Australian Financial Reviews article The Australian Financial Report, released today, shows the number of hotels and guest rooms in Australia has collapsed in recent years as competition from cheaper foreign rivals has led to a decline in hotel stock.
The report, based on data from the Australian Bureau of Statistics, shows hotel stocks have collapsed in every major Australian city over the past five years, with the city of Melbourne, Sydney and Melbourne’s CBD falling by more than 20 per cent between 2016 and 2018 alone.
The peak year was the early 2000s, when hotels were the hot commodity, with Sydney and Adelaide among the worst-hit.
“The most significant change in hotel stocks is the number and strength of foreign competitors,” the report says.
“This trend is also evident in the number, type and location of hotels.”
In 2016-17, foreign competition led to the number one hotel stock market crash in Australia.
The city of Brisbane lost over 12 per cent of its hotel stock, the report said.
“In many parts of the country, foreign competitors have significantly outperformed domestic competitors in the last decade,” it said.
The rise in competition has driven hotel stocks down in cities with high levels of foreign investment.
The city of Sydney had the second-highest share of foreign hotel stock in the report, down 14.3 per cent.
Melbourne’s share was the fourth-highest, down 11.5 per cent, while Brisbane’s share of hotel stocks was the seventh-highest.
“Australia’s overseas capital markets have also been a major contributor to hotel stock declines,” the Australian Financial Commission said in its 2016-2017 Annual Report.
“They have encouraged foreign investment in Australia, provided a competitive environment for Australian businesses, and provided an incentive for investors to move to these markets.”
The report also found Australia’s foreign investor base had dropped to 2.3 million in the year ending March 2019, from 2.4 million in 2016.
“Foreign investors are less willing to invest in Australia’s local and regional economy than foreign investors are in other countries,” the authors said.
“Their ability to invest overseas has declined by a substantial proportion over the last two decades, with many more Australians now unable to access overseas funds.”
The decline in foreign investment has also led to lower prices.
“Prices have been reduced in a number of Australian cities in the past decade, including Sydney, Brisbane, Adelaide, Melbourne, Perth and Adelaide,” the study said.
It also found that foreign investment had increased as foreign competition had intensified.
“There has been a marked increase in foreign competition over the years,” it added.
“For example, the number in Sydney of foreign investors has more than doubled since 2002 to around 2 million, and the number is expected to double in the next 10 years.”
Foreign investors have also lost money when they have bought hotels or other real estate in Australia because they do not have the capital to make the purchase.
This trend has also meant the real estate market in Sydney is being held back by the inability of foreign money to buy real estate, it said, meaning Sydney’s housing market is being hit harder than other major cities.
“Sydney’s real estate and housing markets have been hit hard by the lack of capital for property investment,” the commission said.
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