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Australia-China relations: will the hotel boom go bust as Chinese tourists give Down Under a skip in post-Covid travelling?

July 27, 2021 GMT

Investment in Australian hotels more than quadrupled in the first half of the year, according to property consultancy JLL, a reflection of confidence in robust local demand for travel that is likely to boost one of Covid-19′s worst-hit industries.

But for the hotel segment to sustain growth, international travellers including mainland Chinese are still crucial to the market, analysts said.

And that might just spoil an otherwise bright outlook for Australia’s hotel property segment, because Chinese tourists may have found reasons beyond border closures to give the country a miss.

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In the first six months of 2021, the volume of deals involving hotel properties in Australia more than quadrupled to US$215 million, according to a JLL report. The hefty increase was driven largely by the sale of AccorInvest’s portfolio of 17 hotels in cities such as Sydney, Melbourne and Canberra for US$134 million, said JLL.

“The majority of demand for hotel accommodation in all major markets with the possible exception of Far North Queensland is domestic,” said Max Cooper, director, hotels, Savills Australia and New Zealand.

“However international travel is and likely will remain a very important element for Australian tourism. Likely there will be some shift in international travel patterns over the short to medium terms. Investors consider there will be a full recovery but the timing of that recovery will somewhat depend on the market.”

Like other markets across the globe, Australia’s foreign tourist arrivals slumped in 2020 as borders shut down to stem the spread of Covid-19. International visitors fell 80 per cent to 1.7 million last year and their spending sank 76 per cent to A$11 billion (US$8.1 billion), according to government data.

Visitor nights, a gauge of hotel occupancy, plunged 75 per cent to 69 million in the same period.

China was the second-largest source of international visitors to Australia in 2020 with 184,000, down by 86 per cent from the previous year, while their spending plummeted 78 per cent from A$12.4 billion to A$2.7 billion.

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Even before the pandemic broke out, the number of Chinese tourists in the country had been flat in 2019 and their spending was only up by 6 per cent from 2018, according to the government. This makes it unlikely that once travel restrictions are eased, the mainland Chinese will return in droves to Australia’s tourist destinations.

Besides border closures, there are other reasons they may choose to stay away from Australia. One is the deepening rift between Beijing and Canberra.

China has been warning its citizens about the risk of racial discrimination in Australia. The Washington Post reported in March that nearly one in five Chinese Australians had experienced physical or verbal abuse since the pandemic began. The warning came on the heels of Australia’s criticism of China’s handling of the coronavirus pandemic.

This trend may already be under way, as since last year the Chinese have not invested in Australia’s hotel properties, according to Real Capital Analytics, which tracks real estate deals worth at least A$1 million.

Mainland Chinese were the second-biggest investors in Australian hotel properties in 2017 with US$179 million worth of deals, after Singaporeans’ investments of US$225.5 million. In 2018 and 2019, they were the third-largest investor group in the segment, spending US$26 million and US$48 million, respectively.

“We generally see the main markets fully recovering over a two to three year period,” said Cooper. “Those markets that are less reliant on inbound business such as Adelaide and Canberra are currently fast tracking to full recovery. Sydney and Melbourne have been the most Covid-19 impacted cities in Australia and also have a higher proportion of international tourism which is likely to result in a slower recovery to pre Covid-19 trading levels.”

This article originally appeared on the South China Morning Post (SCMP), the leading news media reporting on China and Asia. For more SCMP stories, please download our mobile app, follow us on Twitter, and like us on Facebook.

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