In Brief: Growing demand for luxury hotels in Australia and New Zealand is driving higher average daily rates and stimulating new investment in the region’s upscale hospitality sector.
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W Sydney Hotel – Image Credit Marriott International
Luxury hotels in Australia and New Zealand have recorded stronger demand and room-rate growth than the broader hotel market, while a limited future development pipeline is expected to support the value and performance of existing assets.
Demand Exceeds Broader Hotel Market
According to CBRE Australia, the luxury hotel sector in Australia and New Zealand is growing faster than the wider hotel market. Demand across major markets increased at a compound annual growth rate of 2.9% from 2019, compared with 1.3% for the overall hotel sector.
Growth in the global luxury market, rising room rates and constrained supply contributed to the result. Luxury hotel occupancy remained between 78% and 79% despite the opening of new properties in the region.
Since 2020, 20 luxury hotels containing 3,517 rooms have opened across Australia and New Zealand. In Australia, luxury properties accounted for about one-third of all hotel rooms delivered during that period.
Room-Rate Premiums Widen
Luxury hotel average daily rates, or ADR, increased in every market reviewed since 2019. The gap between luxury rates and rates across all hotel categories also widened.
In Australia, the average luxury ADR premium rose 53%, from $62 in 2019 to $94 in 2026. Queenstown recorded the largest premium among the markets reviewed, rising from about NZ$78 to NZ$140.
Sydney continued to perform strongly among major gateway markets, while newer properties established higher room-rate levels. Queenstown’s results reflected limited supply and its position as a leisure destination.
Asset Prices and Transactions Increase
The median transaction price per room, or key, rose 81%, from about $396,000 between 2011 and 2014 to $718,000 in the 2023 to 2026 year-to-date period.
Since 2021, about A$3.2 billion in luxury hotel assets has changed hands across Australia and New Zealand. CBRE advised on about A$1.75 billion of those transactions, or 55% of the total transaction value.
Higher valuations have supported activity including hotel conversions, property repositioning, branded residences and independent operating arrangements.
International Buyers Remain Active
Domestic and offshore capital have helped establish pricing benchmarks in the sector. Transactions occurred under varying market conditions, including during pandemic lockdowns and the subsequent recovery in investment activity.
Investment from China and Hong Kong was particularly active between 2012 and 2018. Singaporean and Malaysian investors maintained a steadier presence, while the buyer base became more diverse in recent years.
Offshore interest has supported market liquidity alongside Australian and New Zealand investors and contributed to price, price-per-key and yield benchmarks for luxury assets.
Construction Pipeline Expected to Decline
Eleven luxury hotels containing about 1,979 rooms were under construction across Australia and New Zealand. Most are expected to enter the market during 2026 and 2027.
Beyond the current construction cycle, the confirmed luxury development pipeline is expected to become materially smaller as project feasibility constraints limit future construction. Stronger demand and limited supply additions could support established luxury hotels, particularly in markets where development is difficult.