Melbourne, the events capital of Australia, struck gold with the recent Commonwealth Games. This spectacular sporting showcase, held in March, was not only the largest event ever staged in the city, it was also the biggest revenue earner to date for Melbourne hotels. According to the HotelBenchmark ™ Survey by Deloitte they achieved their highest ever revenue per available room (revPAR) at AUD$183 in March 2006.

Excellent planning, massive investment and the enthusiasm of Melbourne citizens made the Games a resounding success and sharpened up the city’s image as a great place to visit. Not content to rest on its laurels, the city is now making the most of the renewed interest from international tourists and building a brighter future.

Preparation makes perfect

Melbourne is popular with the Meetings, Incentives, Conventions and Exhibitions (MICE) market, which is estimated by Sport and Recreation Victoria to contribute around AUD$1.2 billion annually into Victoria’s economy. Some of the world’s top events, such as the Australian Open Tennis Championships, Melbourne International Arts Festival, Formula 1, Foster's Australian Grand Prix, Australian Football League Finals Series and The Melbourne Cup horse race all contribute to the city’s busy diary.

The Commonwealth Games was a step up from these events, but terrific team spirit across the hospitality industry, Tourism Victoria and Tourism Australia, the government and the people of Melbourne made everything come together in time. Preparation was paramount to the success of the Games, and Melbourne gave a warm and friendly welcome to an estimated 90,000 visitors. The citizens of Melbourne - passionate about sport - were encouraged to get involved, and 15,000 national and international volunteers helped the Games run smoothly.

Both government and tourist authorities provided continued support during the planning stages. The Commonwealth Games Business Benefits program developed by the Victorian Government and The City of Melbourne helped prepare businesses to gain maximum benefit from the Games. A series of Business Ready forums also helped local companies plan ahead.

Infrastructure developments were extensive. Melbourne Airport’s AUD$220m development programme included a 5000m² international terminal expansion, a new access road off the Tullamarine Freeway and a AUD$40m car park expansion.

Not content to stage one of the largest sporting attractions of the year Melbourne went further and added extra appeal and value with Festival Melbourne. This was a free arts and cultural show piece which ran alongside the Games, and 2,500 performers from all over the Commonwealth entertained tourists with concerts, street performances, cultural and visual arts exhibitions.

And of course there was Tourism Australia’s infamous: ‘Where in the bloody hell are you?’ marketing campaign. It may have caused a stir with its ‘typical’ Aussie language, but it gained huge media attention in time for the Games.

Games drive growth

Around 1.5m tickets were sold for the games and the Melbourne 2006 Commonwealth Games Corporation expects visitors to have contributed an estimated AUD$270m to the State’s economy. The majority of visitors were from New Zealand, the UK, Canada, South Africa, Singapore, Malaysia and India.

As shown in the table below, hotel performance in Melbourne saw double-digit growth during the Games, with hotels enjoying an 18.5% increase in revPAR compare to March 2005. This was driven by increases in average room rates which reached AUD$221.


Melbourne’s hotel performance – March 2006

Occupancy Average Room Rate RevPAR
% % Change AUD $ % Change AUD $ % Change
March

82.8

0.8

221

17.6

183

18.5

Source: HotelBenchmark™ Survey by Deloitte


Hoteliers in Melbourne have not always had things so good. As shown in the table below, Melbourne’s hotel performance since 2001 has struggled to reach 2000 performance levels when the city benefited from positive global trading conditions plus the spin off effect from the Sydney 2000 Olympics.

From 2001 to 2003, hotel occupancy and average room rates suffered from the aftermath of 9/11, the outbreak of SARS, and the general downturn in international tourism. Matters were made worse by an oversupply of hotel rooms as 3,000 rooms were added to Melbourne’s total between 2003 and 2005. This cycle of new supply ended in 2005 and revPAR then almost reached 2000 levels, marking an upturn. This indicates that Melbourne is finally coping with its extra rooms but things could be better. To keep this momentum going, everyone involved in the city’s tourism needs to continue to collaborate – as they did during the Games – and stay focused on building upon this recent success.


Melbourne revPAR 2000-2005

Source: HotelBenchmark™ Survey by Deloitte


Fastest growing traffic

With dramatic increases in the number of international arrivals – up by 68% in the past seven years – Melbourne’s future as a tourist destination is looking good.

International passenger traffic at Melbourne Airport has been the fastest growing in Australia for some time, and China, India and Indonesia are the largest increasing inbound markets. All three are projected to provide double-digit growth to Australia from 2005 through to 2014.

With more rooms to fill Melbourne is happy to welcome these extra tourists. Melbourne Airport is now ready for the 555-seat Airbus 380, and half a billion dollars will be invested in airport improvements over the next five years. Increased car parking, additional food and beverage outlets, more international gates, better taxiways, heightened security and additional baggage handling facilities are all included in the plan.

All the pieces of the jigsaw

Tourism Victoria (TV) wants the state to remain the events capital of Australia but also plans to widen its appeal to other markets. Its stated vision – ‘By 2010 Victoria’s tourism industry will be recognised for delivering outstanding visitor experiences’ has led to some innovative marketing.

TV has devised a campaign based on the jigsaw concept and has identified seven key pieces that add up to delighted customers and tourism excellence. Modules have been developed to train people working in the hospitality industry to deliver exceptional experiences for visitors.

A development is planned to transform the southern banks of the Yarra River that runs through Melbourne. Included in the AUD$1 billion project is a 5,000 seat convention centre, an office and residential tower, a five star Hilton Hotel and a picturesque riverfront promenade with cafes and shops. The Melbourne Convention Centre is due to open by 2009 adjacent to the Melbourne Exhibition Centre, ensuring Melbourne keeps its title as MICE leader in Australia.

Regional tourism in Victoria is not being ignored either. The Regional Fast Rail project has been upgrading the railways connecting Melbourne to surrounding areas, and this should be completed this year. New 160km/h trains, upgraded tracks, new timetables and new safety systems are included in the project.

Advantage – Melbourne

Clearly, The Commonwealth Games were an all-round success for Melbourne. The city had a chance to show itself to the world and potential visitors, and it took advantage of it.

Having begun the decade rather slowly and with an over-supply of new hotel rooms, Melbourne’s hotel performance now looks assured, with plenty more visitors on the way. Hotel performance has climbed back up to 2000 levels and a re-energised more stylish Melbourne is working hard to sustain this growth. The baton has now been passed to Delhi for the 2010 Commonwealth Games providing India with the same opportunity to shine.

Note: All analysis in Australian Dollars.


The HotelBenchmark™ Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month. Monthly surveys are produced on the following areas:

  • Four regional rate and occupancy surveys covering Asia-Pacific, Europe, Central & South America and the Middle East & Africa.
  • Twelve country/sub region rate and occupancy surveys for Australia, Benelux, China, Germany, India, Italy, New Zealand, Nordic Countries, Qatar, Southern Africa, Spain and UK.
  • Two city rate and occupancy surveys for London and Paris.
  • Monthly profitability surveys on Germany and London.
  • On an annual basis we produce profitability surveys tracking performance across all regions of the world.
  • Daily HotelBenchmark™ tracks rate and occupancy everyday for 30 markets across the UK, Asia, Europe and the Middle East. Coverage continues to build rapidly since launch in early 2005.

Laura Baxter
+44 (0) 20 7007 1099
STR Global