The stability of forecasts for the Australian hotel market is also true for most of the major cities covered in Hotel Futures


MARKET TRENDS

In 2012 sales in excess of $1.4B have occurred exceeding the prior 2 years where transactions were also over $1B. Hotel development activity continue to increase

Hotel Market Transactions - YTD 2012

Transaction volumes remained high, continuing 2010 & 2011 trend

Half year sales exceeded $700m

Offshore buyers continue to dominate, particularly SE Asia

A significant proportion of offerings remain bank instructed sales and portfolio rebalancing

The largest transaction to date is CHPF Investment Fund’s $415m sale of 3 Marriot hotels (due to the fund termination) to a Malaysian based REIT

Larger owner/operators also more active buyers, e.g. Shangri-la, Silverneedle, Langham

Many regional assets remain on the market, often >12 months, particularly leisure based

Some owners are now holding to capitalise on improved market conditions in CBD areas

Still a gap between buyer & vendor price expectations outside CBD’s

Values still below pre GFC levels, further recovery expected in the short term for CBD assets given continued rebound in corporate travel and limited supply

Hotel Development

Proposal Activity Increasing

Actual hotel openings have again been below market requirements

2012 has seen more proposal activity across several fronts

State and federal government actively participating in the facilitation of hotel investment both locally and overseas (particularly SE Asia and China)

Sydney opened 1st 5 star hotel in Sydney CBD since the Olympics

Any proposal activity will take a minimum of 3 years to arrive

KEY TRANSACTIONS – November YTD 2012

Palazzo Versace Gold Coast to 2 Chinese companies, $68.5m

Port Headland Esplanade Hotel to Con Berbatis and Fonda Group (Australia), $30m

Novotel Melbourne St Kilda to Barana Group (Australia), $55m

Crowne Plaza Hunter Valley to Swartz Family company, $45m

Seahaven Beachfront Resort Noosa to Unison Property Group (Australia), $40m

Hotel Enterprise (to be renamed The Great Southern Hotel Melbourne) to Singaporean syndicate that owns Sydney’s Great Southern Hotel, $23m

Shangri-la Hotel Sydney to Shangri-la Hotels and Resorts (HK), $330m

Rendezvous Grand Hotel Melbourne to Rendezvous Hotel Management/Straits Trading Company (Singapore), $61m

Marriot Sydney, Brisbane & Melbourne to Starhill REIT (Malaysia), $415m

Esplanade Hotel Fremantle to an Australian Sydnicate, $90m

Citigate Perth to GIC (Singapore) & Host Hotels & Resorts (US), $61m

Holiday Inn Brisbane to Shangri-la (HK), $50m

Observatory Hotel Sydney, to Langham Hospitality Group (HK), $40m

Perth Waterfront Development


ARRIVALS AND DEPARTURES

Source: ABS

Resident Departures

Domestic departures were up 9.6% in 2011 thanks to strong June and September quarters

October 2012 domestic departures were up by only 2.1% compared with October 2011September 2011.

October YTD domestic departures are up 5.2% compared to the prior corresponding period Very strong February and March Partially offset by a 4.1% decline in April Changes affected by Easter Holidays in April 2011 and March in

2012 Patterns for 2012, particularly the second indicate that domestic

departure growth rates may have peaked

New Zealand and Asia continue to be the key destinations for overseas travel by Australians

Holiday’s now make up over 50% of all overseas departures

Visitor Arrivals

International arrivals fell marginally by 0.2% in cy2011 due to a weak September, quarter down 2.5%

October 2012 international arrivals were up 3.1% and follows strong results in August and September with growth of 6.2% and 9.6% respectively

July slightly down by 1.1%. October YTD visitor arrivals are up 4.0% on 2011 with only Feb (-

0.5%) and July (-1.1%)showing a decline in visitor numbers All signs point to a strong year with high seasons remaining 2012 is only the 2nd year since 2005 where international visitor

numbers have risen by more than 2%

Source: ABS

The net visitor departures outlook is improving, enhancing demand growth


National Demand 2011

In CY 2011 demand for accommodation increased by 1.1% (forecast 2.6%) across the ten cities covered by Hotel Futures, the 4th smallest gain in the last 10 years Canberra (-7.1%), Gold Coast (-3.6%), Darwin (-2.0%) and Sydney (-0.4%) all

experienced declines in demand in 2011 Melbourne (6.7%) was the only city to experience annual growth over 5% driven by

large supply increases Continued high occupancy levels during the week is making demand growth from the

strong business sector difficult, particularly in Brisbane and Sydney In the 1st half of 2012 national average demand growth was 2.8% (1st half growth in 2011

of 1.7%), led by Gold Coast (7.5%), Perth (6.8%) and Brisbane (5.6%) Canberra (-0.9%) was the only city to experience a decline in demand

Needs to be updated

Tourism Forecasting Committee Summary – Issue 2 November

The 2012 November Forecast to FY22 represents:- A significant increase in both short and long term domestic visitor nights off a

higher base (results in an additional 30M nights in FY21) A minor downgrade (0.1%) in long term international visitor arrivals

The average length of stay for an international visitor is 34.7 nights up from 33.9 in FY 2011

11.8% of the international visitor nights spent in Australia are spent in HMGSA down from 12.9% in FY2011 and well below the highs of 18.7% in FY2005

Australia spent 283.9 million nights away from home visiting other areas of Australia, compared with 266.2 in FY2011 up 6.7%

27.1% of the domestic nights away from home were spent in HMGSA down from 28.1% in FY 2011

Outbound Travel Forecasts

The TFC have forecast a 6.9% increase in short term departures for FY13 following the three prior years of high annual growth over7.5%

This is above current results with YTD September departures 5.6% higher than the prior corresponding period

Long term outbound growth forecasts have been marginally upgraded to 3.9% from 3.8% in May 2012. Both represent an upgrade through the medium term compared with 2011 TFC publications relied on in last years Hotel Futures forecasts

Source: TFC Forecast 2012 Issue 2

DEMAND

Int ArrivalsInt Vis

Nights

Dom Vis

Nights

Int Vis Nights

in HMGSA

Dom Vis Nights

in HMGSA

FY2012 1.2% 3.8% 6.7% -5.1% 2.9%

FY02-FY12 1.7% 4.4% -0.2% 1.2% 0.1%

FY8-FY12 1.2% 4.4% -0.3% -3.3% -0.6%

FY13-FY17 3.5% 4.1% 1.2% 3.6% 1.5%

FY13-FY22 3.2% 4.0% 0.8% 3.3% 1.1%

Ac

tua

lF

ore

ca

st Forecast by Tourism Forecating Committee Nov 12

Inbound v Outbound Visitors Growth Forecast

Source: TFC Forecast 2012 Issue 2


Country Visitors Market % Country Visitor Nights Market %

1 New Zealand 1,191 19.9% 1 China 26.9 12.9%

2 UK 597 10.0% 2 UK 21.7 10.4%

3 China 583 9.7% 3 New Zealand 16.7 8.0%

4 USA 464 7.8% 4 South Korea 13.3 6.4%

5 Japan 344 5.8% 5 USA 10.8 5.2%

6 Singapore 320 5.4% 6 India 8.9 4.3%

1 New Zealand 1,418 17.3% 1 China 52.6 17.2%

2 China 1,039 12.7% 2 UK 25.6 8.4%

3 UK 717 8.7% 3 New Zealand 20 6.5%

4 USA 927 11.3% 4 India 18.1 5.9%

5 Singapore 416 5.1% 5 South Korea 18.4 6.0%

6 Japan 402 4.9% 6 USA 14.9 4.9%

Source: TFC forecast 2012 Issue 2

FY2012 (Actual)

FY2021 (TFC Forecast)

VISITORS ('000s) VISITOR NIGHTS (M)

FY2022 (TFC Forecast)

FY2012 (Actual)

TFC INTERNATIONAL FORECASTS

Long term visitor forecasts represent a slight downgrade with average growth of 3.3% expected in the period to 2021 (3.5% previous forecast)

In FY2011 international visitors accounted for 25.3% of total visitor nights spent in HMGSA slightly up on FY2010 (24.4%)

In capital cities international visitor nights made up 31.9% of total nights in HMGSA for CY2011 down from 33.4%

Melbourne and Perth bucked the trend with both growing their international visitor nights and forecast market mix

According to the TFC international arrivals increased 3.8% during the 12 months to June 2011 to 5.907 million

International visitor nights are forecast to grow 2.7% to 213 million for FY2013 China will continue to expand its market share with visitor arrivals growing to 12.7% in

FY22 (from 8.4%)

TFC DOMESTIC FORECASTS

Long term domestic visitor night forecasts in HMGSA have been upgraded to annual growth of 1.1% from 0.7% to reach 85.4M by FY22 (previously 78.6M)

In FY2012 the domestic sector accounted for 75.9% of total visitor nights in HMGSA in line with FY2010

In FY2012 domestic visitor nights increased by a healthy 6.7% with domestic visitor nights in HMGSA increasing by 2.9% to 76.9 million visitor nights

The November 2012 forecast for long term domestic visitor night growth has been upgraded from the November 2011 forecasts to annual growth of 0.8% for the period to FY2022

Visitor nights are now expected to reach 306.9M by 2020 (previously 267.2M) The share of total visitor nights staying in HMGSA is forecast to remain largely stable at

27.7% Domestic visitor night mix is forecast to fall to 32.8% for capital cities in FY 2022 (FY2012

39.6%)

CAPITAL CITY DOMESTIC VISITOR NIGHT MIX FY11 & FY21

INTERNATIONAL VISITOR ORIGIN MOVEMENT FY11-FY21

DEMAND


National Supply

In 2011 Australian major city hotel supply increased by 1.2%, slightly higher than the 0.7% increase in 2010 2011 represents the 10th consecutive year with annual supply growth of less than 3% A net total increase of 10,300 or only 13% of rooms have been added since 2000 Melbourne again recorded the largest supply growth with a 6.7% increase in room stock, following

5.2% in 2010 Four cities recorded a contraction in supply with Canberra (-3.7%) leading the way followed by Darwin

(-2%), Cairns (-1.8%) and Sydney (-0.7%) Excluding adjustments for changes in ABS boundaries supply is expected to increase by 1.9% across all

cities in 2012 and is below prior expectations. Government bodies, such as Tourism Australia and Tourism NSW are actively participating in the

promotion of hotel development with a focus on funding out of Asia. This together with a shift in local policy should see feasible hotel developments become more readily achievable

Hotel Futures 2012 represents a slight down grade in supply forecasts to prior expectations In 2012 supply is forecast to grow 1.9%, a slight downgrade to our 2011 forecasts Australia market supply growth of 2.5% is expected over the medium term to 2014 a moderate

downgrade as earlier market response estimates are not fulfilled due to reduced current growth Our national long term forecast is for an increase in supply of 2.9% and is marginally below forecasts in

Hotel Futures 2011 with the focus on the next major supply cycle through 2015-2017.

