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COVID-19 costs Vic hotels $1.7 Bn in room revenue alone

May 4, 2021 Association No Comments

COVID-19 cost the Victorian Tourism Accommodation Sector $1.7 Billion in room revenue alone for the year ending February 2021 with recovery to take at least four years according to modelling conducted by AHS Advisory.The AHS modelling is contained in the Accommodation Association’s submission to the Victorian Government’s Inquiry into the impact of the COVID-19 pandemic on the tourism and events sectors.

The AA submission highlights the need for Government support given the financial impact and burden, the investment challenges, the significant job losses and the ongoing employment shortage.

Key findings:

  • Melbourne hotels have been hardest hit with a $1.4 Billion loss of Rooms Revenue alone while Regional Victoria saw a net loss of over $28m Million in Rooms Revenue.
  • This makes COVID-19 the single largest peacetime economic contraction for the Accommodation Sector. There have been significant job losses as a result.
  • The losses experienced by Victoria’s hotels will not be quickly recouped with negative trading conditions of more than $1.16 Billion to continue through to the end of 2022.
  • While the direct impacts were clear, what is more concerning are the unknown impacts on how investors and hotel owners change their investment patterns given the most recent survey showed valuations of Melbourne hotels have recorded decreases as high as 30%.
  • While many regional areas in Victoria have experienced a robust recovery, this recovery has been stymied by staffing shortages.
  • On average, 78% of hotels across Australia are experiencing a skilled labour shortage posing a significant barrier to recovery.
  • These labor shortages often mean existing workers have to put in excessive hours to fill the gaps and are forcing hotels to keep parts of their properties closed.

Summary of recommendations:
The Accommodation Association worked with Victorian Tourism Industry Council (VITC), Committee for Melbourne and other leading stakeholders to establish a comprehensive framework for restarting the industry via a unified plan for recovery.

  1. Visitor Economy Destination Masterplan: Work must commence immediately on a state-wide Masterplan for tourism in Victoria to 2030 for Government and industry detailing future investment requirements and demand building activity for the next 10 years.
  2. Expand and promote the Metro Melbourne Travel Voucher Scheme: an allocation of $8 Million to a second tranche of travel vouchers for Melbourne, supported with a $1 Million marketing campaign to drive visitation from regional areas. Call to action must be to book directly with all hotels with a focus on building demand Sun-Thurs nights during winter 2021.
  3. Support a National approach to hotspot definition for domestic and international health control measures
  4. Supporting Victoria’s demand-driving agencies (Visit Victoria, MCB and Business Events Victoria): invest $40 M per annum over four years discretionary funding for Visit Victoria and $17 Million for MCB. Constant funding of $57 Million p.a. for four years to support the long-term strategic planning and execution needed for sector rebuild.
  5. Plan for Aviation Recovery: International air travel to Melbourne is just 2% of pre-COVID numbers. Domestic air travel just 20% of usual traffic. An aviation recovery strategy is needed to attract direct airline services back to Melbourne and Avalon airports, including $20 Million p.a. over four years to incentivise international airlines to resume direct services.

Quotes from Accommodation Association CEO Dean Long (available for interview)
“Many regional areas which are primarily leisure destinations in Victoria have experienced a robust recovery even though this recovery has been stymied by staffing shortages. On average, 78% of hotels across Australia are experiencing a skilled labour shortage posing a significant barrier to recovery.”

“We urgently need the Commonwealth Government to allow visa holders to work more then 40 hours a fortnight so we can reopen our hotels to match demand.”

“Melbourne is one of the country’s international gateways and as with Sydney, the lack of corporate and international travel continues to heavily impact Melbourne.”

Quotes from Managing Director of AHS advisory Ron de Wit (available for interview)
“Forward bookings for Victorian accommodation in the second half of the year are still at 2020 levels and event investment is currently extremely prudent, so we welcome this much needed support from the state government.”

Managing Director of AHS advisory Ron de Wit said; “The Victorian tourism region felt the full impact of the COVID-19 pandemic losing an estimated $1.7 billion in room revenue alone for the 12 months year end February 2021, compared to the prior 12 months.”

“Melbourne bore the brunt of this with losses exceeding an estimated $1.4 billion in room revenue over the same period and compared to the prior 12 months, and our current forecast for the Melbourne Tourism Region indicates it will take at least four years to build revenues per available room back to 2019 levels.”

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