The federal government is targeting investors and developers to build more hotels and resorts in cities and regions in a bid to meet the target of doubling spending in the tourism industry to $140 billion by 2020.
The government has identified $42bn worth of existing and investment-ready tourism projects needed around the country to cope with an expected demand from domestic and international business and leisure tourists.
Federal Tourism Minister Martin Ferguson will release the Tourism Investment Monitor report in Melbourne today.
The report reveals that 70,000 new hotel rooms will be needed by 2020 to cope with the expected demand.
Mr Ferguson is expected to argue that developing a hotel or resort gives a better return than other investments, given hoteliers, particularly in capital cities such as Perth and Brisbane, are getting such strong room rates.
"There are a range of positive factors likely to support future investment," according to the Tourism Investment Monitor.
The report claims that 80 per cent of accommodation businesses recorded a profit in 2009-10.
"This compares with the aviation industry where data from the International Air Transport Association shows that globally, commercial passenger yields were down sharply by 14 per cent in 2009. Also, the industry's average return was 1.8 percentage points higher than the average return for commercial property."
Mr Ferguson will also announce a long-term alliance between Austrade, Tourism Australia and the Department of Resources, Energy and Tourism encouraging more investment from Asia and the Middle East. Nearly 60 per cent of Australia's hotel transactions last year involved groups based overseas.
Most new accommodation development will occur in Brisbane, Perth, and Adelaide. Development in capital cities is more likely to be serviced apartment complexes than hotels.
Demand for accommodation in capital cities is increasing but hotel supply is not.
The federal government wants more accommodation in capital cities and regional areas, new business event facilities and innovative leisure attractions to serve key growth markets, such as Asia.
Tourism Research Australia expects growth in room stock of 2 per cent in 2016 in the major capital cities, while growth in regional Australia will be about 0.7 per cent.
Hotel rates are expected to continue to increase and the federal government believes the accommodation sector is one which provides both consistent and dependable returns.