Cairns, Australia's Tropical Hub, Gears Up For Renewed Investor Attraction

Located 1,200 miles north of Sydney, Cairns is renowned as the "gateway" to the Great Barrier Reef and the World Heritage-listed Daintree Rainforest. This tropical city is currently experiencing a resurgence, driven not by an influx of new hotels but by a significant rise in tourism and growing investment interest.

Cairns Accommodations: A Hotbed for Investment

As Cairns continues to attract more visitors, hotel investors are taking note of the increasing demand and the city’s limited new hotel developments. This has created a unique investment opportunity in the Cairns accommodation market.

One notable example is the February rebranding of the Cairns Harbourside Hotel. Situated on the city’s scenic Esplanade, this hotel previously operated as a Holiday Inn under Japanese investment firm Taisei Kanko, which was instrumental in Cairns’ tourism boom. The firm expanded the property from the original 100 rooms in 1993 to 173. The Cairns Harbourside Hotel is on the market, one of three significant hotel sales in Cairns this year.

Glen Macdonald, the general manager of Cairns Harbourside Hotel since February, remarked, “People sell for various reasons. It’s not necessarily a negative.” He emphasized that "it’s business as usual" at the hotel, focusing on maintaining the property and guest satisfaction.

Limited Supply, Growing Demand in Cairns

The limited supply of new hotels in Cairns has contributed to a robust market for hotel transactions. Cairns hotels have benefited from an influx of both domestic and international tourists. Yet, the city has seen few new hotel openings in recent years, making existing properties even more attractive to investors.

Mark Olsen, CEO of Tourism Tropical North Queensland, highlighted the need for an additional 500 luxury hotel rooms in the Cairns region over the next decade to meet the growing demand from new markets. However, new hotel projects in Cairns have been scarce since the opening of the luxury Crystalbrook Flynn in November 2020. Matthew Burke, regional manager of Pacific, Japan, and Central South Asia at STR, noted that "no current proposed hotel projects" are in the pipeline for Cairns.

Instead, many existing properties have undergone refurbishments over the past five years to enhance their quality and reposition themselves to support higher average daily rates (ADR). This strategy has been crucial in supporting future occupancy growth amid rising demand.

Wayne Bunz, national director of capital markets and hotels at CBRE, noted that the scarcity of new hotel supply drives investment opportunities in Cairns. He predicted that these supply constraints would continue to support the recovery and growth of the city’s limited hotel assets.

One prominent example is Pullman Cairns International, currently up for sale with a guide price exceeding AU$100 million ($65.2 million) following an AU$17 million renovation by its owner, Shakespeare Property Group, in 2021.

Cairns’ Market Recovery and Tourism Boom

Despite the challenges of limited new supply, Cairns is experiencing a strong market recovery. The city has seen substantial developments, including expanding the port and various infrastructure projects. Macdonald says, “Cairns is rebounding robustly post-COVID, with significant developments underway that will be transformative for the city. We have a very resilient economy.”

Cairns has also experienced a population increase, expected to grow from 175,000 to 230,000 by 2030. This population boom, combined with a tourism surge, underscores Cairns’ transformation from a sleepy town into a bustling hub of activity.

The city’s tourism industry has been bolstered by an AU$ 55 million upgrade to the international airport terminal and increased domestic and international flights. Like other leisure-focused destinations, Burke pointed out that Cairns benefited significantly from Australians opting for domestic travel during and after the pandemic. The city’s average daily rates (ADR) have risen by 33% since 2019, although growth has slowed to 0.5% year-to-date in May 2024, reflecting a normalization of demand. Despite this, Cairns’ hotel occupancy has recovered to about 94% of 2019 levels over the past 12 months.

Macdonald added that June was an exceptional month, with occupancy rates between 80% and 90% and an ADR of approximately AU$155. The city attracts diverse visitors, from inbound tourists and frequent independent travellers to corporate clients and leisure guests.

Tourism & Events Queensland reports that international tourism in Cairns has rebounded to 75% of pre-pandemic levels, with the U.S., United Kingdom, and New Zealand leading the way.

“All recent travel trends indicate that visitors increasingly seek accommodations that reflect the destination's character. We’re excited to offer an authentic tropical Queensland experience,” Macdonald concluded.

Cairns offers a wide range of accommodations for those considering a visit, from luxury hotels like Pullman Cairns International and Crystalbrook Flynn to more budget-friendly options. Whether looking for a beachfront resort, a boutique hotel in the city's heart, or a quaint bed and breakfast, Cairns' diverse accommodations cater to every traveller’s needs, making it the perfect base for exploring the Great Barrier Reef and beyond.