25 May 2016

Report predicts no room at NZ's inns

10:08 am on 25 May 2016

The government may have to step up its role in hotel developments to entice more investors, tourism leaders say, as a new report forecasts a shortfall of thousands of hotel rooms.

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Photo: 123RF

The independent study was released yesterday, just a week after new official figures forecasting the number of tourists will surge from 3.3 million this year to 4.5 million by 2022.

It said the five main tourist destinations - Auckland, Rotorua, Wellington, Christchurch and Queenstown - have just over 20,000 hotel rooms.

By 2025 they would need 9700 more rooms, but current plans showed 5174 will be built - leaving a shortfall of 4500 rooms or 26 hotels.

Auckland faced the biggest shortfall of 1782 rooms, Queenstown would be lacking more than 1400.

Economic Development Minister Steven Joyce said it was about attracting investors, both internationally and domestically

When asked whether the push for more tourist accommodation makes him look out of touch considering the debate about a housing crisis, Mr Joyce described the suggestion as silly.

"We've got a job on to build all sorts of things with a building boom in Auckland of all types. And yes we have to keep working to grow the economy as well as growing the housing stock and I'm sure people would think we can do both at the same time."

Colliers International's Dean Humphries co-wrote the report and said the tourism boom had created a problem.

"One of the great problems we're starting to see is that we don't have enough hotel rooms, particularly around peak period and that may impact the number of tourists coming here moving forward.

New Zealand had struggled to attract international investors because of the low room rates, but that was changing.

"It's probably more attractive than we've seen for a long long time. We're getting room rates growing in the vicinity of five to 10 percent per annum and we're seeing profitability of hotels increasing by anything up to 20 percent per annum so that's obviously making hotels more feasible to build."

But high building costs, lack of land and delayed consents were still putting off investors.

Tourism Industry Aotearoa said the government's new Project Palace programme, which aims to match make investors with opportunities, may not be enough.

Hotel room

The report said NZ's five main tourist destinations would need 9700 more rooms by 2025. Photo: 123rf

The group's chief executive Chris Roberts said the government may have to step up its role.

"Does the government need to have a more hands on role in terms of clearing the way, in terms of compliance, identifying what sites could be built on, finding ways to incentivise people to build hotels over other potential developments?"

Mr Roberts said the report also warned of the risk of oversupply if too many hotels were built at once. He said the timing of new developments would be crucial.

"They have to come at the right times and the right place and for the right type of accommodation. Five star where that's needed, three to four star where that's needed. Oversupply of hotel rooms, we've had that in the past, that's just as bad as having an undersupply."

Christchurch hotel developer Ernest Duval said new developments were desperately needed, but he wanted support for local developers to ensure all the money made in the hotels did not flow overseas.

"If you look at what happened in north Queensland 20 years ago where you had an influx of Japanese tourists, you then had an influx of Japanese developers.

The tourists flew in on Japanese planes, stayed in Japanese hotels, spent money at Japanese stores, visited the reed in Japanese tourist boats and then went home."

Mr Duval said the economy would benefit more if structures were in place to promote local development.

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