City

2000 2011 # %

Melbourne 10,966 17,114 6,147 56.1

Darwin 2,599 3,672 1,073 41.3

Adelaide 3,523 4,598 1,075 30.5

Brisbane 6,555 8,238 1,683 25.7

Hobart 2,090 2,597 506 24.2

Perth 5,169 5,820 651 12.6

Cairns 6,916 7,396 480 6.9

Gold Coast 13,249 13,114 -136 -1.0

Sydney 20,669 19,770 -899 -4.4

Canberra 5,022 4,761 -261 -5.2

Australia 76,760 87,079 10,319 13.4

Source: ABS

City

2011 2020 # %

Sydney 19,770 30,101 10,331 52.3

Perth 5,820 8,226 2,406 41.3

Brisbane 8,238 11,157 2,918 35.4

Melbourne 17,114 21,706 4,592 26.8

Canberra 4,761 5,916 1,155 24.3

Hobart 2,597 3,204 607 23.4

Gold Coast 13,114 15,549 2,435 18.6

Darwin 3,672 4,312 640 17.4

Adelaide 4,598 5,335 736 16.0

Cairns 7,396 8,331 935 12.6

Australia 87,079 113,836 26,756 30.7

Source: ABS & Dransfield Hotels and Resorts

Rooms Growth

Rooms Growth

Supply Since 2000

Forecast to 2020

Source: ABS & Dransfield Hotels and Resorts

Major City Supply Growth Performance and Forecasts to 2020 (excluding 2012 boundary adjustments)

SUPPLY

2012 2012-2014 2012-2016 2012-2020

1Yr 3Yrs 5Yrs 9Yrs

Construction 63% 38% 17% 10%

Proposals -2% 8% 19% 14%

Market Response 38% 22% 64% 76%

Major City Supply Growth Forecasts by Type to 2020

Our five year outlook is based on supply forecasts where 64% of new rooms have not yet been commercialised but are an anticipated response to conditions. There is significant scope for the market to flex up or down from this level depending on short to medium term market conditions

Of the 25,000 additional rooms forecast to 2020 approximately 75% are attributable to market response


2011 Year in Review

In 2011 Adelaide hotels revPAR declined by 2.2% improved over our 3.2% forecast decline

One of only 2 cities to experience a decline in revPAR.

Performance well below the capital city average of 4.6%

Supply of 7.3% (314 rooms) was not fully absorbed

ADELAIDE Upgraded performance in the short term however an influx of medium term supply will temper hotel performance

Supply

In 2011 Adelaide's room stock increased by 7.3% and slightly below 9.1% expectations

Actual hotel rooms increased by 200 rooms

Supply has experienced 4 years of consecutive growth after 3 years of consolidation with absolute room numbers back above the previous high of 2004

Despite a delay in projects in the short term the 2012 forecast represents an upgrade to prior supply expectations as a supply cycle commences. This is largely due to a number of new projects being announced

Supply growth for 2012 is expected to be a low 1% and slightly below previous forecasts for 1.5% growth

Supply increases in the medium term are expected to be a strong 5.1% (approximately 800 rooms) and above prior expectations

Long term supply growth is expected to average 3% over the forecast period to 2020 and represents an upgrade of about 5% to the prior years forecast

Market response makes up 26% of all supply in the next 5 years to 2016 with a high level of proposals increasing supply certainty

Adelaide supply will see strong relative growth over the medium term with the identified proposals being backed by reputable developers with operators secured

Supply Actual & Forecast by Type 2008-2020

2011

FORECAST

ACTUAL

2011

RevPAR -3.2% -2.2% 1.1% ▲

Supply 9.1% 7.3% -1.7% ▼

Demand 4.5% 4.3% -0.2% ▼

Occupancy 73.4% 74.5% 1.1% ▲

ARR 1.0% 0.7% -0.3% ▼

Var

Establishments Rooms RevPAR

Adelaide City 44 4,700 $109.45

Adelaide Tourism Region

Hotels 32 3,728 $115.44

Motels 49 2,039 $64.67

Serviced Apartments 21 1,462 $112.36

Total 102 7,229 $100.50

Star Grading

5-star 5 n.p. n.p.

4-star 38 3,809 $117.75

3-star 42 1,559 $62.37

Other 17 n.p. n.p.

Total 102 7,229 $100.20

Adelaide Regions – December 2011

2012 YTD Performance

Despite a weak June Qtr. Adelaide hotels have recorded YTD revPAR growth of 3.1%

Rate growth of 2.2% was the key driver of the YTD performance and is most likely a result of new product in the market

Occupancies increased marginally by 0.7 points thanks to a 1.1% increase in demand



Demand

In 2011 demand for Adelaide hotels increased by 4.3% in line with expectations

International visitors declined 5.3% and visitor nights declined 3.6%

Domestic visitors increased 9.9% and visitor nights increased 4.5%

Adelaide hotels domestic visitor night content increased from an already high 77% to 80.7%

The TFC forecasts for Adelaide for the period to FY22 are an upgrade and are:-

Annual domestic visitor night growth of 1.0% vs. 0.3% previously

Annual international visitor night growth of 3.5% vs. 2.7% previously

Hotel Futures 2012 represents an upgrade in hotel demand compared to the previous forecast, in line with upgrades to the TFC visitor forecasts

Stronger performances in the second half of the year should see annual demand of 2.5%, above 2.0% prior expectations

Medium term demand growth to 2014 is expected to average 4.2% as a result of the influence of new supply

Long term growth of 3.2% is expected. This represents an upgrade to our forecasts in Hotel Futures 2011

Conclusion

Occupancy is expected to be stable for the next two years

A moderate increase in demand together with small supply growth should see occupancies for the Adelaide market increase to 75.6% for 2012 (up 1.1 points)

Occupancy remains largely unchanged with demand growing at a slightly higher rate than supply.

The 10% increase in supply expected in 2014, and 4% in 2015, will take a number of years to be fully absorbed

Limited rate growth opportunity as a result of sub 80% occupancy and moderate demand growth should see average rates grow by around 2% in 2012

Overall the 2012 forecast represents a small -0.2% downgrade in real RevPAR over the period to 2019, due to softer performance expectations in the medium to long term

In 2012, RevPAR is expected to grow 3.5% representing an upgrade from prior forecasts, and from a higher base

Adelaide hotel performance is forecast to soften over the medium term affected by the influx of supply in 2014 and 2015. This represent a marginal downgrade to the previous forecast

Long term growth of 3.3% is forecast to 2020

The key forecast driver is healthy rate growth of 3%, or greater, for the period 2016-20

Improved international air access may help Adelaide exceed current forecasts

ADELAIDE

Source: Australian Bureau of Statistics / Dransfield. *Room numbers are annualised.

Note: Growth rates for 2003 have been adjusted as advised by the ABS following the break in the time

series

Titles not printed out in full

- Across all cities

Supply Demand


Chng Chng Chng Chng

2000 3,523 5.4% 6.5% $110.42 -0.6% $75.25 0.4% 68.1%

2001 3,548 0.7% 0.9% $110.75 0.3% $75.61 0.5% 68.3%

2002 3,931 10.8% 10.6% $111.35 0.5% $75.88 0.4% 68.1%

2003 4,217 7.3% 3.3% $112.62 1.1% $73.88 -2.6% 65.6%

2004 4,467 5.9% 8.1% $113.66 0.9% $76.08 3.0% 66.9%

2005 4,379 -2.0% 4.2% $113.19 -0.4% $80.53 5.8% 71.1%

2006 4,206 -4.0% 4.0% $121.79 7.6% $93.82 16.5% 77.0%

2007 4,116 -2.1% -0.9% $132.24 8.6% $103.13 9.9% 78.0%

2008 4,169 1.3% 0.4% $142.27 7.6% $109.97 6.6% 77.3%

2009 4,223 1.3% -1.3% $139.92 -1.6% $105.37 -4.2% 75.3%

2010 4,284 1.4% 3.2% $141.84 1.4% $108.66 3.1% 76.6%

2011 4,598 7.3% 4.3% $142.77 0.7% $106.32 -2.2% 74.5%

3.4% 4.1% 2.3% 3.1%

Avg 2002-2011 2.7% 3.6% 2.6% 3.6% 73.1%

Avg 2009-2011 3.4% 2.1% 0.1% -1.1% 75.5%

2012 4,644 1.0% 2.5% $145.63 2.0% $110.06 3.5% 75.6%

2013 4,814 3.6% 3.0% $150.00 3.0% $112.65 2.4% 75.1%

2014 5,326 10.6% 7.0% $153.00 2.0% $111.12 -1.4% 72.6%

Avg 2012 - 2014 5.1% 4.2% 2.3% 1.5% 74.4%

2015 5,539 4.0% 3.0% $156.06 2.0% $112.25 1.0% 71.9%

2016 5,671 2.4% 3.0% $160.74 3.0% $116.33 3.6% 72.4%

2017 5,727 1.0% 2.5% $165.56 3.0% $121.60 4.5% 73.4%

2018 5,784 1.0% 2.5% $172.18 4.0% $128.34 5.5% 74.5%

2019 5,871 1.5% 2.5% $179.07 4.0% $134.79 5.0% 75.3%

2020 5,959 1.5% 2.5% $186.23 4.0% $141.56 5.0% 76.0%

Avg 2015 - 2020 1.9% 2.7% 3.3% 4.1% 73.9%

3.0% 3.2% 3.0% 3.3% 74.1%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Brisbane hotels recorded significant revPAR growth of 7.6% in line with our forecasts

RevPAR growth driven by strong rate growth of 6.1% and a moderate increase in demand above minimal supply growth

One of 3 cities with occupancy in excess of 80%, increasing 1.5% from the previous year

Supply

In 2011 Brisbane supply increased 1.2% and marginally below 1.5% expectations

Minimal supply growth over the past 3 years – 1.8% since 2008

Supply expectations represent an upgrade on the long term previous forecast as a result of improved market conditions and continued delayed supply.

Supply growth for 2012 is a nominal 1.0% which represents a downgrade to the previous forecast.

Increases in supply over the medium term are forecast at 3.5%, as we see a couple of key projects coming on line. This is below prior expectations

Long term supply growth is expected to average 3.9% over the forecast period to 2020 and represents an upgrade on previous forecasts leading to an overall upgrade.

The market response component of supply represents the majority of supply expectations

Over 70% of all future supply and is dependent on continued favorable operating conditions

Market response makes up 59% of all supply in the next 5 years to 2016


Brisbane Regions – December 2011


June YTD the Brisbane Hotel market has continued to record strong RevPAR growth of 8% vs. forecast of 5%

Limited supply growth of 2% against healthy demand growth of 5.6% has helped already strong occupancy levels (78.4%)

Rate growth of 4.4% builds on a strong 1H2011 (6.4% rate growth)

BRISBANE

2011

FORECAST

ACTUAL

2011

RevPAR 7.6% 7.6% 0.1% ▲

Supply 1.5% 1.2% -0.3% ▼

Demand 3.0% 2.7% -0.3% ▼

Occupancy 80.0% 80.0% 0.0% ▲

ARR 6.0% 6.1% 0.1% ▲

Var


Brisbane City Core 73 8,245 $144.84

Brisbane Tourism Region Hotels/Motels

Hotels 31 4,208 $153.29

Motels 91 3,954 $93.30


Total 192 12,958 $125.17

Star Grading

5-star 6 1,337 $195.27

4-star 78 7,391 $134.03

3-star 94 3,788 $90.37

Other 14 442 $63.21

Total 192 12,958 $125.17

Strong short term supports additional supply with good demand drivers to absorb


Brisbane – City Core

Demand

In 2011 demand for Brisbane hotels increased by 2.7% and slightly below expectations, constrained by lack of availability during the week

International visitors declined 6.9% whilst visitor nights increased 8.2%

Domestic visitors increased 1.3% and visitor nights decreased 2.3%

Brisbane hotels domestic visitor nights content increased to 74.8%

The TFC forecasts for Brisbane for the period to FY22 have increased and are:-



Continual strong performance of the Brisbane market has resulted in an upgrade of the demand forecast

Demand growth of 3.0% is forecast for 2012 which is consistent with our 2011 expectations

Medium term demand growth to 2014 is forecast to average 4.3% and represents an upgrade to prior year forecasts . This is consistent with upgraded TFC forecasts and supported by projects including the RNA redevelopment and the revamp of the Brisbane Convention Centre

Over the term of the forecast demand growth is set to average 3.8% and is an upgrade to prior expectations

Conclusion

Occupancy in Brisbane is high and likely to remain so

The lack of meaningful supply over the past few years has seen annual occupancies exceed 80%

Forecast to continue through the medium term until the next supply cycle kicks in

Rate forecasts are strong in the medium term buoyed by an upgrade in demand forecasts coupled with delays in supply. The 2012 rate forecast represents an upgrade on prior expectations

Overall the forecast represents a healthy 6.2% upgrade in real revPAR over the period to 2019, as the market benefits from improved short term conditions

