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Hotel sector seeking greater Government engagement

Hotel sector seeking greater Government engagement to help realise NZ’s economic potential from vaccine rollout and border re-settings

Hotels in New Zealand navigating a difficult path towards a positive future

The opportunity for a sustainable tourism rebound relies not just on a successful vaccine rollout and corresponding loosening of border restrictions, but through greater dialogue between Government and New Zealand’s hotel industry, speakers agreed at the New Zealand Hotel Investment Forum this month.

Andrew Monteith, Partner at MinterEllisonRuddWatts and co-host of the Forum, says that recent news of New Zealand’s plans to review the current border restrictions and MIQ requirements in Q1 2022 has offered encouragement to a battered hotel sector.

“A strong message from the industry participants at the Forum was that prioritising vaccination of our general population is critical as, simply put, there is no Plan B for New Zealand,” says Monteith.

“The pandemic and closed borders has had a devastating impact on New Zealand’s hotel sector. Hotels are expensive infrastructure assets with substantial overheads including a large workforce with a diverse range of skills. The rise in domestic tourism has been fantastic to see, but that alone won’t be enough to support the hotel sector for much longer.

“The Forum participants recognise that vaccination requirements, testing regimes and managed isolation requirements will be a feature of travel for a long time to come. However, recalibrating our border controls to enable safe international travel while managing the general health risk to the population is crucial now to support our starved tourism economy. The Hotel sector is looking forward to working more closely with Government and local authorities to assist in the success of the proposed changes.”

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JLL New Zealand Hotels & Hospitality Group Director Nick Thompson, who co-hosted the Forum, says while the current environment remains challenging for hotel operators, the long-term picture is looking positive.

“Despite MBIE data showing 11 percent of New Zealand’s tourism accommodation was either closed or had no guests in June, the market for hotels has remained active with investors holding long-term investment objectives in the knowledge there are always cycles in the market,” says Thompson.

“Lenders are saying they are well and truly open for business for the right deals, and we’ve seen multiple transactions across all value ranges. There is plenty of capital knocking on New Zealand’s door looking for a new home, which to date hasn’t been able to get in. The biggest issue of getting this capital into New Zealand is that the existing stock remains tightly held among long-term investors.”

Nevertheless, Thompson says the hotel industry’s attractiveness to investors and therefore its ability to support our tourism and wider economic recovery should not be taken for granted.

“Hotels accommodate the vast majority of international visitors to New Zealand, who collectively contribute billions of dollars to our economy. However, as this customer base has no say in local or national elections here, the concerns of New Zealand’s hotel industry around issues such as proposed rate hikes and levies can often be too-easily overlooked.

“As we start to prepare to re-open our borders, further Government regulation has the potential to put the future of New Zealand hotels in jeopardy. Therefore it’s more vital than ever for the Government to maintain open lines of communication with the hotel sector to ensure further decisions are based on a clear understanding of its challenges and capability to assist.”

JLL and MinterEllisonRuddWatts together hosted the New Zealand Hotel Investment Forum on Thursday. Panels of front-line experts discussed key issues and opportunities for 2021 and beyond, as well as strategies to successfully navigate the current hotel environment.

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