Current Issues in the Australian Accommodation Industry

This report discusses the current issues facing the Australian accommodation industry, including competition from Airbnb, digital disruptions, and increased market segmentation. It explores the impact of these issues on the industry and provides strategies and solutions to stay competitive in the market. The report also highlights the importance of technology and market segmentation in reshaping the industry.

Student’s Last Name 1
Hospitality Management
By (Name)
Course
Professor
University
Date

Student’s Last Name 2
Executive summary
The Australian accommodation industry comprises of over 4300 hotels, guest houses, and
serviced apartments. Majority of these are the small unbranded business in the regional parts of
Australia. The last major development cycle in the Australian accommodation sector was during
the 2000 Sydney Olympic that saw the addition of several thousand rooms mostly in the 5-star
category.
Among the current issues facing the industry include high development costs and low
financial returns which has made the expansion of the industry unviable. Other issues are the
emergence of online housing rental platforms such as Airbnb that has attracted some consumers
to renting of premises as opposed to hotel bookings. Digital disruptions have also affected the
Australian accommodation industry necessitating the hotel players to adopt new technologies.
The industry is also focusing on the individual needs of the consumer to get a niche in the
market.

Student’s Last Name 3
Table of Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
The issue of Airbnb......................................................................................................................................4
Digital disruptions........................................................................................................................................5
Increased market segmentation..................................................................................................................6
Conclusion...................................................................................................................................................7
Bibliography................................................................................................................................................8

Student’s Last Name 4
Introduction
The importance of hospitality and the accommodation industry is critical in both the
developed and developing countries. This has been affirmed by the World Travel and Tourism
Council (WTTC), which states that the industry has employed over 240 million people globally.
According to a survey done in 2012, over 70,000 new jobs were created in the Australian hotels
and tourism industry (Gardiner, Grace and King, 2014, pp.710). The survey also predicted
annual growth of 3 percent in the subsequent years. From this, it can be established that the hotel
and accommodation industry is a key player in the economy of Australia. This report will focus
on the current issues affecting the Australian accommodation industry.
The issue of Airbnb
One of the key issue facing the Australian accommodation sector is competition from
Airbnb. This online platform is valued at over 10 billion US dollars which is very much higher
than any hospitality player in Australia. The app has affected the Australian hotel in a huge way
because it provides housing units of all cadres ranging from high-end luxurious apartments to
affordable units and caravans. Airbnb has siphoned the demands from the hotel industry and has
attracted many customers to their platforms (Guttentag, Smith, Potwarka and Havitz, 2018,
pp.350). Significantly higher overheads and strict business models have curtailed the Australian
accommodation sector from competing with the cheaper home stays option provided by Airbnb
(Weber, Crawford, Lee and Dennison, 2013, pp.330). The incursion of Airbnb into the
Australian hotel industry has resulted in the hotels lowering their accommodation rates in order
to stay competitive (Guttentag, 2015, pp.1195). The disruption caused by Airbnb has seen the
hotel market in Australia shift its operation models. Some properties are transforming their
accommodation landscape by including co-working spaces and introducing common areas to
facilitate social interactions of the guests. Some of the Australian hotel brands such as Halcyon

Student’s Last Name 5
House are launching niche brands to attract particular kind of customers such as the millennial
who have the tendency of traveling lightly.
Digital disruptions
The new global hotel brand designs, guest-centric services and the advent of technologies
are changing the Australian hospitality sector. Amidst, market interferences from brands such as
Airbnb, the hospitality sector in Australia is expanding in cities such as Brisbane, Canberra,
Perth, Melbourne and Adelaide (Pike and Bianchi, 2016, pp.125). The impact of millennial
customers has necessitated the complete reshuffle of the operating models of the hotels. This has
resulted in the constructions and upgrading of over 200 hotels to meet the new and increasing
demands of contemporary customers. The advent of the technology has been at the forefront in
reshaping how the hospitality industry in Australia is repositioning itself. The hotels are not only
offering free Wi-Fi services but also ensuring high-speed connectivity while offering casting
services to TV screens in the rooms (Caldicott and Scherrer, 2013, pp.120). Also, most of the
Australian accommodation players are adopting keyless technology for the hotel rooms while
adopting a mechanism that will enable online booking of hotel rooms. The Australian hospitality
industry is also taking the advantage of social software tools such as social media to market
themselves amidst the fierce competition market from the other players in the industry
(McManus, 2013, pp.145). This strategy enables the hotel to tap in existing and new market
space. The hotels are also developing their own website to facilitate real-time customer
interactions. Additionally, most of these industry players are in partnership with travel agencies
such as Expedia that promotes their products to global consumers.