In 2012 revPAR is expected to grow by 7.1%, representing an upgrade to our prior 5% forecast

Brisbane hotels are expected to perform above prior expectations in the medium term to 2014 with revPAR growth of 5.2% compared with 2.3% in Hotel Futures 2011

• Lack of meaningful new supply promotes confidence to move on rate

• Level of risk in the medium term if business confidence, particularly mining related, falls

Our long term forecast to 2020 represents an overall upgrade with forecast average growth of 2.9% vs. 2.6% in Hotel Futures 2011

• There is a softening in the current forecast for the period 2015-17 as the market absorbs significant new supply.



series

BRISBANE

Supply Demand


Chng Chng Chng Chng

2000 6,555 2.2% 3.2% $98.95 -2.8% $63.77 -1.9% 64.4%

2001 6,312 -3.7% 5.2% $101.99 3.1% $71.79 12.6% 70.4%

2002 6,140 -2.7% -0.5% $103.80 1.8% $74.71 4.1% 72.0%

2003 6,064 -1.2% 4.5% $110.34 6.3% $84.03 12.5% 76.2%

2004 6,151 1.4% 5.6% $115.32 4.5% $91.39 8.8% 79.2%

2005 6,423 4.4% 4.0% $128.49 11.4% $101.38 10.9% 78.9%

2006 6,791 5.7% 8.3% $140.83 9.6% $113.86 12.3% 80.8%

2007 7,071 4.1% 4.9% $151.97 7.9% $123.83 8.8% 81.5%

2008 7,795 10.2% 6.1% $160.58 5.7% $125.94 1.7% 78.4%

2009 8,053 3.3% -1.6% $154.08 -4.0% $115.13 -8.6% 74.7%

2010 8,137 1.1% 6.6% $160.14 3.9% $126.27 9.7% 78.8%

2011 8,238 1.2% 2.7% $169.84 6.1% $135.90 7.6% 80.0%

3.7% 4.0% 2.4% 3.1% 71.3%

Avg 2002-2011 2.8% 4.1% 5.3% 6.8% 78.1%

Avg 2009-2011 1.9% 2.6% 2.0% 2.9% 77.9%

2012 8,321 1.0% 3.0% $178.33 5.0% $145.52 7.1% 81.6%

2013 8,597 3.3% 4.0% $187.25 5.0% $153.79 5.7% 82.1%

2014 9,130 6.2% 6.0% $192.87 3.0% $158.12 2.8% 82.0%

Avg 2012 - 2014 3.5% 4.3% 4.3% 5.2% 81.9%

2015 9,874 8.2% 6.0% $194.80 1.0% $156.52 -1.0% 80.4%

2016 10,608 7.4% 4.0% $198.69 2.0% $154.54 -1.3% 77.8%

2017 11,139 5.0% 3.0% $202.66 2.0% $154.63 0.1% 76.3%

2018 11,362 2.0% 5.0% $208.74 3.0% $163.95 6.0% 78.5%

2019 11,475 1.0% 1.0% $215.01 3.0% $168.87 3.0% 78.5%

2020 11,590 1.0% 2.0% $221.46 3.0% $175.66 4.0% 79.3%

Avg 2015 - 2020 4.1% 3.5% 2.3% 1.8% 78.5%

3.9% 3.8% 3.0% 2.9% 79.6%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Cairns hotels recorded revPAR growth of 2.9% and below our 4% forecast

A slight increase in demand, albeit weaker than expected, against a reduction in supply was the key driver

Despite a reduction in supply hoteliers did not grow rate with it falling marginally, suggesting they are still chasing occupancy which increased 3.5% to 62.4%

Supply

For the second consecutive year the Cairns market experienced a decline in supply. Supply reduced by 1.8% and larger than 1% expectations.

The reduction is a combination of hotel closures and lower participation rates for strata owners in letting pools

Our 2012 forecast is based on a change in boundaries and now includes the regions of Cairns City and Port Douglass. To allow for this change, we have made a one time adjustment to supply increasing 2012 by 3.5%

Supply expectations, excluding boundary adjustments, are unchanged to the prior years forecasts

Current market conditions are not considered conducive to development for the short to medium term

Short term forecasts for 2012 are for no supply growth (excluding boundary adjustments)

Medium term forecasts are for low average growth of 0.7%

Long term forecasts of 1.3% show some strengthening in the back half of the forecast but not to a level that would be considered meaningful. Should the market continue to strengthen there is the possibility these forecasts could be exceeded

Market response makes up 100% of all supply in the next 5 years to 2016, no substantial construction or proposal activity

The focus will be a refurbishment rather than a new build for the short to medium term


Cairns Regions – December 2011


The Cairns hotel market has recorded solid RevPAR growth of 6.6% YTD slightly exceeding our 6.1% expectations

Represents a discount of 11% on peak RevPAR levels of 2006

Supply decreased by 1.7% and is down a total of 4.5% since December 2009

Despite a 2.7 point increase in occupancy the market still sits at a low 55.9%

CAIRNS & PORT DOUGLAS

2011

FORECAST

ACTUAL

2011

RevPAR 4.0% 2.9% -1.1% ▼

Supply -1.0% -1.8% -0.8% ▼

Demand 3.0% 1.7% -1.3% ▼

Occupancy 62.7% 62.4% -0.3% ▼

ARR 0.0% -0.6% -0.6% ▼

Var

Boundary adjustment +3.5%

The recovery continues with good medium term prospects

Cairns/TNQ Hotels Establishments Rooms RevPAR

Cairns City & Suburbs 96 7,372

Hotels 36 4,103 $79.97

Motels 59 3,046 $57.48


Total 173 10,904 $66.92

Port Douglas 44 2,508


Cairns & Port Douglas Region

Demand

In 2011 demand for Cairns hotels increased by 1.7% and below 3% expectations

International visitors to Tropical North Queensland declined by 14.4% and visitor nights declined 16.5%

Domestic visitors increased 9.7% with visitor nights decreasing 9.6%

Cairns hotels domestic visitor nights content increased from 60.9% to 67.9%

The TFC forecasts for Queensland excluding Brisbane have been upgraded for the period to FY22 and are:-

Annual domestic visitor night growth of 0.7% vs. 0% previously

Annual international visitor night growth of 4.4 % vs. 2.8% previously

Passengers through Cairns international airport are forecast to double within 20 years on the back of the Chinese market, averaging 3.7% annually and in line with the national average

Demand forecasts for 2012 represent a slight upgrade on 2011 expectations as the Cairns market continues its recovery with international visitors returning to the market

A 2% one time reduction has been made to allow for the inclusion of Port Douglas as Port Douglas resorts typically operate at a lower occupancy than Cairns hotels

Demand growth of 3% in line with prior expectations, excluding boundary adjustments

Medium term hotel demand growth of 3.7% is an upgrade on 2.8% prior expectations and are in line with expected market improvements in visitors

Long term demand growth of 2.9% represents a small upgrade on the 2.7% forecast from 2011

Continued efforts to increase air access to the region could see the market exceed forecasts

Conclusion

Occupancy is low but improving

Occupancies forecast of 65.5% to 2020, are still down some 5 points compared with market highs experienced through 2005-06

Whilst they are not forecast to return to 2006 levels, the forecast represents a vast improvement on recent times

As the market continues to string together periods of growth, hoteliers should gain confidence to move on rates following four years of decline. We have forecast strong rate growth over the medium term to see Cairns surpass previous highs by 2013

Organic rate growth of 4% is forecast and above prior expectations

The inclusion of the Port Douglas market has pushed up rates as it typically has higher daily rates than the cairns market

We have made a one time 3.5% adjustment to the expected rate growth for the market

Overall our forecast represents a 2.2% upgrade in real revPAR over the period to 2019 as the medium term looks positive

In 2012 revPAR is expected to grow by 4.9%. Cairns region forecasts for this period were 6.1% in prior year expectations. The region adjustment has affected the recorded RevPAR performance

In the medium term to 2014 Cairns and Port Douglas hotels are forecast to grow revPAR at 6.4%, which is an upgrade on the prior forecasts for the Cairns region

Our long term forecast to 2020 signals strong average growth of 4.9% compared to previous expectations of 4.8%



series

CAIRNS & PORT DOUGLAS

Supply Demand


Chng Chng Chng Chng

2000 6,916 1.2% 0.7% $98.11 -1.3% $63.60 -1.8% 64.8%

2001 7,048 1.9% 2.6% $98.11 0.0% $64.03 0.7% 65.3%

2002 7,011 -0.5% 1.0% $100.01 1.9% $66.25 3.5% 66.2%

2003 7,337 4.6% 5.9% $99.51 -0.5% $66.73 0.7% 67.1%

2004 7,623 3.9% 8.3% $105.26 5.8% $73.54 10.2% 69.9%

2005 7,499 -1.6% -0.6% $110.83 5.3% $78.22 6.4% 70.6%

2006 7,366 -1.8% -1.3% $117.58 6.1% $83.40 6.6% 70.9%

2007 7,584 3.0% -1.9% $120.95 2.9% $81.76 -2.0% 67.6%

2008 7,717 1.8% -6.9% $119.80 -0.9% $74.13 -9.3% 61.9%

2009 7,748 0.4% -4.6% $110.57 -7.7% $65.03 -12.3% 58.8%

2010 7,532 -2.8% -0.4% $108.76 -1.6% $65.53 0.8% 60.3%

2011 7,396 -1.8% 1.7% $108.12 -0.6% $67.46 2.9% 62.4%

4.3% 4.1% 2.1% 2.2% 66.6%

Avg 2002-2011 0.5% 0.1% 1.1% 0.8% 65.6%

Avg 2009-2011 -1.4% -1.1% -3.3% -2.9% 60.5%

2012 7,655 3.5% 1.0% $116.23 7.5% $70.77 4.9% 60.9%

2013 7,731 1.0% 4.0% $120.88 4.0% $75.78 7.1% 62.7%

2014 7,809 1.0% 4.0% $125.72 4.0% $81.16 7.1% 64.6%

Avg 2012 - 2014 1.8% 3.0% 5.2% 6.4% 62.7%

2015 7,887 1.0% 2.5% $130.74 4.0% $85.66 5.5% 65.5%

2016 7,965 1.0% 2.5% $135.97 4.0% $90.40 5.5% 66.5%

2017 8,125 2.0% 2.5% $140.05 3.0% $93.57 3.5% 66.8%

2018 8,287 2.0% 2.5% $144.25 3.0% $96.85 3.5% 67.1%

2019 8,453 2.0% 2.5% $148.58 3.0% $100.25 3.5% 67.5%

2020 8,622 2.0% 2.5% $153.04 3.0% $103.76 3.5% 67.8%

Avg 2015 - 2020 1.7% 2.5% 3.3% 4.2% 66.9%

1.7% 2.7% 3.9% 4.9% 65.5%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)

Series Break


2011 Year in Review

In 2011 Canberra hotels’ revPAR increased by 2.3% and above our forecast of minimal growth

Despite a sharp drop in demand of 7.1% hoteliers were able to increase ARR by 6%, above our 3.5% forecast

The decline in demand was partially offset by a contraction in supply of 3.7%, resulting in occupancy falling 2.7 percentage points to 73.2%

Stronger rate growth and sustained higher occupancy expectations underpin a RevPAR growth upgrade

Supply

In 2011 Canberra supply fell by 3.7%, higher than our forecast for a 2.2% decline

A number of hotels were converted to better uses

Supply has been falling steadily since 2008

The Canberra market has been characterized more recently by hotel closures with 3 consecutive years of declining supply

The 2012 forecast represents a downgrade to the prior forecast as projects continue to be delayed with minimal development activity.

