The new leading performers

PUBLISHED : Wednesday, 26 July, 2006, 12:00am
UPDATED : Wednesday, 26 July, 2006, 12:00am

SERVICED APARTMENTS are enjoying healthy growth in Australia, providing increasingly intense competition to the hotel industry.

Between 2000 and 2004, the number of serviced apartment rooms increased by 24 per cent, contrasting with a 2 per cent rise in hotel rooms.

Tourism & Transport Forum (TTF) Australia spokesman Peter Staveley confirmed this upward trend. 'The continuing boom in the serviced apartment sector was anticipated and it is pleasing to see the increase in accommodation takings across all sectors,' he said.

'The 9.1 per cent increase in total accommodation takings of hotels, motels and serviced apartments between December quarters 04 and 05 is a solid indicator of a healthy industry.

'Considering that occupancy levels remained relatively constant over the same period - with only a 0.5 per cent increase - the increase in takings are a welcome boost to yield.

'The performance of five- and four-star establishments is continuing to improve, with a respective 3.2 per cent and 7 per cent increase in revenue per available room. The star performers of the industry, undoubtedly, are serviced apartments on all indicators.'

Mr Staveley said the states with the most significant growth in serviced apartment room supply were Victoria (15.9 per cent), New South Wales (14.5 per cent) and South Australia (10.8 per cent), while Queensland at 8.5 per cent had the highest level of serviced apartment rooms in total, almost double that of New South Wales.

He said the growth in the sector was supported by increased consumer acceptance of the apartment-style product, as well as better developed construction and financing models for the investment category.

Despite the plentiful opportunities, Mr Staveley warned that proposed tax changes had the potential to impede growth in the sector.

'Recent amendments put forward regarding 'input taxed' leasing will prevent serviced apartment investors from claiming input tax credits on the purchase price and maintenance costs.

'While TTF Australia believes the changes will deliver clarity, we are concerned about the potential impact of the retrospective nature of the changes on investment. Many investors could be liable for amounts already claimed in input tax credits, directly affecting their ability to further invest in the market or upgrade facilities.

'Additionally, the removal of input tax credits may deter new investment, potentially adversely impacting the only solid area of accommodation supply growth.'

Mr Staveley said that illegitimate operators were also a concern to the industry.

'TTF Australia will continue to advocate for a national certification scheme to manage the continuing problem of illegal serviced apartments. Some operators, particularly in areas with sluggish residential sales and growing tourism demand such as Sydney City, Melbourne Docklands, Brisbane River, Perth and the Gold Coast continue to flout local planning laws by operating residential apartments as commercial serviced apartments.

'The development and operational practices of these apartments threaten duty of care to visitors, industry profitability and investment returns. Therefore, TTF Australia will continue to look out for legitimate operators by weeding out the illegal providers.'

Paul Constantinou, chairman of Quest Serviced Apartments, said that regional Australia was emerging as a significant market for serviced apartments targeting the business sector.

'We see the market continuing to experience solid growth as the trend for businesses to move into regional and suburban centres provides attractive economic benefits.

'With Australian state governments encouraging regional investment and expansion, businesses will continue to relocate their operations to areas outside of existing major central business districts.

'Because there are often few accommodation options to service the increasing demand of extended stay travellers, serviced apartment operators will continue to develop products focusing on these key areas to meet such demand.'

Mr Constantinou said that major industry centres including far north Queensland, Western Australia, Central New South Wales and Victoria would continue to provide opportunities for investors as serviced apartment operators developed new properties to meet business demand.