Student’s Last Name 6
Increased market segmentation
Market segmentation acknowledges the difference in needs, attitudes, taste, lifestyle,
family size, and composition among the consumers. It tends to maximize marketing efforts by
grouping the consumer into different subgroups and attends to their needs specifically (Nunkoo,
Gursoy, and Ramkissoon, 2013, pp.270). Market segmentation views the heterogonous market as
smaller homogenous groups that are differentiated by the characteristics and behavior of the
consumer (Robinson, et al., 2016, pp.1062). In the Australian accommodation industry, market
segmentation is facilitated by Tourism Australia, which is a statutory body that regulates the
hotels and hospitality industry in Australia. The body has the obligation to foster sustainable
tourism that results to increase of customers in the Australian accommodation sector. The market
segmentation in the Australian accommodation sector focuses on demographics and
psychographic elements. Demography includes such factors as age, family status, education, sex,
and lifecycle. In understanding the lifecycle, the Australian accommodation industry can tap into
the potential market that it presents (Dredge, et al., 2013, pp.100). For example, the millennial
market has characteristics such as average incomes, high energy approach to traveling and
disposition to adrenaline activities. The accommodation industry in Australia has understood
these needs and that is why most of the hotels are incorporating fun activities in their marketing
mix (Moyle, Weiler and Croy, 2013, pp.400). The accommodation players in Australia are not
only reducing their booking price but also offering team building activities to attract more
customers to their brand. The psychographic segmentation focuses on the lifestyles of the
different group of visitors coming to Australia (Sisson and Adams, 2013, pp.140). This
segmentation largely focuses on potential influences on buying behavior. This has resulted in the
establishment of a different cadre of hotels in Australia. There are five-star hotels, four stars, and

Student’s Last Name 7
three stars. Some of the customers who have high purchasing power prefer luxurious brands such
as Park Hyatt Sydney and Bamuru plains.
Conclusion
The accommodation industry in Australia is facing a number of issues in trying to keep
up with the competition. The increasing globalization has seen the Australian industry not only
competing with local players but also global brands that have expanded into the Australian
market. One of the critical challenges is the proliferation of Airbnb into the Australia market.
This new service is bringing a completely new experience into the Australian accommodation
sector, giving options for better prices and privacy to the customers. However, the luxury
experience of hotels has gone a long way in countering the spread of Airbnb services. The advent
of technology has also affected the accommodation industry in Australia with most hotels being
forced to improve their services in line with the new technologies. The hotels are upgrading their
services to include Wi-Fi and other key technologies. Technology has not only shaped the
internal layout of the hotels but it has also facilitated the marketing experience with hotels being
forced to move from traditional offline marketing and embracing digital platforms. In the market
segmentation, the accommodation industry in Australia is forced to access the individual needs
of the consumers and formulate services that will suit each consumer segment.

Student’s Last Name 8
Bibliography
Caldicott, R.W. and Scherrer, P., 2013. Facing divergent supply and demand trajectories in
Australian caravanning: Learnings from the evolution of caravan park site-mix options in Tweed
Shire. Journal of Vacation Marketing, 19(2), pp.117-131.
Dredge, D., Benckendorff, P., Day, M., Gross, M.J., Walo, M., Weeks, P. and Whitelaw, P.A.,
2013. Drivers of change in tourism, hospitality, and event management education: An Australian
perspective. Journal of Hospitality & Tourism Education, 25(2), pp.89-102.
Gardiner, S., Grace, D. and King, C., 2014. The generation effect: The future of domestic
tourism in Australia. Journal of Travel Research, 53(6), pp.705-720.
Guttentag, D., 2015. Airbnb: disruptive innovation and the rise of an informal tourism
accommodation sector. Current issues in Tourism, 18(12), pp.1192-1217.
Guttentag, D., Smith, S., Potwarka, L. and Havitz, M., 2018. Why tourists choose Airbnb: A
motivation-based segmentation study. Journal of Travel Research, 57(3), pp.342-359.
McManus, L., 2013. Customer accounting and marketing performance measures in the hotel
industry: Evidence from Australia. International Journal of Hospitality Management, 33,
pp.140-152.
Moyle, B.D., Weiler, B. and Croy, G., 2013. Visitors’ perceptions of tourism impacts: Bruny and
Magnetic Islands, Australia. Journal of Travel Research, 52(3), pp.392-406.
Nunkoo, R., Gursoy, D. and Ramkissoon, H., 2013. Developments in hospitality marketing and
management: Social network analysis and research themes. Journal of Hospitality Marketing &
Management, 22(3), pp.269-288.

Student’s Last Name 9
Pike, S. and Bianchi, C., 2016. Destination brand equity for Australia: testing a model of CBBE
in short-haul and long-haul markets. Journal of Hospitality & Tourism Research, 40(1), pp.114-
134.
Robinson, R.N., Kralj, A., Solnet, D.J., Goh, E. and Callan, V.J., 2016. Attitudinal similarities
and differences of hotel frontline occupations. International Journal of Contemporary
Hospitality Management, 28(5), pp.1051-1072.
Sisson, L.G. and Adams, A.R., 2013. Essential hospitality management competencies: The
importance of soft skills. Journal of Hospitality & Tourism Education, 25(3), pp.131-145.
Weber, M.R., Crawford, A., Lee, J. and Dennison, D., 2013. An exploratory analysis of soft skill
competencies needed for the hospitality industry. Journal of Human Resources in Hospitality &
Tourism, 12(4), pp.313-332.