Supply growth for 2012 is expected to be a moderate 3.6% consistent with our HF2011 forecast

Average supply increases in the medium term are expected to be a moderate 3.2%, above our prior expectations of 2.1%, but off a lower supply base

Long term supply growth is expected to average 2.3% over the forecast period to 2020 consistent with prior expectations as the market response picks up

Market response accounts for over 80% of future supply expectations



Canberra Regions – December 2011


Canberra hotels’ YTD revPAR has increased by 4.7% to June

Despite a slight 0.9% dip in demand , hoteliers were able to deliver strong rate growth of 5.7%

Stable supply together with the slight fall in demand saw occupancy fall marginally to 71.2%

CANBERRA

Canberra Establishments Rooms RevPAR

Hotels 16 2,272 $121.25

Motels 20 1,399 $83.17


Total 53 4,899 $112.32

Star Grading

5-star 3 n.p n.p

4-star 32 3,083 $121.16

3-star 15 1,135 $80.40

Other 3 n.p n.p

Total 53 4,899 $112.32

2011

FORECAST

ACTUAL

2011

RevPAR 0.6% 2.3% 1.7% ▲

Supply -2.2% -3.7% -1.5% ▼

Demand -5.0% -7.1% -2.1% ▼

Occupancy 73.8% 73.2% -0.5% ▼

ARR 3.5% 6.0% 2.5% ▲

Var


Canberra Tourist Region

Demand

In 2011 demand for hotels in Canberra experienced a significant 7.1% decline, worse than our 5.0% expectations

International visitors increased 11.6% however visitor nights declined by 3.6%

Domestic visitors declined by 13.3% with visitor nights increasing by 3.7%

Despite this, the mix of Canberra hotels’ international and domestic visitor nights saw domestic nights decrease from 92% to 88%

The TFC forecasts for Canberra for the period to FY22 have improved and are:-

Annual domestic visitor night growth of 1.2% vs. 1% decline previously


Hotel Futures 2012 also represents an upgrade in hotel demand on the previous forecast, in line with upgrades in domestic visitor numbers provided by the TFC.

Demand growth is forecast at 3% for 2012 in line with prior expectations.

Medium term demand growth to 2014 is expected to average 3%, and above our previous forecast for stagnant demand, as a result of a recovery from the sharp decline in 2011

Long term growth of 2.6% is expected, above prior expectations of 1.8%

Conclusion

Occupancy is expected to remain fairly stable over the medium and long term

Positioned at around 72% consistent with prior expectations

Due to similar low growth rates expected in both supply and demand

Rates have risen

Despite the fall in occupancy since 2010, rates have continued to rise strongly, possibly due to a large number of refurbishments at major hotels and withdrawal of lower quality stock.

This trend is expected to continue with a long term rate growth of 2.9% expected, previously 2.3%

Overall our forecast represents a 9.3% upgrade in real revPAR over the period to 2019. This is due to expectations of stronger rate performance and sustained higher occupancies driven by improved demand with lower supply expectations

In 2012, revPAR is expected to increase by 3.9%, higher than our previous forecast of 1.1%

Medium term revPAR is expected to increase on average by 3%, moderating slightly but still well above our previous forecast of a 0.3% decline

Long term revPAR is forecast to increase on average by 3.2%, above our prior expectations of 1.8%



series

CANBERRA

Supply Demand


Chng Chng Chng Chng

2000 5,022 6.5% 5.4% $99.69 1.1% $59.93 0.0% 60.1%

2001 5,125 2.0% 5.1% $100.78 1.1% $62.37 4.1% 61.9%

2002 5,162 0.7% 2.5% $100.06 -0.7% $63.03 1.0% 63.0%

2003 5,049 -2.2% 2.9% $104.44 4.4% $69.22 9.8% 66.3%

2004 4,921 -2.5% -1.3% $106.08 1.6% $71.20 2.9% 67.1%

2005 4,947 0.5% 3.9% $110.64 4.3% $76.72 7.7% 69.3%

2006 5,003 1.1% 5.5% $118.07 6.7% $85.43 11.4% 72.4%

2007 4,971 -0.6% -0.2% $130.90 10.9% $95.10 11.3% 72.7%

2008 5,107 2.7% -2.0% $148.88 13.7% $103.20 8.5% 69.3%

2009 5,073 -0.7% 1.2% $146.04 -1.9% $103.12 -0.1% 70.6%

2010 4,944 -2.5% 4.8% $150.95 3.4% $114.59 11.1% 75.9%

2011 4,761 -3.7% -7.1% $160.04 6.0% $117.18 2.3% 73.2%

2.2% 3.0% 3.2% 4.0% 64.1%

Avg 2002-2011 -0.7% 1.0% 4.8% 6.6% 70.0%

Avg 2009-2011 -2.3% -0.4% 2.5% 4.4% 73.2%

2012 4,931 3.6% 3.0% $167.24 4.5% $121.78 3.9% 72.8%

2013 5,039 2.2% 2.0% $172.26 3.0% $125.20 2.8% 72.7%

2014 5,230 3.8% 4.0% $175.70 2.0% $127.96 2.2% 72.8%

Avg 2012 - 2014 3.2% 3.0% 3.2% 3.0% 72.8%

2015 5,439 4.0% 3.0% $179.22 2.0% $129.26 1.0% 72.1%

2016 5,603 3.0% 2.0% $184.59 3.0% $131.85 2.0% 71.4%

2017 5,715 2.0% 2.0% $190.13 3.0% $135.80 3.0% 71.4%

2018 5,800 1.5% 2.5% $195.84 3.0% $141.25 4.0% 72.1%

2019 5,829 0.5% 2.5% $201.71 3.0% $148.39 5.0% 73.6%

2020 5,859 0.5% 2.0% $207.76 3.0% $155.12 4.5% 74.7%

Avg 2015 - 2020 1.9% 2.3% 2.8% 3.3% 72.6%

2.3% 2.6% 2.9% 3.2% 72.6%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Darwin hotels recorded revPAR growth of 1.2% above our forecast of a slight decline

The modest growth in RevPAR was as a result of a 1.2% increase in ARR

A 2% decrease in demand for 2011 was met with an similar decline in supply

Supply

In 2011 Darwin’s room stock decreased by 2.0% compared to “as is” expectations

Hotel supply has reached its current peak in this cycle

A supply surge at the start of 2009 saw a 14% increase in room stock

As a result of a change to the recent ABS classifications we have adjusted the 2012 supply forecasts. This change represents a one time reduction in apparent supply of 5%

Supply expectations, excluding boundary adjustments represent a very marginal upgrade. LNG projects in the area may promote additional hotel development if recent conditions continue, but we would not expect to see openings any earlier than 2014

Supply growth for 2012 is expected to be a very low 0.6% (excluding boundary adjustments) attributable to recent expansion at Sky City Darwin

With little to no development activity in the medium term we have forecast average growth of just 1.8% which represents a downgrade on prior expectations as identified projects are delayed

Long term supply growth of 2.2% is a slight upgrade on prior expectations as a result of increased development through 2015 and 2016. This is in response to project related demand



Darwin Regions – December 2011


Year to date Darwin RevPAR has increased by 12.7% to June and well above full year expectations of 2.4%

Driven by healthy rate growth of 3.8% together with demand growth of 5.7%

The Demand growth is against a backdrop of a 2.6% decrease in supply which has see occupancy climb to 72.7%

DARWIN

Darwin Hotels/Motels Establishments Rooms RevPAR

Hotels 14 1,710 $92.75

Motels 14 656 $51.02


Total 42 3,625 $86.32

Star Grading

5-star 2 n.p. n.p.

4-star 18 2,368 $99.78

3-star 12 569 $49.39

Other 10 n.p. n.p.

Total 42 3,625 $86.32

2011

FORECAST

ACTUAL

2011

RevPAR -0.2% 1.2% 1.4% ▲

Supply 0.0% -2.0% -2.0% ▼

Demand -2.2% -2.0% 0.2% ▲

Occupancy 69.0% 70.6% 1.6% ▲

ARR 2.0% 1.2% -0.8% ▼

Var

Boundary adjustment -5%

Strong outperformance in 2012, improved demand upgrade


Darwin - City

Demand

2011 demand for Darwin hotels increased fell by 2.0% in line with expectations

International visitors grew 2.1% however international visitor nights decreased by 17.6%

Domestic visitors decreased 8.4% and visitor nights decreased 5.1%

Darwin hotels have a high 80.6% domestic content increasing from 74.8% in 2010

The TFC forecasts for Darwin for the period to FY22 are:-

Annual domestic visitor night growth of 0.8% vs. -0.8% previously


We have made an adjustment to demand expectations equating to a 5% reduction and equal to the supply adjustment

Hotel Futures 2012 represent an upgrade in demand on the prior years forecast as development projects associated with LNG mining and exploration drive up demand for short term accommodation

Following several quarters of demand growth greater than 5% we have upgraded our 2012 forecast to 6% growth (excluding boundary adjustments). This compares to 2% prior expectations in HF2011

Project demand is forecast to continue through the medium term with growth expectations of 4.3% representing a significant upgrade on prior forecasts

Current expectations are for development activity associated with these projects to be concluded by 2016. We have accordingly forecast a flat period in the longer term as the market returns to normal demand metrics. The long tem forecast for 2.7% growth is an upgrade on the 1.9% expectations in 2011

Conclusion

Occupancy has had a structural lift

The demand associated with major mining projects has underpinned typical low season volumes and created increased competition through the high season. This has the effect of increasing full year occupancy through the medium term

Average occupancy of 74.4% for the term of the forecast to 2020

Well above historical occupancy averages of 68.6% for the period 2002-2011

Good medium term opportunity flattening out

Recent strong demand has given hoteliers the confidence to increase rates, supported by the strong medium term growth. We have forecast a slowdown in rate growth in the longer term

Overall our forecast represents real revPAR growth of 9.9% on the previous forecast, as project related demand affects market outlook. However, market response in terms of new supply levels and rate growth tactics will affect longer term market performance

In 2012, revPAR is expected to grow 10.9% which is a significant upgrade on prior 2.4% expectations

Over the medium term to 2014 Darwin hotels should continue to benefit from project generated demand to deliver revPAR growth of 7.1% up from 2.2% previously

Longer term revPAR forecasts of 3.1% are affected by an expected post project downturn through 2017-2018, however still represent an upgrade on the 2.5% prior expectations



series

DARWIN

Supply Demand


Chng Chng Chng Chng

2000 2,599 -0.2% -0.5% $94.40 -1.4% $63.46 -1.6% 67.2%

2001 2,597 -0.1% -7.0% $95.27 0.9% $59.61 -6.1% 62.6%

2002 2,647 1.9% -0.5% $95.84 0.6% $58.55 -1.8% 61.1%

2003 2,647 0.0% -3.3% $101.55 6.0% $59.98 2.4% 59.1%

2004 2,736 3.3% 17.7% $104.15 2.6% $70.03 16.8% 67.2%

2005 2,871 4.9% 8.5% $111.96 7.5% $77.83 11.1% 69.5%

2006 2,897 0.9% 1.6% $116.89 4.4% $81.83 5.1% 70.0%

2007 2,848 -1.7% 3.7% $126.25 8.0% $93.21 13.9% 73.8%

2008 3,070 7.8% 9.3% $140.26 11.1% $105.01 12.7% 74.9%

2009 3,691 20.2% 11.2% $142.08 1.3% $98.37 -6.3% 69.2%

2010 3,746 1.5% 3.4% $140.83 -0.9% $99.38 1.0% 70.6%

2011 3,672 -2.0% -2.0% $142.52 1.2% $100.57 1.2% 70.6%

3.9% 5.2% 3.3% 4.8% 65.0%

Avg 2002-2011 3.7% 5.0% 4.2% 5.6% 68.6%

Avg 2009-2011 6.6% 4.2% 0.5% -1.4% 70.1%

2012 3,511 -4.4% 1.0% $149.64 5.0% $111.54 10.9% 74.5%

2013 3,559 1.3% 4.0% $157.12 5.0% $120.19 7.8% 76.5%

2014 3,683 3.5% 3.0% $161.84 3.0% $123.20 2.5% 76.1%

Avg 2012 - 2014 0.2% 2.7% 4.3% 7.1% 75.7%

2015 3,920 6.4% 4.0% $165.08 2.0% $122.80 -0.3% 74.4%

2016 4,076 4.0% 4.0% $168.38 2.0% $125.26 2.0% 74.4%

2017 4,117 1.0% 0.0% $168.38 0.0% $124.02 -1.0% 73.7%

2018 4,158 1.0% 0.0% $168.38 0.0% $122.79 -1.0% 72.9%

2019 4,200 1.0% 1.5% $173.43 3.0% $127.10 3.5% 73.3%

2020 4,242 1.0% 1.5% $178.63 3.0% $131.56 3.5% 73.7%

Avg 2015 - 2020 2.4% 1.8% 1.7% 1.1% 73.7%

1.7% 2.1% 2.6% 3.1% 74.4%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)

Series Break


2011 Year in Review

In 2011 Gold Coast hotels recorded revPAR decline of 2.7% greater than our forecast for a more moderate 1.1%

The weakest market in terms of revPAR growth was a result of poor demand falling 3.6% and further than expectations

Occupancy declined 4.1% to 65.3% in line with expectations. This represents the lowest full year occupancy since 2001

The introduction of new 5 star hotels as well as some key refurbishments was behind the improved ARR

Supply

In 2011 Gold Coast’s room stock marginally increased by 0.5% and below 2.0% expectations

Despite the number of hotels actually falling the number of rooms increased thanks to openings of large scale hotels through the second half of 2011

Supply expectations have been downgraded from prior year expectations with a focus on the short term as market response estimates have been delayed or downgraded

Supply growth for 2012 is expected to be a moderate 2.0% , below prior expectations. 2012 growth is due to the full year effect of projects which opened in 2011

Supply increases in the medium term are expected to be expected to be a low 1.2% following the recent opening of three large high profile projects. There are no key projects due for completion in the medium term.

