According to Vice President Marketing & Research, Ms Melinda McKay, a fall in room rates is a contributing factor to this low cycle across Australia, with a change over the March Quarter 1999 in hotels of �3.1% and serviced apartments with �0.7%. However, the motel market is remaining stable with a modest 1.1% improvement on last year.

Ms McKay explained, �During 1998, the regional cities of Adelaide, Darwin, Perth, Canberra and Hobart were outperforming the larger markets. This is now turning around as the major tourism centres of Melbourne, Gold Coast and Cairns show steady signs of growth.� 

Of the smaller regional cities, Canberra was the hardest hit with occupancy falling by 11.1% since the March Quarter 1998 together with room rates dropping by �1.6%.

In the larger tourism regions, Sydney is continuing to feel the effects of �honeymoon rates�, with new hotels and serviced apartments offering entry-level discounts. The demand for accommodation has increased supply by 14.7% in new hotels/motels and serviced apartments since 1998, leading to a solid occupancy rate of 72.8%. 

This demand is set to continue with further construction in Sydney City expected to increase total room supply by 10.7% during 1999, with an additional 6.3% growth in the year 2000.  However the market is experiencing a fall in room rate with a �5.5% change on last year. 
Similar results were also recorded for Brisbane with a 15.3% increase in total room supply over the last Quarter, with projects under construction expected to boost room supply by 3.8% during 1999. 

For the Gold Coast, a 46.2% growth in demand for serviced apartments helped absorb the 45.9% increase in new supply during 1998, however occupancy did decrease by 0.3% to 58.2%.  In overall tourist accommodation, the statistics indicate a very strong recovery in demand in the first quarter 1999 of 14.6%, however evidence suggests the market is still buckling under the pressure of an oversupplied market.

Melbourne has sustained performance levels with four consecutive quarters of large supply growth. Interestingly, the serviced apartments sector has exploded with a 75.2% change in room supply on last year. Occupancy continues to remain strong with an increase to 75.7%, whereas room rates have contracted slightly with a �1.8% change. Almost 1,100 rooms under construction are due to enter the market over the next 18 months with another 707 rooms likely to commence construction in the next 12 months. 

Whilst the hotel industry overall is experiencing a low-cycle period, the future looks steady as the 2000 Olympics will assist in absorbing new supply, increase occupancy and boost room rates in the short to medium term.