23 Jun 2020

Hotels struggling to make profit despite government spend up

4:31 pm on 23 June 2020

Many of New Zealand's largest hotels are filled to capacity, but are hardly making a profit according to an industry expert.

The foyer of the Novotel at Auckland Airport.

Novotel Hotel next to Auckland Airport. Photo: Supplied / Alexa Cook

The government has spent about $81 million so far to put returning New Zealanders into hotels, at a cost of about $4000 per person.

Over the weekend, the government booked hotels in Rotorua to deal with the increase in the number of travellers returning to New Zealand as its Auckland facilities reached full capacity.

There are just over 4000 people in managed isolation across 20 hotels.

However, Colliers national director for hotels Dean Humphries said it was not looking bright for the hotel industry as a whole, with only 25 percent of rooms in demand by the government.

In addition, he said indications were that the government was only interested in large hotels, with at least 200 rooms, located in main centres.

There were about 30 hotels in New Zealand which met this requirement.

As a result, Humphries said total occupancy rates for the month of May were at 27 percent of capacity in Auckland.

He said those hotels used for quarantine were therefore being offered at discount rates, which meant they were not necessarily profitable.

"From what I understand, the room rates are well below what they would be achieving in a normal market situation.

"We've got around 8000 rooms in the five main centres in New Zealand in larger hotels [that have] over 200 rooms so that would suggest we're at half capacity at the moment.

He said there was possibly a lag to get them up to Ministry of Health standards so they could be used as quarantine facilities.

A Covid-19 National Response spokesperson said managed isolation and quarantine facilities need to meet a strict set of criteria to ensure people staying and working in them are kept safe, and that there's a safe transition of people back into the community after their isolation period.

"Potential hotel facilities will be assessed based on demand and suitability. This includes preliminary investigation work by the national isolation, quarantine and repatriation team, and site visits from our on-the-ground teams in the respective locations.

"Hotels are asked to provide a quote for managed isolation business to the Ministry of Health and while the Ministry expects to get best value for money, hotels have set their own rates.'

The spokesperson would not disclose the rates because they are commercially sensitive.

See all RNZ coverage of Covid-19

Get the RNZ app

for ad-free news and current affairs