Hotel could offset rates
Council’s bold $55m plan for 60-room CBD facility and carpark
Whanganui District Council’s plan to build a hotel and multistorey carpark has a hefty price tag but it could keep future rates requirements down by $4 million a year.
The council proposes to invest $55 million into the projects and, if the budget in its draft long-term plan for 2024-34 is signed off after public consultation, construction of the hotel will get under way in 2025/26.
The carparking facility will follow in 2027/28, with ratepayers forking out an annual $30 per property from 2025/26 to 2038/39.
According to the long-term plan consultation document, returns from the projects would start to offset rates after that.
Both facilities would be in the central city.
A hotel feasibility report, commissioned by the council and released in 2022, said a four-star fullservice hotel of 60 rooms was the optimal financially viable development.
Whanganui mayor Andrew Tripe said nothing much had changed since then, except the outlook was “even better”.
He said the council needed to be financially responsible in the short term but it should not stop planning for the future.
“[A lack of accommodation] is limiting us as a district to realise our economic and commercial opportunities, for our ratepayers but also our community.
“With the Sarjeant Gallery, Te Awa Tupua, our heritage buildings and being a Unesco City of Design, Whanganui is going to be an increasingly popular visitor attraction, both regionally and internationally.
“I see the Sarjeant in particular as having significant international interest.”
Redevelopment of the gallery is set to be completed this year.
What the hotel will look like is yet to be decided, with a detailed business case exploring different operating models being the first step if the projects are signed off.
The consultation document said it would only proceed if the business cases demonstrated demand and the projects would be able to provide returns to offset rates by 2038/39.
“We won’t do this if the business case doesn’t stack up or if it’s too risky,” Tripe said.
“From an economic development perspective, if it does stack up we would be fools not to progress it.
“At this stage, we’re looking in the vicinity of $4m per annum.”
Councillor Rob Vinsen said he was in favour of option two in the consultation document — seeking an operator to develop a hotel and carpark for Whanganui.
He “strongly believed” councils and ratepayers were not property developers.
“I totally support council facilitating this and making it happen.
“That means accumulating any property that might be needed, helping with resource consent, those sorts of things.
“As far as developing a $55m hotel and car park, it’s not council business.”
Vinsen said a development in Hamilton was an example of a council aiding the process. Last month, Hamilton City Council signed a conditional agreement to sell properties to the Templeton Group for a high-end hotel development.
Multi-storey carparks were “white elephants” in provincial centres like Whanganui, Vinsen said.
People used the carpark attached to the Plaza in Palmerston North but the four-storey building on Main St was empty, he said.
“The same used to happen in Napier, where I had a business, and the same happens in Trafalgar Square. People don’t down go underneath there unless the top carpark is full.”
He said there used to be two floors of carparking at the rear of the Whanganui Regional Museum.
“We closed it in the end because there were security issues, people were worried about going under there and accessing their vehicle, the museum needed more space, and it just wasn’t being used.
“I think some of the ideas coming forward on this are a little naive.”
Tripe said some hotel operators around New Zealand were not in the business of developing the building.
“They take out a long-term lease. There are different models and we are very open to working on how we might make this happen.”
Hotel Council Aotearoa strategic director James Doolan said his former employer, Marriott, had about 9000 hotels around the world but only owned 50 or fewer.
“It’s not impossible for a theoretical Whanganui ratepayers’ hotel to actually be branded Accor, Marriott, Hilton, IHG or any of the
other well-known brands,” he said.
“Hotels are an unusual asset category because ownership of the real estate is often different from the branding and operation of the real estate.”
Doolan said the council would be taking the development risk but investors were more likely to buy a completed hotel in Whanganui than an unproven project.
High-value tourists, international tourists in particular, needed an airline, airports, on-the-ground transport networks and somewhere to sleep, he said.
“All of that stuff is infrastructure. It takes a long time to build and plan, and it’s expensive.
“Once you build all those things, mum and dad businesses can sell flat whites and give a massage and do all the other things.
“You need that enabling infrastructure though — those key ingredients.
“That’s the backbone and, without it, you’ve got nothing. It doesn’t matter how pretty your mountain is.”
Tripe said Air Chathams operated Whanganui flights in and out of Auckland and there had been discussions about the airline expanding the service to Christchurch.
“We think there is an upside for them to expand their network and grow their business, but also for us to attract different customers to Whanganui.
“Traditionally, people’s first trip to New Zealand might be Rotorua, Queenstown, Auckland, Christchurch.
“On their second trip here they’ll be looking at other options — to see the real New Zealand. Whanganui has proven itself to be a really popular place to come.”
The hotel and car park facility, like the replacement of the Dublin Street Bridge, would be debtfunded.
Council chief executive David Langford said money from “people staying in the hotel and paying for their rooms” would repay that debt, rather than ratepayer money.
“If we had more long-term investments then we could afford to have swimming pools, libraries and all of the other things without it being a massive cost to the ratepayer.”
Issues such as the potential closure of the Whanganui East Pool were separate from the hotel redevelopment, he said.
“The hotel should be funded by the people that stay in the hotel.
“Getting rid of it [from the longterm plan] doesn’t actually make much of a saving at all for the ratepayer.”
Langford said without investments such as the hotel, the only way the council could pay for things was through rates.
The proposed ratepayer contribution would help to pay off the hotel and carpark while it got up and running and “started to be profitable”.
“Then, hopefully, that will come down in the future,” he said.
Doolan said a historical example of government involvement in hotel development was in Milford Sound.
“No one would take the risk of building the first hotel there so the Government built it through the Tourism Hotel Corporation.
“Many of the hotels in Fiji are owned by the Fijian government throughout its retirement savings fund.
“In some ways, that isn’t too dissimilar to what Whanganui council is finding itself considering — ‘we need this infrastructure, no one is going to build it for us, so we’ll do it ourselves’.”