Adding value is vital for hotels in tough times

Adding value is vital for hotels in tough times

Press Release by New Zealand Hotel Council on Monday 23 March 2009

Rotorua hotels must focus on adding value and effectively managing costs to remain competitive as they face softening demand over the next few months, New Zealand Hotel Council (NZHC) chair Jennie Langley says.

The state of the economy is currently the single biggest concern for NZHC members, with revenue coming under significant pressure as demand falls, Ms Langley said in Rotorua today.

“We know the short-term outlook for many hotels is tough but they cannot lose sight of the eventual economic recovery by continuing to deliver quality product, retaining staff and investing in refurbishments and developments,” Ms Langley said.

She presented the results of the NZHC Annual Operating Survey 2008 to NZHC’s Rotorua members and invited guests today.

The importance of attracting New Zealanders and Australians to Rotorua was made clear in the survey, with New Zealanders accounting for 40.2% of all rooms sold in Rotorua last year, followed by Australians at 11.9%.

Tours and groups were the biggest source of business for Rotorua hotels, accounting for 42% of rooms sold, followed by leisure travellers (33.6% of rooms sold).

“Australia and the domestic market will be critical in buffering the industry from lower long-haul international demand. Across New Zealand, falling demand for group travel is being felt, particularly from the valuable Asian markets, so last week’s announcements by the Government and Air New Zealand of an additional $5 million for marketing in Australia will provide a real boost,” Ms Langley said.

Rotorua’s eight NZHC members generated $60 million in revenue in 2008, from a total 1337 rooms, and employed 700 people.

Reflecting the national fall in occupancy (from 70.7% in 2007 to 69.2% in 2008), Rotorua’s average occupancy fell 2.3% to 66%. Across the country, 4.5-star hotels achieved the highest occupancy rates in 2008 (71.1%), while 3.5-star and 4-star hotels experienced the lowest (68.2%).

The average national room rate increased just $1.11 in 2008 to $138.65. In Rotorua, the average room rate was up only 3 cents, to $109.15.

At the same time, operating costs for hotels continued to rise, being equivalent to 74.5% of total revenue in 2008, up from 71% in 2007. Wages accounted for 33% of total revenue in 2008.

“Hotels are coming under increasing pressure to offer discounts but it is very difficult to make up the revenue elsewhere and have funds to invest in the business when the market recovers. We strongly recommend hotels find ways to add value to their guests to help maintain demand,” Ms Langley said.

“The shortage of skilled labour continues to be a challenge for hotels around the country, with consequently a high use of non-New Zealand residents. This is an ongoing discussion with Immigration New Zealand.”

Tourism Industry Association New Zealand (TIA) Chief Executive Tim Cossar, who also attended today’s meeting, said the hotel sector was a major player in New Zealand’s multi-billion dollar tourism industry.

“Hotels are major investors and vital to the economic development of New Zealand. Increased revenue and new investment will be critical, particularly as we approach the Rugby World Cup 2011. As with all tourism businesses, hotels be should looking to cut costs but not at the expense of quality or service to guests,” Mr Cossar says.

“Tourism will help lead New Zealand out of the economic downturn and TIA looks forward to working closely with the hotel sector to achieve this.”

Other highlights from the NZHC Annual Operating Survey 2008:
• NZHC members directly employed around 9100 permanent and casual staff in 2008
• Auckland achieved the highest annual occupancy rate of 72.8%, followed by Wellington (70.5%) and Christchurch (68.2%)
• Wellington had the highest average room rate of $147.39, followed by Auckland ($146.33) and Queenstown ($137.23)
• The average room rate for 5-star hotels was $193.62, 4-star was $129.80 and 3-star was $100.53
• The largest individual source of business was leisure travellers (37.9% of all rooms sold), followed by corporate (23.2%) and tour groups (21%)
• The largest consumers of hotel accommodation in 2008 were New Zealanders (49.5% of all rooms sold), followed by Australians (17.1%)
• On average, 30% of bookings were short-term (made up to seven days prior to arrival), 33% were medium-term (8-30 days prior to arrival) and 37% were long-term (more than 30 days prior to arrival)
• 16% of bookings in 2008 were made online
• Almost all NZHC members provide some sort of recycling facilities.

About the New Zealand Hotel Council

• Represents the interests of New Zealand’s international chain, large independent and privately owned hotels around the country.

• Over 100 members, largely in the five main tourism centres (Auckland, Rotorua, Wellington, Christchurch and Queenstown), account for around 75% of total hotel capacity and close to 100% of ‘large hotel’ inventory.

• Collectively, NZHC members operate almost 17,000 hotel rooms, control assets with a capital value in excess of NZ$3.1 billion, generate annual revenue of over NZ$80 million, and employ in excess of 9000 full and part time staff.

ENDS

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