5 Jun 2015

NZ on track for convention centre glut - investor

10:00 am on 5 June 2015

An international hotel investor is warning that the new convention centres planned for New Zealand could be left empty because of oversupply.

Hundreds of millions of dollars are being poured into building convention centres in Auckland, Wellington, Christchurch and Queenstown in the next four to five years, catering for several thousand delegates.

An artist's impression of the scaled down design agreed for Auckland's SkyCity convention centre.

An artist's impression of the agreed design for Auckland's SkyCity convention centre. Photo: SUPPLIED

Chris Hur of institutional investment firm Host Hotels and Resorts said opening up to four centres at the same time was risky.

"If you just build too many of them at the same period of time, it just feels like you're cannabalising the effect of each other," the Singapore-based investor said.

After two years of wrangling and controversy over funding, SkyCity unveiled plans last week for its self-funded convention centre and hotel costing up to $600 million to open in 2019, catering for 3100 delegates.

Christchurch Convention Centre Precinct is due to open late 2018 in time for a major medical conference.

It will hold up to 2000 delegates and is expected to cost about half a billion dollars, at least half of which is government funded.

Wellington Convention Centre's opening is uncertain but the city council said it was keen to have a project operating as soon as possible.

And Queenstown Lakes District Council planned to seek government backing for its proposed 750-person centre, scheduled to open in 2018.

Mr Hur, whose company owns the Accor hotel chain in New Zealand, said major convention projects in key gateway cities being completed within a span of one or two years would cause a glut.

"It just feels like to me that there's going to be a potential oversupply of convention product in what is still a relatively further away destination. The reality is, and the built-in economy, can they all support the centres?"

Phased construction

Chris Hur said developers should re-think their plans.

"You can either not build them and wait and stagger them, and do one or two and support those and see how it goes.

"You build them and you do tremendous amount of aggressive marketing to hopefully try to fill them but understanding the risk that the occupancy level of that product may be tough to get to levels that would be optimal." he said.

A director at commercial real estate firm Colliers International said New Zealand needed convention centres to attract business at off-peak times, but their openings should be staggered.

"Every major city in the world's building their own convention centre, so it's not just a New Zealand problem," said national director for hotel properties Dean Humphries.

"We might not want to see all our convention centres come on in the same period but I think probably the focus should be getting Auckland and then Christchurch up and running first, and then the possibility of those other convention centres occurring once these ones are established," he said.

Glut warning rejected

Wellington City Councillor Jo Coughlan said the council would not be put off by warnings of a glut.

"What we're doing is we're actually replacing space that we've currently taken out of the market.

"At the moment, for example, our town hall is not able to be used and we feel that doing nothing could cost our city up to 17 percent of our current market share, when new facilities are being built around the country - that's up to $25 million in lost business and about 170 jobs," she said.

Chief executive of Conventions and Incentives New Zealand Sue Sullivan said the developments would not be left empty.

"They're working in different areas.

"There's considerable number of conferencing going on out of Asia that we've not touched and then there's that rotational that we've not been able to access out of Australia.

"So to say that they'll cannabalise each other - I don't see that they will."

Ms Sullivan said none of the four convention centres had final plans, and in the years that it would take to build them New Zealand was missing out on a multi- million dollar business.

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