DEMAND-SUPPLY IMBALANCE TO FUEL PRICE GROWTH

Since Australia reopened its borders in 2022, the tourism sector has witnessed a vigorous rebound, setting the stage for an optimistic outlook for hotel investment activity. Annual short-term visitor arrivals1 into Australia increased by 56% over the year to March 2024 to 7.8 million, while the number of tourist arrivals (arrivals who nominate a holiday as their main reason for travel) roughly doubled to 3.3 million over the same period.

Despite these large increases, the recovery in visitor flows into Australia has further to run. Short-term visitor arrivals are yet to fully recover from the pandemic shutdown – annual arrivals over the year to March 2024 were still 18% below December 2019 levels, while tourist arrivals were 27% lower.

The Australian Trade and Investment Commission (Austrade) forecasts that international arrivals will exceed prepandemic levels in 2025, with strong growth in visitor flows over the medium-term. The Commission predicts 6.9% growth in annual average terms between 2025 and 2028, compared with 5.5% average annual growth over the ten years to 2019. Similarly, international spending is expected grow relatively strongly both in nominal and real terms over the same period compared with the decade leading up to the pandemic.