* Chinese tourism boom fuels rapid hotels expansion in
* Lower A$ & cheap airfares lure visitors, 'big spenders' on
* Construction boom seen adding to economic growth
* Room capacity set to rise by up to 30 pct over next 5 yrs
By Swati Pandey and Tom Westbrook
SYDNEY, Feb 3 The hole in Australia's economy
dug by China's dwindling appetite for its resources is being
filled by the Chinese themselves, whose growing affluence is
powering a surge in travellers in a boon to tourism income and
Emboldened by the flood of big-spending Asian tourists,
Australian hotel developers have embarked on their biggest
Tourism has already overtaken coal as Australia's
second-largest export earner, growing at an annual 13 percent to
A$47 billion in the third quarter of last year.
The travel surge is not new, but it is only now that visitor
demand is pushing room and occupancy rates through the roof,
encouraging hoteliers to make the expensive decision to add
"I have no hesitation at all to build new rooms," said Jerry
Schwartz, who will open a 590-room hotel in Sydney under
franchise for AccorHotel's 's Sofitel chain in
"Since income has got so positive I like to plough some of
the money back in."
The new Sofitel, on the waterfront at popular tourist site
Darling Harbour, is the city's biggest new hotel project since
the Sydney 2000 Olympics. Schwartz agreed in 2014 to acquire it
from developer Lendlease for A$360 million ($272
It is one of around 120 new hotel projects in the pipeline
across the country, which will help boost room capacity by as
much as 30 percent over the five years to 2021, according to
Tourism Accommodation Australia.
Blessed with an abundance of mineral resources that have
helped it extend a remarkable run of 25 years of uninterrupted
growth, Australia's A$1.6 trillion economy is in the midst of a
challenging transition away from a once-in-a-generation mining
Now, as China's voracious appetite for Australia's commodity
exports ebb, the nation has deftly positioned itself as an
attractive destination for Chinese tourists - most of them
well-heeled and eager to splurge on creature comforts.
The resulting spurt in construction activity - expected to
boost broad economic growth by a half a percentage point over
the next year - provides a welcome relief to policy makers who
have been hoping for a revival in other sectors.
"Tourism has been a bright spot for the Australian economy,
and we expect it to continue to add to GDP growth as 2017
unfolds," said UBS economist Scott Haslem.
Indeed, the value of approved construction work for
short-term accommodation catapulted to a record A$2.8 billion in
the September quarter.
Deloitte Access Economics estimates the pipeline of
tourism-related projects at nearly A$20 billion.
Lured by cheaper airfares and a lower Aussie dollar,
holidaymakers from China are increasing at double the rate of
the tourism sector, smashing forecasts and tripling the spending
of next source of visitors, the United States.
Average international fares have fallen 7 percent since June
30, according to Australia's top listed travel agent, Flight
Official data shows Chinese arrivals soared about 300
percent over the decade to June 2016 to top 1 million, and
spending over that period jumped more than six times to A$6.6
Over the past decade Chinese 'high spenders' - with total
expenditure of A$4,200 or more - have been steadily increasing.
Nearly half of them arrived in Australia on a travel package and
group tour, according to a 2015 study by Tourism Research
Australia, for the period between 2005 and 2013.
That has lifted average room occupancy of hotels and motels
across Australia to a record high of nearly 67 percent in the
September quarter. In Sydney and Melbourne - top tourist
destinations- occupancy rates are as high as 90 percent.
Hong Kong's Far East Consortium, Marriott,
Intercontinental Hotels, Starwood and homegrown
Crown Resorts are all expanding in response to this
There are cautionary tales about hotel expansion in
Australia. The last two construction booms, for the Sydney 2000
Olympic Games and to meet Japanese tourist demand in the 1980s
and early 1990s, were followed by busts as too many rooms were
left chasing too few visitors.
"In terms of supply, it's a double-edged sword," said
Olivier Coloun, investment analyst, at fund manager BT
Investment Management, which is the largest shareholder in
Mantra, Australia's biggest resort operator.
"Obviously you don't want supply to grow too quickly because
that can depress room rates and occupancy."
All the same, most in the industry say the China-led boom
has a long way to run.
"Those travellers are looking for a deeper, richer
experience - they will often stay longer, they'll use the food
and beverage, they'll try the local wines," Bob East, the chief
executive of Mantra, told Reuters.
"Their engagement is far deeper and richer."
($1 = 1.3243 Australian dollars)
(Reporting by Swati Pandey and Tom Westbrook, Editing by Jane
Wardell & Shri Navaratnam)