As the lead up to the Commonwealth Games in 2018, we have allowed for a number of higher profile projects. Long term supply forecasts of 1.7% represent a slight downgrade to Hotel Futures 2011.

Of the 2,500 rooms forecast for the Gold Coast market over the long term few are live projects

Over 70% are an estimated market response, which could fluctuate depending on performance.


The well publicised and ongoing deep discounting of finished serviced apartments encourages developers to either delay or abandon projects


Gold Coast Regions – December 2011


June Year to date Gold Coast RevPAR has increased by 7.6%, exceeding 6.2% expectations

Driven by a strong June Qtr. with 8.3% growth

Demand has grown at a health 7.5%, the strongest in the country

Occupancy has increased 3.6 points to 65.5% thanks to strong demand and a decline in supply

GOLD COAST

Gold Coast Hotels

/MotelsEstablishments Rooms RevPAR

Hotels 26 6,125 $111.76

Motels 30 1,394 $75.03


Total 152 13,300 $99.93

2011

FORECAST

ACTUAL

2011

RevPAR -1.1% -2.7% -1.7% ▼

Supply 2.0% 0.5% -1.5% ▼

Demand -2.0% -3.6% -1.6% ▼

Occupancy 65.4% 65.3% -0.1% ▼

ARR 3.0% 1.5% -1.5% ▼

Var

Strong demand growth, reduced supply fuelling a medium term upgrade


Gold Coast – Tourism Region

Demand

In 2011 demand for this largely tourist market decreased by 3.6%, the second largest drop of any market

International visitors declined 12.1% with visitor nights remaining largely unchanged

Domestic visitors declined 5.9% and visitor nights falling by 6.1%

Gold Coast hotels domestic visitor nights content increased from 75.8% to 77.8%

The TFC forecasts for Gold Coast for the period to FY22 have improved and are:-



Hotel Futures 2012 represents a slight upgrade in demand on the previous forecast through the medium term. Improved domestic forecasts across the country should see the Gold Coast market benefit.

Demand growth of 5.0% is forecast for 2012 and represents an upgrade from the 4.0% expectations previously

Medium term forecasts are for average annual demand growth of 4.7% which represents a slight upgrade on prior expectations.

In line with improved forecast expectations from the TFC, the long term demand forecasts to 2020 of 3.6% represents an upgrade from Hotel Futures 2011.

Conclusion

Several years of relatively flat supply should see occupancies begin to improve and push through the 70% barrier to average 72.5%, which has not been reached since 2007.

The addition of 3 high end products together with forecast demand growth should see the Gold Coast market sustain rate growth of 3.1% to 2020. This represents an upgrade on prior expectations , albeit off a low base.

Overall our forecast represents a 3.3% upgrade in real revPAR over the period to 2019 due to improved performance through the medium term

In 2012 revPAR is expected to grow by 6.5% , a slight upgrade on prior expectations due to stronger demand growth and lower than expected supply

Medium term revPAR growth signals the recovery of the Gold Coast market with expectations of average growth of 7.1% to 2014, an upgrade on prior expectations

Our long term forecasts to 2020 of 4.9% growth represent an upgrade on our 2011 forecast thanks to improved demand and rate growth through the medium term.

Market performance over the long term will be influenced by any recovery of the retail apartment market, as this will influence the level of new supply



series

GOLD COAST

Supply Demand


Chng Chng Chng Chng

2000 13,249 1.8% 3.9% $96.28 0.5% $59.49 2.6% 61.8%

2001 13,249 0.0% 3.8% $96.59 0.3% $61.95 4.1% 64.1%

2002 13,096 -1.2% 1.6% $98.58 2.1% $64.99 4.9% 65.9%

2003 13,149 0.4% 0.4% $103.02 4.5% $67.92 4.5% 65.9%

2004 13,240 0.7% 6.2% $108.70 5.5% $75.60 11.3% 69.5%

2005 13,305 0.5% -0.3% $115.21 6.0% $79.48 5.1% 69.0%

2006 13,172 -1.0% -0.8% $123.30 7.0% $85.26 7.3% 69.2%

2007 13,121 -0.4% 1.8% $130.60 5.9% $92.28 8.2% 70.7%

2008 13,524 3.1% -2.6% $136.15 4.2% $90.92 -1.5% 66.8%

2009 13,205 -2.4% -2.9% $132.51 -2.7% $88.01 -3.2% 66.4%

2010 13,046 -1.2% 1.3% $132.38 -0.1% $90.18 2.5% 68.1%

2011 13,114 0.5% -3.6% $134.31 1.5% $87.73 -2.7% 65.3%

3.2% 2.8% 2.6% 2.4% 65.4%

Avg 2002-2011 -0.1% 0.1% 3.4% 3.6% 67.7%

Avg 2009-2011 -1.0% -1.7% -0.4% -1.2% 66.6%

2012 13,445 2.5% 5.0% $137.00 2.0% $91.65 4.5% 66.9%

2013 13,512 0.5% 4.5% $141.11 3.0% $98.15 7.1% 69.6%

2014 13,647 1.0% 4.5% $146.75 4.0% $105.62 7.6% 72.0%

Avg 2012 - 2014 1.3% 4.7% 3.0% 6.4% 69.5%

2015 13,920 2.0% 4.0% $152.62 4.0% $111.99 6.0% 73.4%

2016 14,440 3.7% 4.0% $155.67 2.0% $114.53 2.3% 73.6%

2017 14,973 3.7% 2.0% $158.79 2.0% $114.91 0.3% 72.4%

2018 15,198 1.5% 5.0% $166.73 5.0% $124.82 8.6% 74.9%

2019 15,426 1.5% 1.5% $171.73 3.0% $128.56 3.0% 74.9%

2020 15,657 1.5% 1.5% $176.88 3.0% $132.42 3.0% 74.9%

Avg 2015 - 2020 2.3% 3.0% 3.2% 3.9% 74.0%

2.0% 3.6% 3.1% 4.7% 72.5%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Hobart hotels recorded revPAR growth of 3.1% outperforming our forecast for a 2.8% decline

Rate growth of 3.9% above expectations represents a full recovery of a weak 2010

Moderate supply growth was not fully absorbed causing occupancy to decline 0.8% to 72.9%

Supply

In 2011 Hobart experienced a small 2% increase in supply, the equivalent of less than 100 rooms.

Actual was well below our healthy supply growth expectations of 4.4%

Australia’s smallest market has seen very little movement in net hotel rooms over the past couple of years. With net movement of less than 270 rooms since 2004

Supply expectations have remained largely unchanged. The Hobart market is the smallest of the ten cities we review and it remains difficult to predict market responses. One new project can have a significant statistical effect on the market

Supply growth for 2012 is a low 2.8% and is the result of a new hotel opening in May of this year. This represents an increase on prior expectations and includes delayed supply expected to come on line in 2014

Supply increases of 2.6% in the medium term are largely associated with a single project and we have made limited allowance for additional market response

Long term supply growth is expected to average a low 1.9% to 2020 and represents a downgrade from 2011 expectations of 2.2%. This equates to less than 50 rooms in this small market

Supply increases over the last couple of years have not been matched with organic market growth, which typically deters additional future development


A lack of proposed activity means that we do not expect any major new openings for at least 2 years.


Hobart Regions – December 2011


In the six months to June 2012 RevPAR in Hobart has increased by 2.3% compared to 2.0% expectations

Driven by a 1.5% increase in rate

Minimal supply decrease of 0.7% together with static demand saw occupancies slightly improved to 76.2%

HOBART

Hobart Hotels

/MotelsEstablishments Rooms RevPAR

Hotels 17 1,298 $114.63

Motels 20 715 $81.04

Serviced Apartments 10 590 $138.49

Total 47 2,603 $110.87

Star Grading

4-star 22 1,571 $128.82

Other 25 1,032 $83.41

Total 47 2,603 $110.87

2011

FORECAST

ACTUAL

2011

RevPAR -2.8% 3.1% 5.9% ▲

Supply 4.4% 2.0% -2.4% ▼

Demand 0.0% 1.2% 1.2% ▲

Occupancy 70.3% 72.9% 2.5% ▲

ARR 1.5% 3.9% 2.4% ▲

Var

Moderate upgrade as all key indicators improve slightly


Hobart and Surrounds – Tourism Region

Demand

In 2011 demand for Hobart hotels marginally increased by 1.2% and above static expectations. This recovers the decline experienced in 2010

International visitors declined 8% or 7,000 in what is a very small portion of the market

Domestic visitors decreased 7.4%, however domestic nights in Hotels and Motels increased 39%

Hobart hotels domestic visitor nights content increased from 83.3% to 88.8%

The TFC forecasts for Hobart for the period to FY22 have been upgraded and are:-

Annual domestic visitor night growth of 1.6 % vs. -1.1 % previously

Annual international visitor night growth of 3.1 % vs. 1.7% previously

TFC forecasts have been highly variable perhaps highlighting the inherent risks involved with small market analysis

Hotel Futures 2012 represents a minor upgrade in demand on the previous forecast, with a focus on the short to medium term. The size of the market however, means that demand growth patterns can be volatile.

