Gold Coast Backpacker Market Review November 2024

Gold Coast backpacker and hostels market sees undersupply

Demand for backpacker and hostel accommodation in Queensland’s Gold Coast is exceeding the supply available on the market, according to findings from the latest M3 Property research report.

The report, Gold Coast Backpacker Market Review – November 2024, analyses the current state of the backpackers and hostels market on the Gold Coast. Research shows that the market is undersupplied, with a lack of budget price backpacker hostels in comparison with the demand from this sector of the travel market. However, while the industry has low barriers to entry, there are some key challenges facing the sector.

These challenges include the rising price of beds due to the relative lack of competition in the sector; the popularity of accommodation-share providers such as Airbnb; and rising inflation and interest rates which have not just driven up operator costs but have also reduced real household discretionary incomes in Australia.

Despite this, there is relatively high demand for the sector. Backpacker and hostel accommodation is part of the Caravan Parks, Holiday Houses and Other Accommodation sector, which generated Australia-wide revenue of $306.7 million for the 2024 financial year. Industry revenue for the sector is forecast to increase by 1.1 per cent over the five years to 2029.

James Ruben, National Director, Specialised Assets at M3 Property, said, “The Gold Coast Backpackers and Hostels market has sizeable opportunities for operators to enter an undersupplied market. While there are some 70 hotel and motel tourism assets within Surfers Paradise alone, there is a lack of budget options for the budget traveller market, with just 12 backpacker hostels located across the Gold Coast.”

During 2023, the Gold Coast tourism market generated $7.8 billion in visitor expenditure from approx. 12.2 million visitors. Although the budget traveller and working holiday tourism market is just a small part of the sector overall, it is an important part. The Australian Government granted 224,431 Working Holiday Maker (WHM) Visas during the 2023 financial year alone. According to Tourism Research Australia (TRA) there were around 29,082 WHM travellers to Surfers Paradise alone in the twelve months to March 2024.

According to Mr Ruben, “Given that there is more demand than there are backpacker hostels available, especially on the Gold Coast, it is worth noting that there are relatively low barriers to enter the backpacker hostel sector, with no real legal barriers and relatively low start-up costs. Higher real estate prices have made this more difficult in the past decade, but the potential capital gains from property increasing in value in future years helps to offset this cost.”

The most recent backpacker hostel to sell on the Gold Coast was the Capsuleaccomm Hostel at 34 Nerang Street, Southport, which sold for $1,125,000 excluding GST in January 2022. Across Australia, since the end of 2020, five YHA hostel assets have transacted for a total of $33.1 million. These sales occurred during the later part of the pandemic and highlighted that some investors could see the potential for strong returns in the sector in the post-pandemic years, when the market was significantly impacted by COVID-19 restrictions and lockdowns.

Additional report findings

• There are currently 12 backpacker hostels across the Gold Coast, with one located in Surfers Paradise currently being fitted out and due to open in October 2024.
• Eight of the Gold Coast hostels are in Surfers Paradise, with two in Southport, one in Coolangatta and one in Bilinga.
• The largest hostel is the six-level Bunk Surfers Paradise Backpackers Hostel in Surfers Paradise. The hostel was originally opened in 1999 and was refurbished in 2017.
• All the hostels on the Gold Coast have a combination of shared bunk rooms and private rooms.
• There are also plans to build two new hostels. Plans have been submitted to replace an existing hostel at 4-10 Pine Avenue, Surfers Paradise with a new 7-storey building with up to 102 rooms. There are also plans to construct a 243-bed hostel at 7 Staghorn Avenue, Surfers Paradise.
• Average pricing for a single night in a bunk room is $61, with a range from $49 to $104. This is significantly higher than prices pre-COVID and travellers often need to book in advance to secure accommodation.

Click the link below to read the full report.

Gold Coast Backpackers Insight – November 2024