Review of Australia’s hotel property market

Driven by the movement of people and capital, Australia’s hotel property sector is at an important juncture.

In 2024, there was a divergence in demand, as travel and tourism remained resilient, however investment volumes were relatively subdued. As 2025 continues to unfold, both people and capital are moving more freely. Buoyed by the good value proposition presented by Australia’s key leisure and corporate destinations, a more favourable debt outlook, combined with the country’s longstanding position as a stable market with limited volatility, has created positive sentiment and a healthy outlook for the sector.

This is an enviable position and one that is expected to be sustained throughout the remainder of the year and 2026 and beyond given the sectors core fundamentals. In addition to the generally positive tourism and investment outlook, a constrained supply pipeline in terms of new hotels is anticipated to remain a market characteristic -leading to -heightened investor interest from both domestic and international capital sources.

The latest statistics from Tourism Research Australia (TRA) for the YE June 2025, indicate that domestic trips were in line with the previous year, domestic nights reduced by 2%, and the corresponding overnight spend by 1%. Whereas, international trips, nights and spend were reportedly up by 6%, 8% and 18%, respectively.

Although showing some signs of improvement recently, a long running period where the Australian dollar has been well below historical highs, has positioned Australia as an appealing proposition for the inbound traveller. However, when considering the outbound market, a weaker currency may deter those travelling and choosing to stay onshore.

Intuitively, this would point to an environment that is both conducive to inbound and domestic visitation, although we observe that while short-term inbound arrivals increased by 6.1% between YE July 2024 and YE July 2025, outbound visitation (short-term departures) also increased by 8.7%, according to the ABS.

In recent years, inbound visitation from the US, UK and Europe as well as Asia has been strengthening. More particularly, while inbound visitor numbers from China have yet to return to 2019 levels (67% recovered), this key source market is making a strong recovery increasing by 17% in the last 12 months (YE July 2025). Overall inbound visitation has proven extremely resilient due to strong growth in other source markets including the UK (+13% YoY, 96% recovered), Japan (+10% YoY, 82% recovered) and Singapore (+8% YoY, 92% recovered), alongside those markets that have already surpassed 2019 levels such as Vietnam (+140%), South Korea (+133%) and India (+121%).

Of course, growth is not merely leisure-related. This is especially the case for Australia’s capital cities which benefit from a significant amount of corporate related demand and is of particular importance to a city hotel’s trading performance. Even during periods of economic uncertainty, when companies become more budget conscious and technological advancements reduce the need for in-person meetings they are still experiencing growth.

Conferencing, major sporting and concert events and cultural attractions are driving peak periods in demand across most key markets around the country. This has been evident recently by events such as Vivid Sydney, British & Irish Lions tour, AFL and NRL finals series, as well as are forecast to for upcoming music concerts such as AC/DC, Oasis, Metallica and Ed Sheeran. The importance of event related demand has been amplified in the case of markets such as Brisbane which is leveling up as a host city for large scale events ahead of and in readiness for the 2032 Olympics.

These demand drivers have resulted in robust hotel trading conditions over 2025. Occupancy in most key markets is improving year-on-year and approaching or surpassing 2019 levels. Whilst Average Daily Rate (ADR) growth has moderated from 2024 levels, it continues to sit at a significant premium. Consequently, Revenue Per Available Room (RevPAR) has seen strong growth of 5% to 12% year-on-year across most major markets, outpacing inflationary growth. According to STR Global as at YTD August, nation-wide occupancy has increased 2.0 pp year-over-year, ADR has increased 2.4%, and RevPAR increased 5.4%.

Julian Whiston, Head of the Hotels & Hospitality, Australia & New Zealand within JLL’s Value and Risk division, notes:

“In the wake of the trading disruption at the beginning of the decade, it is great to see both domestic and international demand recover and improve in Australia’s key markets. Markets appear to have now largely recalibrated and we are seeing trading performance surpassing pre-pandemic levels."

“A firming of demand is a positive for hotel property investment as cash flow growth drives investor interest and capital growth. However, the extent to which improving demand will manifest depends on where a market sits in its lifecycle. The markets that have recently experienced increases in hotel supply will absorb demand quickly and increased visitation and overnight stays might go undetected in terms of a market’s overall performance”, adds Whiston.

Worthwhile also noting that despite an improved trading environment the opportunity for new development remains challenging in most markets owing to the associated cost of delivering a hotel property of scale.

“Ultimately, as trading performance improves the potential viability of new hotels will likewise improve especially with regards to those projects that are both well-conceived and well-located,” adds Whiston

The prospect of improved trading performance in an established and transparent market like Australia attracts capital interest.

In 2024, hotel property investment was relatively subdued when compared to historical highs with annual volumes totalling $1.69bn. During this period domestic investors characterised the market accounting for 81% of total transaction volumes. There was also a large orientation towards mid-market transactions (under $40 million).

The Australian hotel property investment market is anticipated to experience improved investment volumes in 2025. This is owing to the availability of quality investment opportunities, a resurgence of offshore capital, and other factors such as moderating interest rates, perceived favourable currency conditions for inbound capital and the prospect of trading improvements in selected core markets.

Year-to-date (September) settled sales volumes have reached in excess of A$1.6 billion, and with a number of opportunities yet to be finalised, full-year volumes are set to exceed 2024, and have the potential to surpass long-term averages.

“While the domestic investors remain in play, established and new capital source markets out of Asia, the US and EMEA appear to be targeting hotel investment opportunities in Australia” says Whiston.

Notable sales in 2025 to date have included the Park Hyatt Melbourne, Frasers Suites Perth for conversion to residential housing as well as the Vibe Gold Coast and Mayfair Adelaide.

Investment momentum is forecast to continue into 2026, likely driven by a continued domestic and offshore investment, capital interest and the expectation of further moderation in the cost of debt. As well as robust investor interest across both city and regional locations, primarily for both sought after trophy assets and value-add and conversion opportunities. While the market remains tightly held, this environment is likely to be seen as an opportune time for some market participants to divest.