Demand growth of 3.0% is expected in 2012 which is a healthy upgrade from 1% growth forecasts previously, buoyed by June quarter performances and general market sentiment

Medium term demand growth is expected to average 2.7% which represents an upgrade on prior expectations

Long term growth is expected to average 1.9% to 2020 as medium term growth slows. This represents a small increase on prior forecasts

Conclusion

Occupancy in Hobart is forecast to remain steady through the medium and long term to average 72.8%. This is below the tipping point to promote additional supply in a market of this size

Our outlook for rate growth remains largely unchanged in the short term, albeit from a higher base as a result of the market outperforming expectations in 2011 and consistent with YTD performance

Overall our forecast represents a strong 6% upgrade in real revPAR over the period to 2019, as the market continues to outperform previous short term expectations

In 2012 revPAR growth of 2.2% is expected off a higher base and above prior expectations

Hobart hotels are expected to average revPAR growth of 2.7% through the medium term which represents an upgrade on the prior forecast

Our long term forecast to 2020 of 2.6% growth is an upgrade on expectations

The real yield forecast is flat compared with most of the other markets and illustrates the difficulty in forecasting small markets with low growth



series

HOBART

Supply Demand


Chng Chng Chng Chng

2000 2,090 -0.1% 1.3% $93.60 4.6% $58.58 6.1% 62.6%

2001 2,091 0.0% 0.2% $94.43 0.9% $59.20 1.1% 62.7%

2002 2,179 4.2% 1.5% $93.28 -1.2% $56.93 -3.8% 61.0%

2003 2,317 6.3% 15.5% $102.20 9.6% $67.80 19.1% 66.3%

2004 2,385 2.9% 5.0% $107.20 4.9% $72.54 7.0% 67.7%

2005 2,442 2.4% 6.6% $113.19 5.6% $79.71 9.9% 70.4%

2006 2,372 -2.9% -2.6% $120.43 6.4% $85.06 6.7% 70.6%

2007 2,372 0.0% 2.4% $124.45 3.3% $90.05 5.9% 72.4%

2008 2,382 0.4% 1.3% $127.65 2.6% $93.19 3.5% 73.0%

2009 2,486 4.4% 8.1% $125.12 -2.0% $94.62 1.5% 75.6%

2010 2,547 2.5% -0.5% $126.02 0.7% $92.51 -2.2% 73.4%

2011 2,597 2.0% 1.2% $130.94 3.9% $95.39 3.1% 72.9%

1.6% 3.3% 3.0% 4.7% 63.5%

Avg 2002-2011 2.2% 3.8% 3.4% 5.1% 70.3%

Avg 2009-2011 2.9% 2.9% 0.9% 0.8% 74.0%

2012 2,670 2.8% 3.0% $133.56 2.0% $97.48 2.2% 73.0%

2013 2,749 3.0% 3.0% $137.56 3.0% $100.43 3.0% 73.0%

2014 2,804 2.0% 2.0% $141.69 3.0% $103.45 3.0% 73.0%

Avg 2012 - 2014 2.6% 2.7% 2.7% 2.7% 73.0%

2015 2,860 2.0% 1.5% $145.23 2.5% $105.51 2.0% 72.7%

2016 2,903 1.5% 1.5% $148.86 2.5% $108.15 2.5% 72.7%

2017 2,946 1.5% 1.5% $152.58 2.5% $110.85 2.5% 72.7%

2018 2,990 1.5% 1.5% $156.40 2.5% $113.63 2.5% 72.7%

2019 3,035 1.5% 1.5% $160.31 2.5% $116.47 2.5% 72.7%

2020 3,081 1.5% 2.0% $164.32 2.5% $119.97 3.0% 73.0%

Avg 2015 - 2020 1.6% 1.6% 2.5% 2.5% 72.7%

1.9% 1.9% 2.6% 2.6% 72.8%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Melbourne hotels recorded revPAR growth of 2.8% slightly below our 4.0% expectations

With very little difference between supply and demand movement, ARR growth of 2.7% was the key driver

Uncertainty from increased supply reduced ARR increases to 2.7% and $172.26

Medium term RevPAR growth of 4.9%, tempered by some supply, soft 2012 leads to a minor downgrade

Supply

In 2011 Melbourne again led all markets with supply growth adding almost 1,100 rooms or 6.5% though slightly below our 7.5% expectations

Supply increases were greatest in the 1st and 4th quarters with 8.7% and 7.5% respectively

Melbourne has increased supply by 37% since 2000, over the same period Sydney has decreased supply by 4.4%

Supply expectations have remained largely unchanged although there have been some delays

Supply growth for 2012 is expected to be a low 1% consistent with previous forecasts following several years of larger growth

Supply increases in the medium term to 2014 are expected to be a moderate 2.3% and are now above prior expectations, albeit off a slightly lower base

Long term supply growth is expected to average 2.6% over the forecast period to 2020 and slightly above prior expectations with a net increase of 100 rooms, although supply timing has been pushed out

Of the forecast supply increase over the next 5 years it is important to note that over 50% or 1,200 rooms is expected from market response and is not attributable to specific projects that are in progress



Melbourne Regions – December 2011


YTD RevPAR in Melbourne hotels has seen a small 0.5% increase and was one of only two markets to experience a decline in revPAR for the June Qtr.

A 3.4% increase in supply was initially absorbed with demand increasing by 3.8% thanks to a strong March Qtr.

Supply growth in the June Qtr. outstripped demand which saw occupancy decline slightly

MELBOURNE


Inner, Rem

Southbank &

Docklands Total

123 17,433 $141.75

Melbourne Tourism

Region Hotels/Motels

Hotels 84 13,959 $140.28

Motels 104 5,127 $80.48


Total 293 26,555 $125.20

Star Grading

5-star 19 n.p n.p

4-star 148 15,540 $123.95

3-star 108 5,339 $74.44

Other 18 n.p n.p

Total 293 26,555 $125.20

2011

FORECAST

ACTUAL

2011

RevPAR 4.0% 2.8% -1.2% ▼

Supply 7.5% 6.5% -1.0% ▼

Demand 8.0% 6.7% -1.3% ▼

Occupancy 79.1% 78.9% -0.2% ▼

ARR 3.5% 2.7% -0.8% ▼

Var


Melbourne – Inner, Remain, Southbank & Docklands

Demand

In 2011 demand for Melbourne hotels increased by 6.7% slightly below very strong expectations.

Melbourne is the only major city that has had the supply capacity to generate healthy demand growth

International visitor nights to Melbourne have increased by 6.7% and 5.8% respectively

Domestic visitors and nights both grew by 5.7% and 1.3% respectively

Melbourne hotels domestic visitor nights content fell, marginally to 66.1% from 67.0%

The TFC forecast for Melbourne for the period to FY22 represents an upgrade and are:-



Following a strong couple of years of supply driven demand we expect reduced demand growth leading into the next development cycle in 2016/17. The 2012 forecast does however represent an upgrade on the previous forecast.

We expect demand to increase by 2% in 2012 consistent with prior expectations albeit from a lower base

Medium term demand growth is expected to average 2.8%, an upgrade on prior forecasts and in line with upgrades from the TFC

Long term growth of 3.1% is now forecast which is marginally above prior expectations

Conclusion

Consistent with the other major Australian markets, Melbourne may be characterised by high occupancy averaging 80.7% over the period of the forecast to 2020.

The market has been able to absorb the entirety of the significant increase in supply since 2001

2011 occupancy of 78.9% is 6.9 points higher than 2001

Rate expectations for the forecast period have remained largely unchanged.

More recently rate growth has been minimal, as would be expected given market conditions and in response to the influx of supply.

As supply growth plateaus we should see rate growth escalate

Overall our forecast represents a small 1.9% downgrade in real revPAR over the period to 2019, thanks to softer rate growth expectations in 2012

In 2012, RevPAR is expected to grow by 2%, down from the previous forecast of 5.7%

• YTD performance reflects major market demand nervousness due to a slight dip in occupancy

• YTD rate growth of just 0.2% with the June quarter experiencing a 0.2% decline

Melbourne hotels are expected to perform slightly below prior expectations in the medium term to 2014

Our long term forecast to 2019 represents a slight upgrade of 0.2% compared to the prior forecast

• Weaker than expected rate growth in the short term

• The market catches up to the previous forecast by 2016. This is as a result of stronger rate growth through the medium term facilitated by delayed supply



series

MELBOURNE

Supply Demand


Chng Chng Chng Chng

2000 10,966 2.1% 6.3% $141.77 -0.4% $104.40 3.7% 73.6%

2001 11,594 5.7% 3.4% $142.14 0.3% $102.34 -2.0% 72.0%

2002 11,951 3.1% -0.4% $138.04 -2.9% $96.06 -6.1% 69.6%

2003 13,106 9.7% 10.7% $135.97 -1.5% $95.53 -0.5% 70.3%

2004 13,807 5.4% 10.0% $134.43 -1.1% $98.64 3.3% 73.4%

2005 14,149 2.5% 6.6% $140.37 4.4% $107.14 8.6% 76.3%

2006 14,730 4.1% 6.8% $153.12 9.1% $119.92 11.9% 78.3%

2007 14,760 0.2% 3.7% $161.38 5.4% $130.78 9.1% 81.0%

2008 14,848 0.6% -0.2% $171.20 6.1% $137.69 5.3% 80.4%

2009 15,286 2.9% -2.2% $165.30 -3.4% $126.26 -8.3% 76.4%

2010 16,074 5.2% 8.4% $167.80 1.5% $132.11 4.6% 78.7%

2011 17,114 6.5% 6.7% $172.26 2.7% $135.87 2.8% 78.9%

5.1% 5.4% 2.5% 3.1% 71.3%

Avg 2002-2011 4.0% 5.0% 2.0% 3.1% 76.3%

Avg 2009-2011 4.9% 4.3% 0.2% -0.3% 78.0%

2012 17,282 1.0% 2.0% $173.98 1.0% $138.61 2.0% 79.7%

2013 17,713 2.5% 3.0% $182.68 5.0% $146.26 5.5% 80.1%

2014 18,314 3.4% 3.5% $195.47 7.0% $156.66 7.1% 80.1%

Avg 2012 - 2014 2.3% 2.8% 4.3% 4.9% 80.0%

2015 18,591 1.5% 3.0% $205.24 5.0% $166.90 6.5% 81.3%

2016 19,303 3.8% 4.0% $211.40 3.0% $172.19 3.2% 81.5%

2017 20,308 5.2% 4.0% $215.62 2.0% $173.62 0.8% 80.5%

2018 20,957 3.2% 3.0% $223.17 3.5% $179.36 3.3% 80.4%

2019 21,376 2.0% 2.5% $230.98 3.5% $186.54 4.0% 80.8%

2020 21,590 1.0% 2.5% $239.07 3.5% $195.94 5.0% 82.0%

Avg 2015 - 2020 2.8% 3.2% 3.4% 3.8% 81.1%

2.6% 3.1% 3.7% 4.2% 80.7%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Perth was the strongest city market with revPAR growing by a very high 15.1% and above our already healthy 10.2% forecast

Rate growth of 11.2% from a very strong corporate sector was the key driver of this standout performance

A lack of supply saw occupancies grow 3.5% to 84.1% and only marginally behind Sydney. One of 3 city markets with occupancy over 80%

Supply

In 2011 the Perth market continued to be characterised by inadequate supply with an increase of just 0.1% and in line with forecasts

Hotel room supply is the same as 2004

Perth saw its 1st major hotel opening this year, the statistical impact of which will be felt in 2013

Supply expectations have remained largely unchanged. A number of projects, including the Perth Waterfront are still in the early stages of the development process

Supply growth for 2012 is expected to be a low 2.3% and consistent with previous forecasts

Supply increases in the medium term are expected to average a moderate 4.6%, largely in line with prior expectations. Previously expected market response has been replaced with specific projects

Long term supply growth is expected to average 3.7% to 2020 and marginally below prior expectations due to delays in market response to date

Of the 2,250 rooms forecast to be added to the Perth market over 76% (1,650) rooms are an estimated market response which could flex if conditions change.


There is some risk that the supply estimates may not be met with relatively limited proposal and construction activity. High rate growth and operator interest does have developers looking for sites

Outside of the CBD region the Burswood development of an additional 500 rooms will have a positive net impact on the market and create a level of capacity and supply induced demand


Perth Regions – December 2011


Perth hotels have continued to experienced very strong revPAR growth, recording a 17.9% increase in the first half of 2012

Demand in Perth has increased by 6.8% despite supply constraints

Supply has seen a modest increase of 2.8% Occupancies have jumped to a very strong 83.4% As a result of the strong operating environment Perth

Hoteliers have been able to increase rates by 13.5%

PERTH

2011

FORECAST

ACTUAL

2011

RevPAR 10.2% 15.1% 4.9% ▲

Supply 0.0% 0.1% 0.1% ▲

Demand 3.0% 3.6% 0.6% ▲

Occupancy 83.7% 84.1% 0.4% ▲

ARR 7.0% 11.2% 4.2% ▲

Var

Perth Regions Establishments Rooms RevPAR

Perth City 45 5,802 $145.41

Perth Tourism Region

Hotels 46 6,433 $139.51

Motels 37 1,949 $92.40


Total 124 10,872 $130.48

Star Grading

5-star 6 n.p. n.p.

