The $2 billion hotel building boom
The biggest hotel construction period in New Zealand is in full swing with about $2 billion worth of construction completed and under way.
In the past 12 months just over
1000 new hotel rooms have opened. A total of 440 of them are in Auckland, 380 in Wellington, 170 in Queenstown and 86 in Christchurch, a Colliers report said.
Another 3900 are under construction, two-thirds in Auckland, including the 300-room Horizon Hotel, being built alongside the under-construction New Zealand International Convention Centre for SkyCity. The hotel’s opening date is up in the air after the huge fire at the convention centre.
Colliers International hotels specialist Dean Humphries said new construction had started in the past 18 months after 10-15 years of an investment drought in the hotel sector.The tourism boom of
2013 to 2017 was the catalyst for the investment surge.
‘‘We certainly need new rooms. International visitors demand that.’’
Much of the country’s hotel stock was built in the late 1960s and early 1970s, so was now dated.
Humphries puts the building cost per hotel room conservatively at about $400,000 on average but some would be much higher.
The Park Hyatt in Auckland had been rumoured to cost more than $1 million a room but other hotels were closer to $300,000 to
$350,000 a room, depending on the star-grading.
‘‘It’s great news for the industry and it’s a massive amount of money being invested by the private sector.’’
Existing hotels were also being updated and refurbished because times were better and owners were able to reinvest in their hotels. ‘‘Lots of hotels are being repositioned and refurbished, like the Grand Mercure in Wellington.’’
A big pipeline of projects had been announced but construction had not started, particularly in places like Queenstown. ‘‘For the region that probably needed it most outside of Auckland, it’s been quite disappointing.’’
However, it was expensive to build in Queenstown and securing consents was challenging.
Humphries said he had been in the industry for 30 years and the last wave of development was in the late 1980s and early 1990s ‘‘but that was nothing like this’’. ‘‘This is the biggest cycle we’ve seen.’’
International visitor numbers – the main driver – had soared in the past 20 years from about 2.4 million to nearly 3.9m in the year to July
2018.
With demand outstripping supply and occupancy rates soaring, the industry earned some bad press over high room rates in 2017.
The new hotel stock would address that. ‘‘Platforms like Airbnb have had to soak up a lot of that demand. If we didn’t have them we wouldn’t have had the people in.
‘‘Now hopefully the hotels are fighting back and they are going to get some territory back and market share back.’’
Few, if any, of the hotel projects are talking about building sustainably to achieve Green Star certification.
‘‘They would love to but the cost to build hotels is so high that most of the new developments at best are marginal.
‘‘There is little profit at all in these developments, so to add layers would probably make it cost prohibitive,’’ Humphries said.
But hotels were getting rid of plastic products and consumables and implementing operational efficiencies through more energyefficient lighting and heating.
New Zealand hotel investment though was much smaller than what was taking place in Australia, Asia and in many parts of the world.
‘‘The whole world is undergoing a phenomenal increase in hotel inventory but that’s because global travelling numbers are growing every year by about 200 million people.’’
Last year about 1.7 billion people travelled around the world and New Zealand hosted a tiny proportion of them. Even domestic travel was growing with more and more people travelling for leisure and business, Humphries said.
Opening and being built
Auckland
About 200 rooms had been completed in Auckland in the first nine months of this year, and some of these were extensions to hotels or small hotels.
The Hilton Hotel had added 21 rooms on the top floor and The Quest Hotel at Highbrook Business Park added 58 rooms, doubling capacity.
Two new hotels were the
85-room Ramada Manukau and the
48-room Ramada in Victoria St. In total about 2640 rooms were under construction in Auckland. A total of 1080 in seven hotels were
scheduled to open next year.
Rotorua
The 160-room, five-star Pullman Hotel was soon to be completed and was expected to open early next year.
Wellington
The 134-room Rydges Wellington Airport hotel opened this year, and the Oaks Wellington Hotel in Courtenay Place with 226 rooms opened a few weeks ago. Planned for the capital and scheduled to open next year was a Ramada Wellington comprising 93 hotel apartments and 24 residential units.
Christchurch
The boutique Sudima Hotel with 86 rooms opened mid year in the central city. The Novotel at Christchurch Airport with 200 rooms is scheduled to open later this year. A
48-room hotel in Colombo St and a
71-room boutique hotel in Victoria St are also planned.
Queenstown
The Ramada Hotel in Frankton Rd with 131 rooms opened this year, as did a hotel with 40 apartments at Nugget Point, Colliers said. Opposite the Ramada in Frankton Rd, a Holiday Inn Express with 227 rooms was expected to open in the first quarter of next year.
Earthworks for Ramada Kawarau River Hotel and Suites had started. It will have 87 hotel suites and 97 residential apartments and is scheduled to open in 2022.
Auckland 2020
A 195-room Park Hyatt is scheduled to open on the waterfront, as well as the 154-room Travelodge in
Wynyard Quarter, the boutique 104-room Hotel Britomart about mid-year and the 150-room QT Auckland in the Viaduct.
The former Waldorf Stadium Hotel, sold last year and renamed the Nesuto Stadium Hotel, was adding 78 rooms to be completed in the second half of next year, Colliers said. The new 96-room Mercure Hotel in Queen St was scheduled to open next year.
Auckland 2021
The Cordis Hotel, formerly The Langham Auckland, was building a new tower of 250 rooms, which would be the biggest hotel in New Zealand with 659 rooms, Colliers said.
The new 194-room Sudima Hotel in the central city opposite the convention centre was due to open in 2021, as was the DoubleTree by
Hilton with 120 rooms being built in south Auckland at Karaka.
Auckland Airport was planning to open a 144-room hotel from the conversion of an office building, and a Ramada Hotel of 63 hotel rooms was scheduled to open in Newmarket.
Auckland 2022
Te Arikinui Pullman Auckland Airport Hotel with 311 rooms is being developed by Auckland Airport and Tainui Group Holdings for a scheduled opening in early 2022. The other major hotels under construction were the Holiday Inn Express and the EVEN Hotel, which would have 490 rooms.
The 37-level building would have the Holiday Inn Express on the lower floors and EVEN Hotel on the upper ones and was scheduled for a 2022 opening.
Now hopefully the hotels are fighting back and they are going to get some territory back and market share back [from Airbnb]. Dean Humphries Colliers International, above