Australia’s hotel construction pipeline is entering a more restrained and location-selective phase, with new supply growth slowing materially and future projects shifting beyond traditional CBD cores, according to Colliers’ Australian Accommodation Supply Update.
The report found that 2,339 new hotel rooms were completed across the country’s 10 major accommodation markets in 2025, increasing total supply by just 1.3 per cent to 135,579 rooms.
While new openings occurred across most capitals, completion rates have fallen sharply compared to earlier cycles amid mounting construction costs, labour shortages and tightening feasibility margins.
Melbourne led the nation’s new supply, adding more than 1,014 rooms, followed by Sydney’s metropolitan areas and the Sydney CBD.
Colliers said new openings, including 1 Hotel Melbourne, The EVE Hotel Sydney, 25hours Hotel Sydney The Olympia, and Lyf Bondi Junction highlight the strong shift toward design-driven, experience-focused properties.
Colliers identified about 7,272 rooms currently under construction and set to open through to 2028, with a modest concentration slated for 2026.
Roughly 30 per cent of this pipeline sits outside traditional CBD hotel markets, especially across metropolitan precincts in Adelaide, Brisbane, Melbourne and Sydney.
This trend is expected to ease future competition within established CBD hotel districts, even as total supply continues to edge higher nationally.
“New hotel supply hasn’t disappeared, but it has become far more selective as the supply cycle recedes,” said Karen Wales, Head of Hotels, Transaction Services at Colliers.
“Pipeline projects are skewed towards metro locations and integrated precincts rather than delivering large volumes of new stock into CBD cores, which fundamentally changes the impact on existing assets.”
Major integrated developments, such as Queen’s Wharf Brisbane (which will introduce several hotels under multiple brands), demonstrate how new projects are increasingly linked to mixed-use precincts, transport connections and tourism-oriented infrastructure.
Despite a slowdown in tender price escalation during 2025, construction costs remain the single largest structural constraint on new hotel development.
According to Rider Levett Bucknall data cited in the report, the cost of developing an upscale, multi-storey hotel in Sydney now exceeds $830,000 per room once construction and FF&E expenses are combined — well above pre-pandemic benchmarks.
Colliers noted these conditions have forced developers and capital partners to reconsider project timing, scale and even viability.
“Feasibility is now the real handbrake on new hotel supply. Even where demand fundamentals are strong and operating performance is improving, construction pricing, funding terms and holding costs are preventing many proposed projects from moving forward,” Wales said.
Colliers expects new hotel openings to peak in 2026 before moderating sharply in subsequent years.
Although more than 6,500 additional rooms are proposed nationwide, only a limited portion is anticipated to reach construction under current cost conditions.
Yet for investors and operators, the constrained supply pipeline offers some upside.
“Given today’s elevated replacement costs, existing hotels are becoming more valuable by default,” Wales added.
“This dynamic supports asset values, underpins refurbishment investment, and reinforces the long-term appeal of quality hotel stock, particularly in markets where new supply is increasingly constrained.”