4-star 46 4,914 $146.66

3-star 53 3,468 $95.65

Other 19 2,490 $147.20

Total 124 10,872 $130.48

Strong uplift in forecasts with increased demand and rate and unchanged supply expectations


Perth – Inner City and Remainder

Demand

In 2011 demand for Peth hotels increased by 3.6% and slightly above our 3% expectations

International visitors to Perth increased by 5.5% and nights remained stable with less than 1% growth

Domestic visitor nights to Perth declined by 5.0% nights in Hotels and motels increased by 1%

Perth hotels domestic visitor nights content fell marginally to 63.6% from 64.3%

The TFC forecasts for Perth to FY22 have been upgraded and are:-



Hotel Futures 2012 represents an upgrade in demand on the previous forecast, focussed on the long term. There is a level of forecast risk due to the local market volatility, particularly in recent times

We expect demand to increase by 3% in 2012 consistent with prior expectations

Medium term demand growth is expected to average 3.7%, and is dependent on new supply. This forecast is consistent with Hotel Futures 2011

Long term growth of 3.2% is expected. This is a slight upgrade on prior expectations and is supported by an upgrade in the TFC long term forecasts

Conclusion

Perth should continue to operate in a high occupancy environment for much of the term of the forecast (average 81.4%)

There are no specific signs that high rate growth will abate in the short term. Rate forecasts represent an upgrade on HF2011 thanks to short term increases

We do not expect the double digit revPAR growth to continue in the medium term. Our current forecasts are conservative and seek to compensate for perceived risk

If demand for short term accommodation does fall through the medium term there is scope for supply correction, given the current status of much of the supply

Overall our forecast represents a significant 13% upgrade in real revPAR over the period to 2019. The market continues to outperform short term expectations

In 2012, RevPAR is expected to grow by 10.7%, representing an upgrade to our 5.7% forecast of 2011

• Continued strength in the business demand in the short term will see occupancy rates remain above 80%

• Lack of new supply gives hoteliers continued confidence in growing rate however the 2nd half of 2012 should settle down

Perth hotels are expected to perform above expectations in the medium term to 2014, with RevPAR growth of 6.2% compared with 3.6% in Hotel Futures 2011

Our long term forecast to 2020 represents a slight upgrade when compared with the prior forecast 3.1% vs. 2.6% in Hotel Futures 2011



series

PERTH

Supply Demand


Chng Chng Chng Chng

2000 5,169 3.0% 6.4% $99.55 -3.0% $68.80 0.2% 69.1%

2001 5,264 1.8% -1.4% $98.85 -0.7% $66.17 -3.8% 66.9%

2002 5,366 1.9% 4.4% $94.10 -4.8% $64.49 -2.5% 68.5%

2003 5,584 4.1% 7.2% $99.10 5.3% $69.93 8.7% 70.6%

2004 5,834 4.5% 7.1% $100.66 1.6% $72.79 4.1% 72.3%

2005 5,608 -3.9% -0.1% $104.63 4.0% $78.63 8.0% 75.1%

2006 5,529 -1.4% 3.9% $116.68 11.5% $92.43 17.6% 79.2%

2007 5,544 0.3% 4.4% $133.37 14.3% $110.01 19.0% 82.5%

2008 5,869 5.9% 5.6% $159.36 19.5% $131.14 19.2% 82.3%

2009 5,847 -0.4% -5.2% $160.46 0.7% $125.71 -4.1% 78.3%

2010 5,815 -0.5% 3.1% $163.91 2.1% $133.11 5.9% 81.2%

2011 5,820 0.1% 3.6% $182.23 11.2% $153.20 15.1% 84.1%

6.0% 8.5% 4.5% 6.9% 69.5%

Avg 2002-2011 1.1% 3.4% 6.5% 9.1% 77.4%

Avg 2009-2011 -0.3% 0.5% 4.7% 5.6% 81.2%

2012 5,956 2.3% 3.0% $200.45 10.0% $169.63 10.7% 84.6%

2013 6,280 5.4% 4.0% $214.48 7.0% $179.02 5.5% 83.5%

2014 6,568 4.6% 4.0% $220.91 3.0% $183.35 2.4% 83.0%

Avg 2012 - 2014 4.1% 3.7% 6.7% 6.2% 83.7%

2015 7,069 7.6% 5.0% $223.12 1.0% $180.67 -1.5% 81.0%

2016 7,493 6.0% 5.0% $225.35 1.0% $180.75 0.0% 80.2%

2017 7,718 3.0% 2.0% $229.86 2.0% $182.58 1.0% 79.4%

2018 7,834 1.5% 2.0% $234.46 2.0% $187.15 2.5% 79.8%

2019 7,951 1.5% 2.0% $241.49 3.0% $193.71 3.5% 80.2%

2020 8,070 1.5% 2.0% $248.74 3.0% $200.51 3.5% 80.6%

Avg 2015 - 2020 3.5% 3.0% 2.0% 1.5% 80.2%

3.7% 3.2% 3.6% 3.1% 81.4%

HISTORICAL

Total Actual Avg

(1988-2011)

FORECAST

Total Forecast Avg

(2012-2020)


2011 Year in Review

In 2011 Sydney hotels recorded revPAR growth of 7.1% below our 10.7% forecast

Growth mostly due to a 7.0% increase in rate Marginal decline in demand was offset by a contraction in

supply

Supply

In 2011 Sydney’s room stock contracted by 0.7% in line with expectations

In the past 5 years Sydney has not had annual room supply growth of more than 1%

In 2011 Sydney had its first new 5 star hotel open since 2000.

Supply expectations, on a like with like basis, have remained steady with increased focus on the next development cycle, expected to begin in 2015/2016

Supply growth for 2012 is expected to be 3.2% (excluding boundary adjustments) consistent with previous forecasts. Sydney has recently seen a couple of key hotel projects come on line

Supply increases in the medium term are expected to be a low 2.7% and consistent with the prior forecast. A couple of new projects have replaced the prior allowance for expected market supply response

Long term supply growth is expected to average 4.2% over the forecast period to 2020 . This equates to over 8,000 additional rooms and [is consistent with prior expectations

The majority of supply is a market response and not from a currently live project

Of the 9,000 rooms forecast, over 75% are expected market supply response

The performance of the Sydney market over the next 2-3 years should determine the level of market response in the outer years.


The announcement of the 900 room convention centre hotel has not changed our supply forecast due to the large allowance for rooms previously allowed for as a market response


Sydney Regions – December 2011


YTD June 2012 the Sydney Tourism Region has experienced revPAR growth of 1.2% vs. expectations of 7.9% for the Sydney City Region

Sydney inner had YTD revPAR of $162 vs. expectations of $169 in HF 2011

Sydney CBD region has YTD occupancy of 83.9% however stalling demand has seen hoteliers hesitant to move strongly on rate

Moving into what is typically the stronger half of the year we should see some strengthening in ARR and revPAR

2011

FORECAST

ACTUAL

2011

RevPAR 10.7% 7.1% -3.6% ▼

Supply -0.5% -0.7% -0.3% ▼

Demand 3.0% -0.4% -3.4% ▼

Occupancy 88.5% 85.8% -2.7% ▼

ARR 7.0% 6.8% -0.2% ▼

Var


Sydney City Region 114 19,872 $173.93

Sydney Tourism Region Hotels/Motels

Hotels 106 19,656 $164.42

Motels 107 7,074 $91.36


Total 283 32,699 $147.58

Star Grading

5-star 23 6,934 $219.45

4-star 124 17,743 $146.37

3-star 106 6,847 $93.72

Other 30 1,175 $55.71

Total 283 32,699 $147.58

SYDNEY

note that % is based on adjusted 2011 forecast due to change in regions

Large % decrease in market response in 2012 is due to a repositioning of regions (actual

market response is 1% increase)

Sydney market has been downgraded in the short term due to soft 2012 demand but is expected to recover through the forecast period to 2020. Changes in ABS classification has seen comparison to the prior year difficult


Sydney – Inner

Demand

In 2011 demand for Sydney hotels increased by 4.3% and in line with expectations

International visitors to Sydney declined by 3.5% however visitor nights increased by 5.7%

Domestic visitors to Sydney increased by 5.5% and visitor nights increased by 4.2%

Sydney hotels domestic visitor nights content increased slightly to 55.0%, from 53.2%

The TFC forecasts for Perth to FY22 have been upgraded and are:-



Whilst hotel demand growth in the short term has been downgraded we expect the market to recover over the long term as supply driven demand in 2016/2017 see the forecast to 2020 deliver an upgrade on the previous year

Excluding the adjustment for the change in boundaries we are forecasting flat demand in 2012 and below the 3% growth forecast previously. There is the potential that this can be exceeded in what is typically a stronger second half of the year

Medium term demand growth is expected to average 1.8% for the new region which represents a slight downgrade compared to prior forecasts

Long term growth of 3.6% is expected. This is an upgrade on prior forecasts thanks to improved expectations through 2016-2017

With the redevelopment of the Sydney Convention Centre there is some risk in medium term demand (2015), particularly if suitable alternative venues cannot be sourced or accepted by prospects

Conclusion

Occupancy is expected to average above 80% for the period to 2020 with the forecast supply being mostly absorbed

Despite a softening in rate growth forecast in 2012 we expect the market to recover in the medium term as world markets and business confidence recovers

Overall our forecast represents a marginal downgrade in real RevPAR over the period to 2019, as a result of our downgrade to short term forecasts of 7.9%

In 2012, RevPAR is expected to grow by 2.9%, representing an significant downgrade to our 2011 forecast

• Due to a change in ABS boundaries there is a chance that the CBD market could outperform these forecasts

• Lack of meaningful demand growth and volatility will see hoteliers be less bullish on rate growth in the months ahead

Sydney's hotels are expected to perform slightly below prior expectations in the medium term to 2014. RevPAR growth of 5.8% is expected compared with 7.5% previously

Our long term forecast of 3.6% annual growth to 2019 represents an upgrade when compared with the prior forecast of 2.4%


Note: Due to a reclassification of ABS statistics we have had to adjust 2012 supply and demand. To

adjust for the break in the series we have reduced 2012 supply by 8%, which after new growth and

expected market supply response results in a net 5% decrease in room stock. We have also made a

similar adjustment to total demand. Excluding the adjustment for the change in classification we are

forecasting flat demand for 2012

Series Break

SYDNEY

Supply Demand


Chng Chng Chng Chng

2000 20,669 13.3% 12.7% $159.83 11.7% $113.72 11.1% 71.2%

2001 21,378 3.4% -0.9% $139.73 -12.6% $95.21 -16.3% 68.1%

2002 19,641 -8.1% -2.6% $139.05 -0.5% $100.42 5.5% 72.2%

2003 18,173 -7.5% -2.5% $147.69 6.2% $112.38 11.9% 76.1%

2004 18,293 0.7% 4.6% $150.98 2.2% $119.42 6.3% 79.1%

2005 19,046 4.1% 2.7% $161.47 6.9% $125.98 5.5% 78.0%

2006 19,509 2.4% 3.0% $170.20 5.4% $133.58 6.0% 78.5%

2007 19,701 1.0% 5.0% $179.26 5.3% $146.30 9.5% 81.6%

2008 19,891 1.0% -0.5% $184.69 3.0% $148.61 1.6% 80.5%

2009 19,854 -0.2% -0.4% $168.94 -8.5% $135.67 -8.7% 80.3%

2010 19,911 0.3% 6.8% $175.70 4.0% $150.27 10.8% 85.5%

2011 19,770 -0.7% -0.4% $187.68 6.8% $160.99 7.1% 85.8%

3.9% 4.1% 1.5% 1.9% 74.2%

Avg 2002-2011 -0.7% 1.6% 3.1% 5.5% 79.8%

Avg 2009-2011 -0.2% 2.0% 0.8% 3.1% 83.9%

2012 18,789 -5.0% -6.0% $195.19 4.0% $165.60 2.9% 84.8%

2013 19,213 2.3% 2.5% $208.86 7.0% $177.61 7.3% 85.0%

2014 19,759 2.8% 3.0% $223.48 7.0% $190.33 7.2% 85.2%

Avg 2012 - 2014 0.0% -0.2% 6.0% 5.8% 85.0%

2015 20,595 4.2% 4.0% $239.12 7.0% $203.21 6.8% 85.0%

2016 21,886 6.3% 7.0% $243.90 2.0% $208.69 2.7% 85.6%

2017 23,670 8.1% 7.0% $248.78 2.0% $210.61 0.9% 84.7%

2018 24,617 4.0% 3.0% $253.75 2.0% $212.75 1.0% 83.8%

2019 25,355 3.0% 2.0% $261.37 3.0% $217.01 2.0% 83.0%

2020 26,116 3.0% 2.0% $269.21 3.0% $221.35 2.0% 82.2%

Avg 2015 - 2020 4.8% 4.2% 3.2% 2.6% 84.0%

3.2% 2.7% 4.1% 3.6% 84.4%

HISTORICAL

FORECAST

Total Actual Avg

(1988-2011)

