Aug 14 2019
The Tourism industry in Australia has grown substantially over the past five years. Rising domestic tourism and strong growth in international arrival numbers have boosted demand for the accommodation sector as a whole.
According to industry research firm IBISWorld, domestic tourism accounts for over 70% of Tourism industry revenue, although international tourism represents the fastest growing market. Despite strong demand from domestic and international tourism, Airbnb’s arrival in Australia in 2013 has created a challenging operating environment for the Motels industry.
“The depreciation of the Australian dollar over the past five years has supported domestic tourism activity, as international tourism has become more expensive for domestic residents. As a result, both domestic visitor nights and expenditure have grown over the past five years,” said IBISWorld Senior Industry Analyst, Yin Yeoh.
“The rising popularity of self-drive holidays has encouraged domestic travellers to visit regional Australia. Similarly, international travellers have expressed a similar interest in visiting regional areas, with international visitors indicating a desire to spend an average of six nights of a 14-night trip in regional Australia,” continued Ms Yeoh.
According to Tourism Research Australia (TRA), 301 million visitor nights were spent in regional Australia in 2018, up from 232 million in 2013. Despite a 29% increase in overnight stays in regional Australia, motel operators have not benefited from the rise in regional tourism.
Changing accommodation preferences
Data from TRA shows that holiday homes appear to be the preferred choice of accommodation for regional travellers. Over half of regional visitor nights are spent in private holiday rentals, and only 19% of total regional visitor nights are spent in hotels. As a result, the Motels industry is anticipated to record subdued revenue growth of 1.4% in 2019-20.
To compete with private holiday rentals, motel operators have expanded their presence by listing on platforms offered by firms in the Online Travel Bookings industry. However, the commission charges of 25% to 30% charged by the booking services have adversely affected motel operators. As a result, some motel operators in regional Victoria have exited the industry as operators cannot cope with the strong competition from private holiday rentals listed through online platforms, such as Airbnb.
According to IBISWorld, companies in the Hotels and Resorts industry are also facing competition from private holiday rentals. However, revenue for the Hotels and Resorts industry is anticipated to increase at an annualised 3.9% over the five years through 2019-20, to $12.9 billion. Hotel operators have managed to maintain revenue growth over the past five years by moving away from owning physical property towards management arrangements.
“Tourists have increasingly opted for private holiday rentals offered through sites like Airbnb due to the practical benefits they offer, as they are usually lower in cost, pet friendly, better located and furnished with household amenities. Airbnb has made it much easier for consumers to find larger and more luxurious rooms in regional areas compared with what motels offer at a similar price,” said Ms Yeoh.
Partnerships between operators in the International Airlines industry and Airbnb have also consolidated the home sharing giant’s position as a mainstream accommodation provider.
- In October 2016, Qantas announced a partnership with Airbnb that allow Qantas Frequent Flyer members to earn Qantas Points when they book Airbnb accommodation via Qantas’ website.
- In March 2017, Jetstar announced a partnership with Airbnb to allow Jetstar’s customers to book Airbnb accommodation along with their flights. Jetstar is the first low-cost airline to partner with Airbnb.
“While Airbnb has been great for consumers and regional economies, motels and hostels in smaller remote areas are feeling the brunt of the sharing service’s success. Motel operators are facing stronger competition in terms of room rates, facilities and room availability,” said Ms Yeoh.
Motels struggling to compete
The YHA backpackers’ hostel and apartments in Foster, Victoria, has closed indefinitely after 15 years of operation, citing an inability to compete with the rise of private holiday rentals offered through online travel booking websites. Similarly, motel operators in other parts of regional Victoria, such as Beechworth, are reporting similar struggles.
“Several accommodation providers in the Bed and Breakfast Accommodation industry have been unable to cope with the increased competition from accommodation offered through online platforms and have exited the industry. This trend is not particularly surprising, as a Google search for motels in Beechworth returns 57 results, while a search for accommodation in Beechworth on Airbnb returns over 300 results,” said Ms Yeoh.
In addition, the growing popularity of online accommodation aggregators has made accommodation prices more transparent, placing further pressure on motel operators to keep prices low to remain competitive.
Following criticism from parts of regional Australia due to the growing number of properties providing short-term rentals, Airbnb has expanded its listing offerings to include boutique hotels and bed and breakfasts.
In response to these criticisms, Airbnb also launched The Country Pub Project in June 2019, which gives country pub owners funds to help revitalise their establishments. These businesses are also partnered with Airbnb hosts to help them get their rooms ready for guests and help them gain maximum exposure among international and domestic guests.
IBISWorld reports used to develop this release:
- International Airlines in Australia
- Domestic Airlines in Australia
- Tourism in Australia
- Online Travel Bookings in Australia
- Motels in Australia
- Hotels and Resorts in Australia
- Bed and Breakfast Accommodation in Australia
- Qantas Airways Limited
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3641
Mobile: 0422 773 995