21 Jun 2015

Shortage of hotel rooms at 'critical' levels

3:38 pm on 21 June 2015

A hotel investment advisor is calling on councils and the Government to offer rates relief to developers, saying the shortage of hotel rooms has reached critical levels in summer.

Hotel room

Photo: 123rf

Colliers International's head of hotels Dean Humphries said the number of rooms was growing by one percent compared with five percent annual growth in demand, due to record tourist numbers.

He said Auckland was actually losing hotel rooms with 40 percent being converted to apartments.

Mr Humphries said Tourism New Zealand's new strategy to encourage visitors to come during the off-peak seasons was a good idea but it would not stop the growth in visitors in summer.

He said the Government and councils should also look at offering incentives to developers.

"I think the Government and local councils may need to look at some other initiatives as have been implemented in place like Brisbane in the past where they provide developers and investors some form of rating relief or incentives to develop," he said.

Queenstown's tourism head said the town would need hundreds more hotel rooms in the next few years but no development plans were in place to fill the demand.

Tourism numbers hit new records last summer with more than 900,000 guest nights from January to March.

The town was also expecting a bumper ski season, launched on Friday with its annual winter festival.

Head of Destination Queenstown Graham Budd said the town's 33 hotels were full on the busiest days of summer and winter when the population swelled from 20,000 to 80,000.

He said 500 more rooms would be needed in the next few years to cope with the expected growth but only one 40-room hotel was being built.

"I think another 500 odd rooms is probably the sort of number we're going to need over the next few years, not necessarily right today because people need to make money right throughout the year not just at peak time of course but I think that's the sort of number we're going to need," he said.

An Auckland tourism manager said high building and land costs were hampering new hotel investment.

Auckland's tourism agency ATEED said proposed new developments in the next five years could add up to 1300 rooms to the city but some were not confirmed.

The five-star hotels included Beijing-owned Fu Wah Group's $200 million 200-room project in Wynyard Quarter due to be finished in 2018, SkyCity's 300-room development expected to open by the end of 2019, and a Chinese-funded Ritz Carlton is also proposed for the CBD.

ATEED's tourism manager Jason Hill said Auckland's hotels were full in summer but at other times their occupancy and room rates were still low, holding back new developments.

He said land and building costs in the city were high and developers couldn't make money until room rates rose.

"There's challenges at the moment around building costs in the CBD, the cost of land obviously is increasing so its really hard for the hotel companies to make money in the current environment until those rates and occupancy rates continue to go higher for them," he said.

Mr Hill said the hotel room shortage would last at least four years.