As we approach cruise ship season, Savills examines the impact of the cruise ship industry on the Sydney hotel market.
As Sydney continues to grow as a major international cruise destination, Sydney’s inner CBD hotels will clearly reap the benefits.
According to the Port Authority of New South Wales, more than 346 cruise ships are expected to enter Sydney’s ports between 25 November 2015 and 24 November 2016, with passenger days expected to surpass 1.35 million, contributing to demand for Sydney hotel rooms, adding further pressure on existing high occupancy levels which are currently sitting at 85% YTD October 2015.
Sydney remains the main port for embarkation and disembarkation in Australia and continues to grow as a major international cruise destination. Furthermore, Sydney is the only port in Australia which has two dedicated cruise facilities, the Overseas Passenger Terminal and White Bay, which can accommodate three cruise ships simultaneously. More recently the Overseas Passenger Terminal underwent a major upgrade and can now accommodate the ‘megaliners’, such as Cunard’s QE2. It has also recently been reported that Ovation of the Seas, a USD1billion (AUD1.39 billion) 5,000 passenger cruise ship, will be arriving into Sydney waters in 2017.
As the majority of passengers on cruise ships either start or finish their cruise in Sydney, the impact will be felt by the hotels nearest Circular Quay, including Park Hyatt Sydney, Four Seasons, Shangrila, Pullman Quay Grand, Sydney Harbour Marriott, Intercontinental, Holiday Inn Old Sydney and then rippling out towards Sydney’s remaining southern CBD hotels.
Vasso Zographou, Director of Savills Hotels Australia, noted that cruise ship guests are taking the opportunity to explore Sydney and staying additional nights in Sydney’s hotels. Furthermore, international guests are capitalising on the falling Australian dollar and staying at Sydney 5-star hotels which have become more affordable.
“Sydney is a ‘bucket list’ destination and will receive maiden voyages throughout 2015/2016 from cruise ships including: Costa Luminosa, Golden Princess, Pacific Aria, Pacific Eden, Explorer of the Seas, Superstar Virgo, Azamara Quest and Pacific Venus.”
Destination NSW reported that in 2013-14, around 84% of international passengers stayed up to three nights in Sydney, which is a typical embarkation/disembarkation travel pattern displayed in other global port cities.
Whilst there is no doubt cruise ship related hotel occupancy has an accretive impact, occupancy patterns continue to reflect the ebb and flow of the corporate market, market seasonality and holiday periods.
As Sydney’s occupancy rates creep above 85% and hotel Operators continue to yield room rates, the knock on effect will be increased RevPar and higher profitability. The resultant improvement in Sydney’s trading fundamentals will continue to entice investment in this sector.
To learn more on the outlook and trends of the hotels industry, view our latest reports.