Southern DHB is pushing for Dunedin and Invercargill to be used for managed isolation ahead of Queenstown, due to concerns about its lack of medical facilities.
The DHB has been meeting today to discuss plans by the government to expand its facilities to the bottom of the South Island.
It said there was not enough medical care available in the resort town - but the government is not ruling Queenstown out of the running just yet.
Southern DHB chief executive Chris Fleming today told board members the government was well aware of their preference list.
Queenstown would face added pressure if additional medical care was needed because it lacked tertiary or secondary hospital facilities, he said.
"It's not so much Covid I'm worried about because there will be Covid positive people in that isolation group. It's the fact that a lot of the people we're treating now have other complexities associated with their ongoing health."
The Rees Hotel Queenstown chief executive Mark Rose was not keen to have his accommodation turned into an isolation facility, but said the issue ran deeper than that.
"We just don't have the ... facilities. We struggle during the ski season just with injuries on the mountain. If we had a big outbreak and had a bunch of cases become serious, we'd have to look to be able to transport them to Invercargill or Dunedin anyway so it makes a lot more sense that that's where they start out," Rose said.
Queenstown Lakes Mayor Jim Boult said the DHB's wishlist did not make it a done deal, but he was pleased to hear the feedback.
"That's an entirely sensible recommendation. This is nothing to do with whether we want or don't want isolation cases in the district, it simply recognises the very limited hospital facilities that we have," Boult said.
It would be common sense to set up facilities in Dunedin or Invercargill, he said.
Dunedin Mayor Aaron Hawkins was unsurprised by the priority list, saying the southern city was well placed for health care.
"These are New Zealanders who are returning home and we have an obligation to look after them when they're here, and that means making sure that they have access to the best health care that they can if they need it while they are here in managed isolation," Hawkins said.
He has already received positive feedback over recent days about managed isolation, and said the city was prepared to do its bit to support returning New Zealanders.
However, Hawkins wanted to know more details about the isolation process and how risks would be contained so residents were kept safe.
Minister of Health Chris Hipkins wasn't ruling Queenstown out of the mix, but said the presence of public health teams would factor into the government's decision.
"Never say never. What Dr Woods and Air Commodore Webb are looking for at the moment is speed so they're obviously looking to set up managed isolation and quarantine facilities in areas where they can do so quickly," Hipkins said.
"But with the passage of time, it may well be that there are a range of additional facilities that may be pressed into use including potentially ones in Queenstown."
Invercargill's mayor, deputy mayor, council and Great South declined or were unavailable for comment.
Megan Woods, the minister in charge of quarantine and isolation facilities, is expected to visit the southern district in the coming weeks to consider hotel options.