Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Hotel Development Boom Well Underway, but Caution Required

Hotel development boom well underway but caution required, says industry expert

Auckland, August 23, 2017 - A hotel development boom is well underway throughout New Zealand, new research from Colliers International shows.

Dean Humphries, National Director of Hotels at Colliers International, says the country is in the midst of the highest level of development activity in its history as investors look to take advantage of the ongoing tourism boom that started in 2013.

“Auckland, our country’s international gateway city, is leading the way with nine projects currently under construction, totalling about 1,400 guest rooms.

“We are also aware of at least 30 pipeline projects currently in early planning/design and feasibility phases, representing over 3,500 additional guest rooms.

“This level of hotel development activity is unprecedented in the New Zealand context and is a reflection of the exceptional growth in hotel trading conditions over the past four years.

“Latest market indicators to the year ended June 2017 show Auckland reached an average occupancy rate of 87 per cent at an average room rate of $200.”

Humphries says outside of Auckland, other metropolitan markets throughout the country are also undergoing a flurry of development activity.

Five projects with a total of about 600 rooms are under construction in the Wellington region, two of which are existing hotels undergoing repairs.

In Christchurch, the 204-room Crowne Plaza Christchurch was recently completed, and a further three hotels with some 470 rooms are under construction.

“Surprisingly, Queenstown, New Zealand’s leading tourism destination and the region needing new hotel inventory the most, only has three small hotels under construction totalling just 200 guest rooms,” Humphries says.

“However, no fewer than 15 projects totalling just under 2,500 new guest rooms are currently on the drawing board.”

Humphries says while demand fundamentals are strong in most regions throughout the country, there are a number of barriers to entry for investors and developers looking to enter the market.

These barriers include high construction and land costs; an often lengthy and complex consenting process; availability of development funding; and in the case of Auckland, the newly implemented Accommodation Provider Targeted Rate which has created an additional impediment to project feasibility.

“Furthermore, developers looking to build over the short term are also having to deal with resource constraints within the construction sector,” Humphries says.

“For instance, Auckland is highly constrained with limited capacity to build new hotels over the next few years due to construction resources being tied up with significant infrastructural and private sector developments such as the New Zealand International Convention Centre, City Rail Link, and Precinct Properties’ Commercial Bay development.

“To summarise, it is evident that there is now significant interest in the development of hotels to cater for medium term demand. As such, it is now a case of pulling together the required resources to actually build these hotels.”

The Colliers International report also offers words of caution for the booming hotel and tourism sectors, noting in particular growth in Chinese inbound visitors has now stalled after multiple years of double digit growth.

Humphries further notes that an overabundance in new supply, particularly in regions where demand is less pronounced, will likely have a negative impact on hotel performance and asset values, citing overseas examples such as Brisbane and Perth, which are now suffering from a glut of new hotel rooms that are driving down occupancy and room rates.

“In this regard, we need to keep a close eye on all of New Zealand’s key tourism markets to ensure the balance in demand and supply does not tilt too far towards the supply side,” he says.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Energy Resources Aotearoa: New Law On Decommissioning Could Be Costly Overkill
A new law on decommissioning oil and gas fields passed by Parliament today has good intentions but is overkill, according to Energy Resources Aotearoa. "We strongly support operators taking responsibility and paying the costs for decommissioning, which is what all good operators do," says chief executive John Carnegie... More>>

Commerce Commission: News Publishers’ Association Seeks Authorisation To Engage In Collective Bargaining

News Publishers’ Association of New Zealand Incorporated seeks authorisation and provisional authorisation to engage in collective bargaining with Facebook and Google. The Commerce Commission has received applications from News Publishers’ Association of New Zealand Incorporated (NPA) seeking authorisation and provisional authorisation on behalf of itself... More>>

Reserve Bank: MPC Continues To Reduce Monetary Stimulus
The Monetary Policy Committee agreed to raise the Official Cash Rate (OCR) to 0.75 per cent. The Committee agreed it remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment... More>>

PriceSpy: Producer Prices Increase
New Black Friday and Covid-19 Report* released by PriceSpy says people’s fear of stepping inside physical shops during big sales events like Black Friday has risen since last year; Kiwis are still planning to shop, but more than ever will do it online this year... More>>

NZ Skeptics Society: Announce Their 2021 Awards, And Dr Simon Thornley Wins The Bent Spoon

Every year the New Zealand Skeptics presents its awards to people and organisations who have impressed us or dismayed us, and this year it’s been hard to pick our winners because there have been so many choices!.. More>>

REINZ: Sales Volumes Leveling Out

Data released today by the Real Estate Institute of New Zealand (REINZ) shows there were 44 fewer lifestyle property sales (-2.6%) for the three months ended October 2021 than for the three months ended September 2021... More>>

BNZ: Auckland Retail Card Spending Bounces Back In Step Two
Bank of New Zealand (BNZ) card spending data released today shows one week of retail therapy at Alert Level 3 Step 2 has been enough to raise card spending in Auckland to levels greater than before the Delta lockdown... More>>