Hotels feel heat with expansion
The hotel industry is facing an uncertain 2019 and beyond as more than 3000 new hotel rooms hit the market in the next two years, warns tourism consultants Horwath HTL.
It follows Horwath’s warning last year of an oversupply of hotel rooms, particularly in Auckland.
The hotel industry had enjoyed a significant period of growth in revenue and profitability, ‘‘but the outlook for further improvement in 2019 and beyond is uncertain’’.
Affecting the hotel industry was a marked decline in the growth of visitor numbers and new hotels with more than 3000 new rooms expected to open this year and next.
Most affected would be Auckland where the bulk of new hotel rooms were opening.
Auckland was already feeling the heat with declining average daily rates and average occupancy rates.
By the end of 2020, 3105 new rooms in 36 new hotels were expected to have opened, with 947 rooms in 2019 and 2158 rooms in 2020 in the main tourist centres.
More than 1500 of the additional rooms would open in Auckland, with most of those in 2020, a 16 per cent increase in room supply
In Queenstown more than 450 rooms will open in the next two years, but none will be five-star, and in Christchurch more than 550 will open, with more than 400 in Wellington, and just over 150 opening in Rotorua.
International visitor arrival growth had flattened to 1.3 per cent for the year to March 31, 2019, compared with 7.8 per cent in the previous year.
The Ministry of Business, Innovation and Employment had lowered its forecasts to 4.25 per cent average annual growth in international visitor spending over 2019-2025 from its 2018-2024 forecast.
‘‘The visitor arrival forecast for the year ending December 2019 is approximately 40 per cent lower than the previous year’s forecast.’’
In particular, the forecast for Chinese visitor growth in 2019 had fallen to 3 per cent from 11 per cent.
The United States would be the fastest growing source market in 2019 and 2020 with US arrivals forecast to grow by 5.5 per cent a year in 2019 and 2020.
The slowdown in international visitor growth and increase in hotel rooms had hurt average occupancies and room rates, the report said.
The average occupancy rate of major hotels fell to 78 per cent in the year to April 30, 2019, from 82 per cent in the previous year.
Revenue per available room fell almost 3 per cent in the April 2019 year, with the decrease mostly caused by Auckland hotels.
The average daily rate fell to $176 for the April 2019 year, down from $191 in the previous year, caused by falls in Auckland and Christchurch.
Average occupancy rose in three regions, Rotorua, Nelson-Marlborough and the central North Island while it was steady in Wellington. In all other areas it fell.
In general, regional centres had performed better than main centres which were affected by the increase in room supply.
Auckland’s softer hotel market would continue in the short term partly because of the big increase in room supply. Increases were less significant in other centres and not expected to affect hotel performance as much as in Auckland.
But the longer term outlook was positive for tourism and the hotel industry, with growth in demand expected to continue. New conference centres in Auckland, Wellington and Christchurch would contribute to that as well as the greater focus on destination marketing and events.