Last year marked a significant turning point for the Australian hotel sector. According to CBRE’s 2026 Hotels Australia report, the sector recorded strong performance in 2025, supported by improvements in both operational metrics and capital market activity.

The robust performance follows the continued recovery in international arrivals to Australia. The country registered 8.9 million international visitors in 2025, up 7% y-o-y. However, this is 5.6% below pre-pandemic levels, based on 2019 figures. A full recovery to pre-pandemic levels is expected this year, the report adds.

This comes as visitors from China — Australia’s second-largest source of international arrivals — make their return. Arrivals from China grew 17% last year to just over one million. While this remains below 2019 levels, CBRE expects Chinese visitor numbers to fully recover by 2027.

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Australia’s largest source of international arrivals, New Zealand, has already recovered to pre-pandemic levels. Similarly, the US, which ranks third, has exceeded its 2019 arrival numbers, alongside emerging markets such as India, South Korea, Indonesia and the Philippines.

As arrivals from China rebound, international visitor levels are expected to continue to see steady growth. Tourism Research Australia (TRA) projects the country will see 10.9 million visitors by 2030, translating to an annual growth rate of about 4% over the next five years.

The rise in arrivals has been accompanied by an even stronger increase in spending. International visitor expenditure reached a record A$37.1 billion ($48 billion) between January and September last year. China (A$12.3 billion) accounted for the bulk of it, followed by the UK (A$4.8 billion) and the US (A$4.6 billion).

Broad-based growth across operating metrics

In the hotel industry, CBRE’s report highlights a stronger showing across all key performance metrics. As of December 2025, nationwide occupancy stood at 73%, up 2.9% y-o-y and just shy of a full recovery to pre-pandemic levels.

Average daily rate (ADR) across Australia has already exceeded pre-pandemic levels, rising 3.6% in 2025 to A$248. Growth was driven by markets including Brisbane, Perth, Sydney and Cairns. Meanwhile, nationwide revenue per available room rose 6.7% last year, supported by both occupancy gains and higher ADR.

While higher international arrivals contributed to improved performance, the data also reflects sustained domestic travel activity. Following an “exceptionally strong” travel rebound in 2024, domestic travel has largely held steady, CBRE notes. TRA data showed a 2% y-o-y increase in domestic overnight trips as of September 2025, while visitor nights — a metric used to measure the total number of nights domestic travellers spent away from home — remained broadly flat.

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Growing return-to-office mandates, along with more sporting and cultural events, have also boosted corporate and MICE (meetings, incentives, conferences and exhibitions) travel. However, while this has bolstered mid-week hotel demand in major city markets, CBRE’s report notes that performance has been fragmented, with New South Wales, Victoria and Queensland capturing the bulk of domestic trips and spending.

Hotel investment deals hit record high

As Australia’s hotel sector approaches full recovery, investor interest in the sector has been renewed. Following muted activity in 2024, hotel transactions rebounded significantly last year, with total sales volume reaching A$2.7 billion across 34 deals — a record high, according to CBRE. The figure excludes transactions below A$10 million and hotels sold for change of use or redevelopment.

The scale of deals has also grown, with several transactions exceeding A$100 million in 2025. These include Park Hyatt Melbourne, sold by China’s Fu Wah International Group to Thailand’s KS Hotels & Resorts for A$200 million in August; as well as Ayers Rock Resort, sold to Journey Beyond, a US private equity-backed tourism company, for A$300 million in December.

Deals were dominated by offshore investors, who accounted for 78% of hotel sales volume in 2025, a large swing from the year before, when they accounted for 27%. The US led the pack, contributing to 40% of transaction activity, followed by Thailand and Taiwan.

Singapore was also a key contributor to 2025 capital inflows, accounting for 6% of transaction volume. Transactions included the purchase of Skye Suites Sydney by Furama Hotels International from defunct Australian property developer Crown Group for A$68 million in July. Crown Group went into liquidation in 2023 after a falling out between its founders, Indonesian-born Iwan Sunito and Paul Sathio.

Elsewhere, JD Properties, owned by Singapore’s Jaleel family, acquired George Hotel in Brisbane for A$34 million in November.

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Narrow pipeline 

While hotel demand is projected to see steady growth in the coming years, supply is not keeping up. “Australia’s hotel sector is entering the next phase of the cycle with a structurally thin development pipeline that is unable to respond quickly to recovering demand,” CBRE says. The firm estimates that incoming hotel supply between 2025 and 2030 will be 41% below the amount of new supply recorded over the past decade.

CBRE attributes the undersupply to structural headwinds including higher land costs, tighter financing conditions and increased regulatory requirements. Construction costs have also risen significantly. Data from cost management consultant Rawlinsons shows that hotel room build costs have increased by between 25% and 45% from 2019 to 2025 across major Australian markets.

The persistent undersupply is expected to support the Australian hotel sector. CBRE estimates that as operators raise room rates in response to growing demand, the sector will see sustained income growth, supported by positive fundamentals.

At the same time, investment momentum is expected to remain healthy. “Gateway market assets remain scarce, supporting pricing resilience and competition,” the report states. In addition, Australia’s relative stability, transparency and yield profile are expected to continue attracting offshore capital, particularly for high-quality, income-producing assets.

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