High costs eat into profit margins of local hoteliers

The high costs of running a hotel in Australia, with wages, energy and administration charges, have eaten into profit margins at a time when occupancy and room revenues are on the rise, say industry experts.

The high costs of running a hotel in Australia, with wages, energy and administration charges, have eaten into profit margins at a time when occupancy and room revenues are on the rise, say industry experts.

The Horwath HTL Australia annual Survey of Operations report says despite historically high occupancy and room rate levels, Australian hotel profit margins have failed to grow in the past five years.

John Smith, chief executive of Horwath HTL Australia, said the findings were based on trading results in 2012 from more than 60 mostly city-based five-, four- and three-star hotels.

"Survey-wide occupancy in 2012 reached an impressive 78 per cent, the same level as reported in the 2007 Survey of Operations, before the onset of the global financial crisis," Mr Smith said. "Yet despite the combined effect of both high occupancies and strong room rate growth, gross operating profit as a percentage of revenue declined marginally over the period, from 36 per cent in 2007 to 34 per cent in 2012."

Mr Smith said the findings were disappointing, but not surprising given the high operating costs in Australian cities. "The result highlights that Australia now has some of the most expensive cities in the world for hotels to operate in," he said.

The report comes as the Singaporean M&L Hospitality group moves ahead after development approval for the $160 million upgrade of the Four Points by Sheraton Sydney, Darling Harbour.

James Packer's proposed Crown casino and six-star hotel is awaiting final approval for construction at the Barangaroo site on the edge of the CBD.

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