Melbourne’s booming hotel scene drives tourism recovery

Melbourne’s hotel market is experiencing a remarkable resurgence, marking a new chapter in the city’s tourism and hospitality sector. With global brands investing in premium properties and a wave of new developments emerging across the city, Melbourne is solidifying its position as a leader in Australia’s accommodation landscape.

A key highlight of this boom is Accor’s expansion, demonstrated by the newly upgraded Sebel Melbourne Kew. This 112-key property, featuring 89 hotel rooms and 23 apartments, is Accor’s ninth Victorian Sebel location, adding to their extensive Australian and New Zealand portfolio. According to Adrian Williams of Accor Pacific, Melbourne’s thriving events and international tourism sectors are driving demand, making the city a hotspot for new hotel openings.

Another exciting addition is The Hoxton, marking its Australian debut in 2027 within Alfasi’s Matchworks development at Cremorne. This 198-key lifestyle hotel from Ennismore promises a design celebrating Melbourne’s industrial heritage and local culture, contributing to the city’s growing appeal beyond the CBD.

Melbourne continues to outpace its closest rival, Sydney, in new hotel developments. Research from JLL reveals that by 2026, Melbourne will have welcomed over 7,050 new hotel rooms since 2019, a 32.6% increase compared to Sydney’s 16% growth. The influx of international brands, including Hyatt Place, Ritz Carlton, and Shangri-La, highlights global confidence in Melbourne’s hospitality market.

The city’s robust events and conference scene, combined with world-class infrastructure, is a driving force behind this growth. TFE Hotels’ Chris Sedgwick emphasises that Melbourne’s appeal extends beyond leisure, with the meetings, incentives, conferences, and exhibitions (MICE) sector playing a crucial role in hotel demand.

Investment is also spreading to Melbourne’s city-fringe locations. Notable projects include MA Financial Group’s acquisition of Vibe Hotel Melbourne Docklands and Shayher Group’s billion-dollar Destination Pentridge development, showcasing confidence in Melbourne’s broader tourism landscape.

Visitor spending is reaching record highs, with $39.7 billion recorded by September 2024—a 26% increase from pre-pandemic levels. Projections suggest this figure could soar to $53 billion by 2028, bolstering investor optimism.

Meanwhile, private financing is playing an increasing role in bringing hotel projects to life. The completion of Melbourne Place hotel, a $150-million development backed by Merricks Capital, exemplifies how alternative funding sources are filling the gap left by traditional banks.

Despite the positive outlook, challenges persist. Occupancy rates, while improving, remain below pre-pandemic levels, and rising construction costs are adding pressure to project feasibility. Additionally, cuts to Visit Victoria’s marketing budget have raised concerns about sustaining visitor demand for the expanding hotel inventory.

However, Melbourne’s long-term prospects remain strong. The city’s population is projected to reach 6 million by 2031, supporting continued growth in tourism and hospitality. Increased passenger numbers at Melbourne Airport and a favorable exchange rate are further boosting international visitation.

Established hotels are also evolving to meet changing consumer preferences. The transformation of Rydges Hotel Melbourne, including a revamped events venue, and new rooftop dining at Vibe Hotel Melbourne illustrate how operators are investing to stay competitive.

With its vibrant cultural offerings, world-class events, and ambitious hotel developments, Melbourne is firmly positioned as Australia’s premier destination for business and leisure travelers. As the city embraces this exciting growth phase, the outlook for Melbourne’s hotel sector remains bright and promising.