Room shortage threatens 2032 Olympics as costs surge
Young Queensland developer Kenneth Wagner wants to build a much-needed hotel in Brisbane ahead of the 2032 Olympics and has a unique business model to make it work.
But the director of KPAT Hotels says he cannot compete with Brisbane’s housing developers for prime land in the heart of the city, with the region grappling with a critical shortage of hotel rooms.
“It’s no secret that residential developers in Brisbane can afford to pay more for land than hotel developers can,” Wagner said.
“If you put us against them, they would outbid us every day of the week. We can’t compete.”
This week Wagner opened the 180-room Avani Mooloolaba Beach Hotel on the Sunshine Coast; this hotel was the first internationally branded full-service hotel in the area in over 40 years.
Avani is the second new hotel to open in the Brisbane, Gold Coast and Sunshine Coast region in the past year, following the 208-room Mondrian, which opened in Burleigh Heads in June.
Wagner, whose father Dennis is a property magnate from Toowoomba and one of Australia’s richest families, said Avani was only possible because the Sunshine Coast Council made the land available exclusively to hotel developers.
“This meant: [the council] When we put it up for sale, we weren’t competing with residential developers or management rights developers in the market,” Wagner said.
“This is the only reason why we live here today in a hotel and not in a traditional seaside apartment building with deeded floors.
“We’re actually not ashamed to tell people that. We didn’t get subsidies. We didn’t get discounts. What we did was we paid the most on that day for what the city wanted delivered on site.”
Unless serious steps are taken to deliver more projects, Queensland will face a shortfall of 14,700 hotel rooms needed by 2032. According to a new report released Wednesday by the Property Council of Australia..
Supply is already so tight that events such as the NRL Magic Round and the Brisbane Truck Show are driving a spike in room rates; An overnight stay in Brisbane cost visitors up to $900 last weekend.
Wagner, whose family built Toowoomba’s Wellcamp Airport and runs Oaks Hotels in regional Queensland, has called on all levels of government to make land in Brisbane’s CBD, South Bank and South Brisbane available to hotel developers, leaving areas such as Spring Hill and Woolloongabba for residential development.
“We would love a pre-Olympic presence in Brisbane if it was the right land,” he said.
“It doesn’t necessarily have to be somewhere by the river, definitely somewhere with a view of the river… but you need to be right in the center of the city.”
Wagner said building the Avani hotel in less than two years made it possible to close the accommodation gap before the Olympics.
“We need fast approvals. We need very little red tape, and the point is, we need the land allocated to us,” he said.
Property Council Queensland chief executive Jess Caire said the state’s hotel shortage was no longer a short-term slump but a long-term problem.
“There is demand, global interest is coming, but the rooms are not coming,” he said.
“Queensland’s hotel markets are doing exactly what we hoped they would – attracting visitors, increasing occupancy and delivering strong returns – but the supply response has completely stalled.”
Based on current trends, the planned pipeline will deliver only 9 percent of the government’s own long-term Target 2045 target of 40,000 rooms.
According to commercial real estate agency CBRE, construction costs for mid- and upper-class hotels have increased by nearly 40 percent since 2019; Another 18 percent increase is expected in 2026 and 2027.
“The gap between what a hotel costs to build and what it can earn is widening every month,” said Ally Gibson, head of hotels research at CBRE.
“Projects that did not accumulate last year accumulate even less today. The market is performing well; the construction economy has deteriorated.”
But Wagner found a viable alternative.
“Our model is a little different because we have a completely vertically integrated delivery model,” he said.
“We’re developers, we’re builders, we’re owners and we’re operators. That’s probably the main thing that allows us to compete where others can’t.”
Wagner said temporary accommodation options would be required for the Olympics, pointing to Sydney’s use of cruise ships for the 2000 Games.
“However, temporary accommodation on cruise ships docked in Hamilton cannot be our primary source of tourist accommodation,” he said.
According to the Property Council’s report, room-night demand in cities that hosted past Olympics was generally higher in the second and third years after the Games than during the event itself.
Start your day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
