The Accommodation industry, what higher interest rates mean for Buyers and Operators in 2026 682

The Reserve Bank’s February 2026 update confirms a shift many in the accommodation sector are already feeling, demand remains solid, but money is no longer as cheap as it has been.

The RBA has noted that inflation has proven stickier than expected, the labour market remains tight, and economic activity has surprised on the upside. As a result, the decision to move interest rates higher earlier than expected has been taken, and these are likely to stay there for some time.

This isn’t a story of an economy in downturn, but it is a change in how assets should be priced, funded and run.

The Big Picture

The Reserve Bank’s February 2026 update confirms a shift many in

- The cash rate has risen by 25 basis points from 3.6 to 3.85 and may rise again
- In turn this will have an impact on clients Borrowing capacity
- Operating costs, especially wages, remain elevated
- Demand for accommodation is holding up better than many expected

The result for those in the market? Cash flow matters more than forecasts, and buyers are going to become more selective.

How this impacts the Accommodation industry?

Demand Is Still There.

Across the accommodation industry, trading conditions remain broadly supportive:

- Domestic travel is resilient
- Business and regional travel remains steady
- Cost-of-living pressures are pushing travellers toward better-value accommodation

This has helped support occupancy and revenue, particularly for well-located, well-run assets.

Costs Are Rising Faster Than Before

Operators are dealing with:

- Higher wages due to a tight labour market
- Increased insurance and utility costs
- Maintenance and upgrade costs remain elevated

These higher pressures on the operating costs are contributing to the growth in inflation and as a result the RBA has felt it prudent to adjust rates to try and arrest this.

Assets that can react to these pressures quickly will better placed moving forward.

Interest Rates Are the Big Divider

This is where the differences between sectors within the accommodation industry matter most.

- Motels and caravan parks generally have more flexibility to reprice income.
- Management rights may be more exposed because they:
1. Have traditionally held a higher debt funding position
2. Are more sensitive to lender serviceability rules

As rates rise, both buyers and operators are recalculating what they can afford — this is a great opportunity to contact your finance broker.

What Buyers Are Doing Differently

Buyers across the accommodation sector are becoming more disciplined:

- Focusing on actual cash yield, forecasting needs to be realistic
- Stress-testing deals at higher interest rates (as are the Banks)
- Paying closer attention to staffing requirements and cost structures
- Being more selective about price, agreement terms and risk

This doesn’t mean buyers have disappeared (far from it) it means they’re more selective.

What Operators Need to Focus On

Strong operators will find benefit focusing on:

- Tightening labour efficiency
- Actively managing costs rather than absorbing them
- Keeping financial reporting clean and transparent
- Planning capital expenditure instead of deferring it

In this market, operational quality shows up very quickly, especially when a buyer or bank looks under the hood.

What This Means for Values

- Transaction volumes may slow
- Prices may soften in some cases
- The gap between high-quality and average assets will widen

Assets with:

- Strong, consistent cash flow
- Sensible staffing models
- Realistic pricing assumptions

These will continue to attract buyers, even in a higher-rate environment.

The Bottom Line

This is not a crisis — it’s just a slight adjustment. Operators in the accommodation industry can continue to perform well in this environment, but they need to adjust to the higher interest environment. Cheap debt is no longer doing the heavy lifting.

For buyers, discipline is the edge. For operators, efficiency is the advantage. Those who adjust will be well positioned as the cycle moves forward.

Make informed decisions and secure a thriving investment today with CRE Brokers - Contact Us today to discuss your investment aspirations.

Don’t let good opportunities to purchase pass by!

Author,
Cameron Wicking
Mike Phipps Finance