Queenstown and Rotorua lead hotel sector

The tourism hotspots of Queenstown and Rotorua are the star performers in the hotel sector in 2018, driving much-needed new supply in both centres.

Colliers International’s latest Hotels Report shows 132 rooms have been completed in Queenstown in the last 12 months, while a further 374 are under construction. In Rotorua, there have been no new rooms completed but 171 are under construction.

Colliers’ national director of hotels, Dean Humphries, says these new rooms are much needed as New Zealand’s tourism boom continues.

“There were 3.8 million international visitors in the year to August 2018, up 3.6 per cent. Demand remains strong inkey tourist centres, with occupancy rates of 83 per cent and 80 per cent recorded in Queenstown and Rotorua respectively.”

The largest amount of new room supply is in Auckland, where 460 new rooms have been completed this year and 1016 are under construction.

Auckland’s historically strong revenue growth has taken a breather after an exceptional performance in 2017; albeit occupancy remains the highest in the country at 83.7 per cent.

Revenue growth per available room (RevPAR) in Auckland dipped by 1.9 per cent in the year ending September 2018. Over the same period, the average daily rate (ADR) increased modestly by 1.8 per cent.

Humphries says the plateau in performance in New Zealand’s gateway city by no means suggests the hotel sector has reached its peak.

“Last year was exceptionally strong for Auckland hotel operators, with exceptional revenue growth underpinned by demand from the Lions Tour and the World Master Games. We expect a surge in visitors over coming years, with the America’s Cup, Apec and the completion of the International Convention Centre adding to demand.”

In Queenstown, ADR grew by 12.3 per cent in the last year to $242.62, resulting in a 13.4 per cent increase in RevPAR. Rotorua recorded an ADR of $134.79, up 5.1 per cent, resulting in a 7.8 per cent increase in RevPAR. Growth in the other key centres has generally plateaued.

On the investment front, demand continues to outstrip supply.

“We continue to see strong interest for hotel assets in all key centres, but opportunities remain scarce. The only major hotel to have changed hands in 2018 so far was the 178-unit Waldorf Stadium Apartment Hotel in Auckland — the first major CBD hotel to sell in Auckland since the Hilton in 2012. Heightened investment activity has also spread into provincial New Zealand where investors are seeing attractive returns and improving fundamentals.”