Hotel asset management in Australia

Australia’s hotel sector has entered 2026 with a level of confidence not seen since before the pandemic. Strong domestic demand, rebounding international arrivals, and a disciplined development pipeline have created a market where performance is rising, investor appetite is returning, and asset management is becoming more sophisticated — and more essential — than ever before.

Yet the landscape is also shifting.

Operating costs remain high, labour shortages persist, and guest expectations are evolving faster than many hotel assets can adapt. For owners, the question is no longer whether asset management adds value; it’s about how quickly it can unlock performance, protect margins, and future‑proof assets in a market that is becoming more competitive and complex.

RevPAR growth remains strong in Australia’s major cities, driven by ADR rather than occupancy. Perth, Brisbane and Melbourne, which have experienced significant supply growth, are dealing with softer occupancies but are still managing to grow and hold rate. This solid performance is built on the stability of demand drivers, particularly the domestic market, which accounts for over 70% of city hotel occupancies.

While business travel has yet to recover to pre-pandemic levels, especially in Melbourne, the shortfall has been largely offset by sustained growth in events-based tourism and leisure travel.

In 2025, Australian hotels enjoyed record-level events demand built on major sporting tours like the Ashes cricket series and British & Ireland Lions Rugby Union as well as headline music concerts.

At the same time, the shift from traditional business hotels to ‘lifestyle’ hotels in many cities has fuelled growth in leisure travel, with an emphasis on wellness and distinctive dining options.

The arrival of dedicated lifestyle brands such as Mondrian, Hyde, 25 Hours, Moxy, Caption by Hyatt as well as locally developed lifestyle hotels has helped boost hotel spend by providing premium onsite venues and experiences.

Total international visitor arrivals to Australia has made a full post-pandemic recovery, with annual arrivals finally surpassing pre-COVID levels and reaching approximately 8.4 million visitors. While total trip volume is now roughly on par with 2019 levels, visitors are staying longer and overall international tourism spend has surged beyond pre-pandemic records.

The pace of this recovery has varied significantly by country, reshaping the demographics of Australia’s inbound tourism.

The recent Middle East conflict has threatened to curtail growth, but Australian hotels’ strength in the domestic sphere as well as record inbound arrivals from neighbouring New Zealand and a resurgence in travel from China and Southeast Asia has insulated the country from the reduction in services by Middle East-based airlines.

Arrivals from India, Vietnam, Thailand, and the Philippines have surged past pre-pandemic levels. Similarly, markets like South Korea, Indonesia, and Singapore have recovered rapidly and currently exceed 2019 figures.

The United Kingdom (UK) market was supercharged in the past year thanks to major sporting tours and, with airlines pivoting to build capacity via Asian hubs, the UK and Europe markets are forecast to remain strong despite the Middle East disruption.

As in most countries, economic conditions remain precarious, but high levels of discretionary spending by Australian baby boomers who own their own homes and are enjoying considerable returns from property, superannuation and the stock market are feeding a growing demand for quality leisure stays across the country.

The challenge for Australian hotels is to provide facilities and experiences that are attractive enough to persuade them to stay in Australia, rather than spend tens of thousands of dollars on overseas holidays.

Over the past three years, Australia's hotel development has seen a significant slowdown due to elevated construction costs and labour constraints. Nationwide, roughly 6,000 new hotel rooms were added across major markets, bringing the total national supply to approximately 135,000 rooms.

In this environment, development activity has increasingly shifted toward metropolitan and suburban hubs rather than traditional CBD cores. Sydney’s recent additions have been largely lifestyle-driven hotels located on city fringes, while Melbourne has seen an uptick in developments in suburban areas close to business parks, healthcare precincts and education facilities.

Meanwhile, a driving force for new accommodation in southeast Queensland is the 2032 Olympic Games, which will be co-hosted in Brisbane, Gold Coast and Sunshine Coast.

While projections call for a dramatic surge in hotel room capacity ahead of the Games, questions around the long-term sustainability of that inventory once the event concludes remain unanswered. As seen in other host countries, the threat of post-Games oversupply is real. Will the market collapse under excess capacity, or will owners pivot toward adaptive reuses, similar to the transformation that redefined the hotel landscape of Sydney’s Kings Cross?

Infrastructure investment is also creating new development opportunities. The opening of Western Sydney Airport in the coming year is attracting considerable interest from hotel investors, while a major expansion of Perth Airport will see a new Pullman developed.

New global brands are set to enter the Australian market over the next three years: Hyatt's Andaz brand will make its Australian debut at The Star’s Gold Coast property, Marriott will introduce its luxury St Regis brand, also on the Gold Coast, while reviving the long departed Le Méridien brand on Lindeman Island in north Queensland. Arguably, the most anticipated opening of 2027 will be the first-ever Waldorf Astoria Hotel in Australia, on a prime site overlooking Sydney Harbour Bridge and Sydney Opera House.

Construction costs for new hotels have surged substantially since the pandemic, which has heavily stalled new project pipelines and encouraged reinvestment in existing hotel stock instead.

Assets are being repositioned, with the strongest returns coming from the conversion of regionally located motels and tired midscale hotels into lifestyle and even luxury brands, upgrading F&B concepts and reconfiguring underperforming spaces such as oversized/under-utilised lobbies and unused meeting rooms.

The structure of hotel management agreements has changed quite dramatically in Australia over recent years with the emergence of Third-Party Operators (TPO). Players such as Trilogy Hotels, 1834 Hotels and La Vie are taking over day-to-day hotel operations and asset performance while retaining the brands of traditional hotel management companies such as Accor, IHG, Marriott and Hilton.

Until recently, the franchise model was largely restricted to smaller independent hotels, but the rise of TPOs is reshaping the asset management landscape and this trend is expected to continue.

We see a shift in operational leverage and governance as a TPO structure decouples the brand from daily management, placing an independent third-party operator at the helm. In this scenario, the asset manager can enjoy greater operational leverage, as the TPO is directly accountable to the owner. This allows for immediate intervention and rapid pivots in property level strategy, with far fewer contractual hurdles.

By contrast, under a Hotel Management Agreement (HMA), the asset manager operates primarily as an auditor and influencer, ensuring the property is getting its fair share of corporate regional demand and challenging the brand if direct-booking channels are underperforming. The General Manager and executive team are employed directly by the brand, meaning their corporate allegiance lies with brand headquarters and the brand operator maintains day-to-day operational control.

Capital allocation and asset preservation can provide different opportunities under a TPO model. Where operators require physical upgrades or technology rollouts to meet brand standards, the asset manager can act as the buffer between franchisor's requirements and direct capital towards property enhancement opportunities.

Australia’s hotel sector remains resilient with strong RevPAR growth, record international visitor spending, and demand for events, leisure, and lifestyle experiences. Yet this performance masks persistent structural challenges that threaten to impact future returns. Geopolitical and economic headwinds, labour shortages, and recent supply growth in key markets have pressured margins even as top-line revenue grows.

The rise of third-party operators has altered the operating landscape, offering owners unprecedented operational control while requiring sophisticated asset management skill sets to capitalise on that leverage.

The fundamentals are strong and with the development pipeline forecast to shrink dramatically, active asset management will play an increasingly important role. We believe hotels that will thrive in the next cycle are those whose owners recognise that current market conditions create an ideal environment for capital allocation, operational transformation, and strategic repositioning.