Australia’s tourism offerings may be world-renowned but this home of natural wonders still hasn’t seen its tourism industry return to its pre-pandemic peak.
International visitor arrivals are still down 40% and Australia isn’t alone in being swept up in a global short term rental market slowdown that’s been witnessed around the world this year.
The Land Down Under’s enduring appeal is a magnet for short term rental investment and it’s easy to see why. Australia attracts more than 5.6million international visitors a year (May 2023), tourism spending was generating more than $120 billion annually before the pandemic and the tourism industry supports 5% of the workforce.
But Australia’s fight back to full strength is very much a work in progress and this has created mixed fortunes recently for different types of destination Down Under.
Australia As A Whole
Revenue per available rental (RevPAR) in Australia has dropped 1.3% in the past year to $79, helped by a 7.7% fall in occupancy which offset a 4.9% rise in Average daily rates (ADRs) to $324. The result is a weak performance when inflation, which is running at 5.4%, is factored in.
However, the picture varies dramatically when we look at some of Australia’s most famous destinations, suggesting some of the urban locations that would have suffered most over the past few years. But, they are now coming from behind and advancing the fastest. This means the best places to invest in an Airbnb could be changing.
With revenues under pressure and property managers needing to stay one step ahead to support nightly rates and occupancy, we’ve pulled data on four of the most important STR markets in Australia to take a deep dive into their short term rental market performance, using scraped market data as of 17th July each year.
Australian Destinations To Watch
1. Gold Coast
The Gold Coast is well known for its beaches, in particular its star attraction, Surfer’s Paradise. This long sandy seaside resort also hosts a popular market several evenings a week and a clutch of famous theme parks, including Warner Bros. Movie World, Dreamworld, and SeaWorld.
Tourism has struggled to get back to pre-pandemic levels when 14.4 million visitors arrived in 2019, but this is expected to happen this year. With the Gold Coast leading the way it’s no surprise to see some robust numbers here. RevPAR on the Gold Coast has climbed 17.2% annually to $102, mainly helped by ADRs that have risen 14.5% to $378. Occupancy is up 3.8%. This is a relatively strong performance that reflects the demand this area enjoys.
2. Greater Sydney
Sydney is the capital of New South Wales and Australia's most populous city. It’s known for its harbourfront, which is home to the world-famous Sydney Opera House and Harbour Bridge. But escape from the city and you’ll also find Bondi Beach among more than 100 others.
Sydney is a hugely popular destination that attracted more than 10 million visitor nights in 2021/22 but, like Melbourne below, was not able to command nightly rates as high as the state or national average. Surging demand is producing some impressive growth figures in 2023. Nowhere is this showing through more than in Sydney’s rate of RevPAR growth, which was nearly double that of the Gold Coast over the past year. Sydney’s RevPAR increased 30% in 12 months to $52 but, this time, it is occupancy doing the heavy lifting. Occupancy rose 21.4% annually while ADRs have supported the improvement with nightly rates climbing 7.6% to $312.
Melbourne is the state capital of Victoria, a coastal city home to the dynamic Melbourne Arts Precinct which consists of the Arts Centre and the National Gallery of Victoria. It’s the second most populous city in Australia and is known for its metropolitan European charm (as well as booming nightlife).
Melbourne is the most popular interstate overnight leisure destination in Australia, with 3.6 million visitors staying 14.6 million nights and spending $5.1 billion. Over 90% of Australians planned to travel domestically in 2023, and Melbourne surpassed Sydney to be the fifth top domestic destination for 2023 (the Gold Coast was third). Melbourne Airport welcomed more than 30 million people in the year to June 2023 — a 138% increase on the year before and an 82% rise in the year to June 2019.
All the key performance indicators (KPIs) here indicate another strong performance for a much-loved urban setting that would have lost out more than rural locations during the pandemic. RevPAR growth in Melbourne is almost strong enough to rival Sydney, rising by 27.5% to $65 in just 12 months. ADRs have climbed well above the rate of inflation, increasing 18.3% to $220, while occupancy is up a healthy 7.1%.
To illustrate just how important it is to pick STR investments in the right location, we went back to state-level data to show you how the rest of Melbourne’s home state of Victoria is faring. The difference is stark.
Despite being a hugely popular tourist destination in its own right, Victoria isn’t seeing any revenue growth at all. In fact, RevPAR in Australia’s second-smallest state has fallen 6.9% despite the strong tourist appeal of its mountains, beaches, wineries — and 45 national parks. RevPAR sits at $67 — still only slightly higher than Melbourne despite ADRs being significantly higher at $307 (up 3.7%) because occupancy has dropped 8.3% annually to 22%.
International overnight visitors to Victoria have increased substantially in the year to March 2023 — up 740% at 1.4 million — but this is still a 54% fall from March 2019. Victoria is clearly also still in recovery mode but has stagnated this year.
Why Are The Cities Showing Such Strong Growth?
Domestic tourism is huge in Australia, but it’s likely that its major cities are disproportionately benefited by overseas tourists, both because of their appeal and the fact they act as gateways for international arrivals. Visitor numbers across Australia are still recovering post-pandemic but the pace of that recovery appears to be gaining pace in cities like Sydney and Melbourne.
Tourism is destined to remain a crucial industry for Australia. It has so much to offer — it has some of the most eco-friendly short term rental options in the world and it is also a highly unusual market. Average stays last a whopping 37 nights — no doubt a symptom of the high proportion of gap year travelers who make a beeline for Australia every year and the long journey times involved in reaching the continent.
- Looking at Melbourne and Sydney, the data suggest RevPAR in urban locations is still weaker than the national average but this could be about to change with areas like these seeing strong growth.
- Location matters when it comes to short term rental investment, so do your research and ensure your Airbnb or short term rental is less vulnerable to downturns
- Focus on RevPAR when assessing the strength of an investment, but be aware that strengthening occupancy will play a major role in improving profitability.
If you want to learn how to use STR market data to identify the best cities to invest in real estate, sign up for a demo of our DestinationData Dashboard.