Hotel industry's recovery could be hampered by up 4200 new rooms under construction, mostly in Auckland and Queenstown

Hotel industry's recovery could be hampered by up 4200 new rooms under construction, mostly in Auckland and Queenstown

Forty per cent of this country's hotels are either closed or in temporary hibernation, while another 40% are operating with a limited number of rooms and skeleton staff levels, according to a nationwide survey of the hotel industry by commercial real estate company Colliers International.

It also found that hotel occupancy fell from 80% in the first quarter of this year to under 20% in all key markets in April, while room rates declined by up to 50%.

"There is no doubt there will be some casualties in our sector as owners and operators establish whether they can efficiently run their businesses in this new era," Colliers National Director of Hotels Dean Humphries said.

"While a path to recovery is emerging, hotel performance is unlikely to fully recover to pre-coronavirus levels for up to five years, in part because of a large number of new hotel rooms currently under construction," he said.

"The majority of New Zealand's 27 hotel projects under construction will continue, although some will be deferred until the market improves.

"Most projects will face a delay in completion in the order of three to six months.

"These account for close to 4200 additional rooms with the majority of these projects being located in Auckland and Queenstown.

"However, proposed new hotel developments are likely to be halted over the short to medium term," he said.

Humphries said the industry's recovery would be domestic-led.

"Before COVID-19, domestic guests accounted for more than 50% of hotel room night demand throughout the country, with the exception of Queenstown at 34%.

"We expect an initial uptick in domestic tourism, followed by demand from a trans-Tasman and Pacific bubble that may be established by the third or fourth quarter of this year."

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15 Comments

What about the motel industry?

Also struggling but less than hotels because international tourists on average have more money to spend on accommodation than NZ travellers, so motels have a higher proportion of domestic guests.

What happens when Hotels start pricing their accommodation to capture a bigger share of the domestic tourist market than they otherwise normally would? $100 a night at the Novotel = $?? a night at a motel?

It's a quick race to $0 when you're already halfway there.

A five star hotel in the town centre cannot be profitable at $100/night per room, a motel can.

What about all the three and four star hotels, though?
For every one 5 star, there is probably 5 of those..

Aim wont be profitability, more survivability

Both were under assault by Air BnB. Expecting they will really struggle.

Repurpose them for Kiwibuild? Last time I was in Hamilton I noticed there was a really large development on the board by Fosters Construction, is that going ahead?

The whole tourism industry's survival in NZ depends on how soon the border with OZ will re-open. More OZ's will come to NZ as they won't be able to travel to other countries

The current slump in Hotel occupancy and rates is a welcome reset.

The recent, last 5? years in Hotel accommodation has had the effect of making it almost unaffordable for average Jo/Joe Kiwi to take a holiday and stay in a hotel.

So let market forces prevail and let business take its course. New Hotels and good hotels will thrive.
Crappy accommodation will either upgrade or close the doors. Thats OK by me.

Note: Declaration of Interest. I have financial interest in three hotels in SE Asia albeit I am a Kiwi.

Domestic tourism was 50% and now assuming that same number will be interested to travel still how many will be actually able to spend or will want to spend - If 50% than overall will be hard to run hotel or activity with 25% occupancy or even 30%

I agree and would add that I suspect that a significant proportion of hotel nights in Wellington, Auckland and Christchurch aren't "Domestic tourism" in so much as domestic business related travel. I'm not convinced that this segment is going to bounce back now that everyone has experienced Teams/Zoom online meetings. There are advantages to face to face meetings so some travel will remain but there's an awful lot of meetings that in truth can take place online without much being lost and saving everyone a lot of time and money in the process.

speaking to people in the office, no one is planning a holiday in NZ at the moment as everyone is worried about their jobs, and fair enough. I don't think anyone is safe in this environment. I guess until we actually see some job growth or replacement as promised by the government this is going to be the norm, so I would'nt expect any great bounce from the domestic market, especially in winter, once the Saturday sports crank up also I am guessing not many will venture too far from home.

The tourism industry needs to change, but after a few sad years it will probably resume the same track. Sadly.
My comments are pre virus.
I am frequently in Queenstown, it's awful.
The Wakatipu basin is overcrowded, it's not even easy to drive around.
Infrastructure is unaffordable for locals, but the industry protests paying it's share. They have been able to raise room rates from 250 to 400+ in recent years, but claim a $20 bed tax will ruin occupancy.
Foreign ownership is commonplace, and with a weak and naive tax system, tax is avoided.
Hard working New Zealanders have their incomes kept low by importing workers from low income countries. Those desperate people are also exploited.

What a shame you don't enjoy your frequent visits to Queenstown, I wonder if its not for you why bother?
I live & work in Queenstown and for all its challenges, its wonderful. Really wonderful.
You're right, infrastructure was indeed unaffordable for locals - but was in no way influenced by the Hotel industry (I assume that you're commenting on this article), but by the unbridled private rental market.
You're right, our room rates being dynamic have enjoyed healthy growth in recent years but this hasn't always been the case. Hotels and our shareholders ride the wave of cyclical demand, and on a global scale our rates are a pittance. Just to correct you on your stats, Queenstown hotel ADR finishing Dec 2019 was just $252.32 not 400+.
And in reference to your (Pre-covid) comment regarding hard working New Zealanders and low incomes, very few hoteliers in Queenstown pay just minimum wage. As an industry we look after our staff irrespective of where they come from, and follow the law which requires us to hire New Zealanders first. Do you have any specific examples of exploitation you could share with this thread?
We proudly have more NZers on team than ever before and continue to nurture this pipeline, however, I fear that attracting young NZers into our industry post COVID will be even tougher than before.
And please dont forget that some of our migrant workforce become kiwis. These people add so much to our community. We are so grateful to them, and only someone like yourself looking in from the outside would think to conclude they are exploited and keep kiwis from jobs.
You're right that the Tourism industry needs to change. We all do.

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