Total Forecast Avg

(2012-2020)


CHANGES TO ABS CLASSIFICATIONS Changes to Classification

Effective from 1 January 2012, the ABS has replaced the Australian Standard Geographical Classification (ASGC) with the new Australian Statistical Geography Standard (ASGS) as the geographic framework for its survey data. For more detail visit the abs website at www.abs.gov.au

Effect on Hotel Futures

For the purposes of our Hotel Futures analysis, this changes the boundaries applicable to the Darwin and Cairns regions. Accordingly, comparisons with prior period data for these two regions is not exactly like for like, however the effect of the change in coverage is relatively minimal. We have taken the opportunity through these classification changes to include Port Douglas in our Cairns market forecasts Sydney City has undergone a more significant change in reporting and we now also compare data movements in the broader Sydney Tourism Region which has not undergone any boundary changes To allow for adjustments in regions we have made a one time adjustment to supply and demand for the 3 cities affected. The changes and affect on the national market are summarised in the table to the right We have made an additional one time adjustment to rate growth for the Cairns and Port Douglas market to allow for market characteristics of the Port Douglas market which typically attract a higher average room rate compared to the Cairns City Region

Adjustments

Rate

% # % # %

Cairns 3.50% 259 -2% (33,685) 3.50%

Darwin -5% (185) -5% (47,295)

Sydney -8% (1,616) -6% (371,373)

Total (1,542) (452,353)

Adjustment as % of

2011 Australian

Market

-1.8% -1.9% immaterial

Supply DemandCity


GLOSSARY Glossary of Terms

Australian Bureau of Statistics (ABS)

The ABS is Australia’s national statistical authority and provides quarterly statistics of hotels, motels and serviced apartments.

Average Room Rate (ARR) The Average Room Rate is the average daily revenue per occupied room. Calculated as Total Room Revenue divided by occupied room nights. This rate is calculated net of GST. Also known as Average Daily Rate (ADR).

Global Financial Crisis (GFC) The GFC refers to the global economic slowdown that commenced in 2008.

Hotels Hotels with facilities, licensed to operate a public bar. References made to the ‘hotel market’ generally include motels, guest houses and serviced apartments.

HMGSA Hotels, Motels, Guest Houses and Serviced Apartments

Motels Motels licensed which predominantly provide short-term accommodation available to the general public, provide a bath (or shower) and toilet in most guest rooms and have breakfast available for guests.

Serviced Apartments Self contained units with full cooking facilities, daily service and provision of linen and laundry.

Occupancy The Occupancy is the number of rooms occupied divided by the number of rooms available.

RevPAR The revPAR is the revenue per available room night calculated as occupancy multiplied by Average Room Rate. Also known as and previously defined in Hotel Futures as Yield.

Real RevPAR The revPAR calculated in 2011 dollars to remove the effect of inflation. Previously defined in Hotel Futures as Real Yield.

Yield The Room Yield is the revenue per available room night calculated as occupancy multiplied by Average Room Rate. Also known as RevPAR.

Real Yield The Room Yield calculated in 2010 dollars to remove the effect of inflation. Also referred to as Real RevPAR

Tourism Forecasting Committee (TFC) A division of Tourism Australia. The TFC is an independent body charged with providing consensus forecasts of activity across international, domestic, and outbound tourism sectors.

Table Reference

Room Night Supply

The sum of the number of rooms available for each night of the year. This is not always the same as a calculation of the number of rooms times the number of days in the year as rooms are not always available for the whole year when new Supply is introduced, or old Supply withdrawn part way through the calendar year.

Rooms This figure is based on the equivalent rooms available for the full year calculated by dividing Room Night Supply by the number of days in the year.

Room Night Demand The sum of the number of rooms occupied for each night of the year. This information is not directly supplied by the ABS and is calculated by multiplying Room Night Supply by the reported Occupancy.

Star Grading The grading of hotels and motels with facilities based on the classification used by members of the Australian Automobile Association (AAA).


METHODOLOGY & BACKGROUND In producing Hotel Futures, Dransfield have committed to making available to investors long term historical information and one view of what the future might look like. Investors now

have available to them forecasts of key demand drivers, published by Tourism Research Australia (TRA), and a number of other government and private sources. Supply information is

provided by local and state governments as well as private organisations. Hotel Futures seeks to interpret the impact of these expectations on hotel revenues, when combined together

in a supply/demand equation.

In presenting a market forecast it is important for readers to accept that individual hotels will be influenced by the market, but will not behave in an identical manner. The market

forecast is therefore a guide against which the past and future performance expectations for any particular hotel may be reviewed

Demand

In our analysis, the TFC visitor forecasts and customer market mix in individual states are blended and adjusted to reflect historical differences between these key drivers, actual results

and the impact of additional supply. Supply often stimulates demand growth and there are differing expectations for individual city growth rates compared to the whole state.

Historically, actual performance and our forecasts for a city’s demand growth have exceeded ‘melded’ growth rates (combined International and Domestic forecasts) based on TFC

data for larger geographic areas, sometimes quite substantially.

Our demand forecasts are partly based on international and domestic visitor forecasts published by Tourism Research Australia (TRA) through the Tourism Forecasting Committee

(TFC). They also require a level of subjective judgement. In November 2012, TFC released revised forecasts updating those issued in November 2011 relied upon in the 2011 edition

of Hotel Futures. It is important to note from this edition going moving forward TFC forecasts will be produced on a financial year basis. For the incidences where calendar year

calculations are required Dransfield have taken an average to calculate. The long term averages are not expected to be materially affected.

There are multiple indicators of future demand for the major cities considered in Hotel Futures. The TFC publishes a range of related actual and forecast national statistics including:

• International Arrivals;

• International Visitor nights;

• International Visitor nights in Hotels, Motels, Guest Houses and Serviced Apartments (HMGSA);

• Domestic Visitor Nights and

• Domestic Visitor nights in Hotels, Motels, Guest Houses and Serviced Apartments (HMGSA).

International visitor forecasts are now undertaken on a state by state basis, similar to what has historically been provided for the domestic forecasts. We have undertaken correlation

testing on each of the above demand indicators and found varying degrees of correlation to actual results in different years. None of the individual indicators have a very strong

historical correlation with the Room nights occupied in the cities that Hotel Futures reports on. This is partly due to the differing proportions of international and domestic visitors in each

city though we do take regard of the known changes in market mix. It is also due to the differing geographic boundaries of the indicators and the subject, for example, using the

international forecast for the whole state has only an indirect relationship with an individual city. Changes in the level of supply in each city also alter travel patterns as room availability

improves.

The difficulty in using raw statistics is demonstrated by considering the lack of growth in International arrivals in 2009 compared to the 5% increase in International Visitor nights and 6%

reduction in International Visitor Nights to Hotels. The demand figures estimated in Hotel Futures therefore require a significant subjective assessment.

Supply

In calculating short-term supply expectations, projects recently completed, under construction and those proposed are taken into account. Probability estimates have been used for

sites where construction has not started and may not start or could be delayed.

In several markets, many sites are mooted as possible hotel projects. Our forecasts recognise that not all project proposals will proceed. Each time a project is generally perceived as

going ahead, the likelihood for other proximate developments reduces. Remaining proposals are delayed as financiers and investors take into account the impact of additional supply.


Changes in Australian Bureau of Statistics Methodology

As a result of the introduction of the Goods and Services Tax (GST) on 1 July 2000, the ABS reports data inclusive of GST. To enable meaningful comparison to the previous years, we have adjusted the post 1 July 2000 data by reducing revenues by 1/11th, making them net of GST. In the June 2003 quarter, an additional 132 establishments (5,918 rooms) were added to the Australian Bureau of Statistic’s Survey of Tourist Accommodation room stock count. The addition of these establishments resulted in a break in the time series between the March and June quarters 2003 and would tend to understate supply growth. To offset this, the base figures for quarters June 2002 to June 2003 have been increased by a factor, provided by the ABS, to take into account the effect of the break in the series. The factor used varies for different cities and ranges from an increase of 1.9% to 6.2%. In 2007 the ABS redrew the geographical boundaries of the Sydney City Region and divided the City Region into four sub-regions: Inner, South, East and West. The changes to the boundaries has not impacted the total Sydney City region, rather the sub parts of the region have been redrawn. In the 2012 TFC forecast, historical performance and forecasts are being reported on a financial year basis. Previous calendar year forecast of November 2011 have been adjusted to report on a financial year basis for comparative purposes, they are at best an indication of what the financial year forecasts would have been if prepared last time.

Room Rate Methodology

Real room rate change is mostly impacted by occupancy levels. Changes upward generally lag occupancy movements by approximately twelve months, whilst hoteliers respond to new market circumstances and contract prices move. Regression analysis has been used to analyse historic real rate growth and is used as a guide to forecasting likely future growth rates based on expected occupancy levels. Room rates are presented net of GST.

Room Yield/REVPAR Methodology

The most reliable indicator of hotel profitability is the revPAR (revenue per available room or yield) which indicates the revenue available from which profit is derived. Given the change in inflation over the last decade, we have calculated a ‘real revPAR’ curve in each market so that a more realistic comparison of future expectations and past performance can be made. The real revPAR is also a good guide as to when new projects might be considered viable, and therefore likely to proceed. Nominal growth rates depend on the starting base, (e.g. growth rates calculated from a peak will be lower and often negative compared to growth rates calculated from a trough). Comparing the average real revPAR of a whole forecast to prior forecasts is therefore the most objective and complete way to determine if it has been upgraded or downgraded. For the purposes of comparing current forecast real revPAR with our previous forecasts, CPI data has been used.

Sources of Historic Forecast Data

Where it is noted that Australian Bureau of Statistics (ABS) data has been used in our analysis, this refers only to historic data. Forecasts are solely the product of Dransfield, though the construction of the forecast may rely on information published by Tourism Research Australia. Tourism Research Australia was created on 1 July 2004 and brings together the Australian Tourism Commission, See Australia, the Bureau of Tourism Research and the Tourism Forecasting Council. The Tourism Forecasting Committee (TFC) was also established following the formation of Tourism Australia (TA), and like its predecessor, the Tourism Forecasting Council. The TFC remains an independent body providing forecasts of activity across international, domestic, and outbound tourism sectors. The resources for the TFC are provided by Tourism Research Australia (TRA), which is a division of Tourism Australia. Copyright in ABS data resides with the Commonwealth of Australia. Used with permission.

METHODLOGY

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A REVIEW OF THE REVENUE PERFORMANCE OF MAJOR 2020cdn2.blocksassets.com/assets/dransfield/dransfield-documents/... · 4 AUSTRALIA AT A GLANCE 2012 This is the sixteenth edition of