Looming hotel crisis putting tourism at risk, says expert

Looming hotel crisis putting tourism at risk, says expert

Auckland, March 9, 2017

Auckland’s critically short supply of hotel rooms is shrinking while demand continues to increase, putting New Zealand’s tourism growth at risk, says a leading hotel expert.

Dean Humphries, Colliers International’s National Director of Hotels, says the looming hotel crisis comes after New Zealand’s biggest year for tourism to date.

There were 3.5 million visitors to New Zealand last year, and government forecasts are for 4.5 million annual visitors by 2022.

“We simply don't have enough hotel rooms in our current inventory to cope with this level of growth in the tourism sector,” Humphries says.

“If immediate solutions are not found, it is unlikely we will continue to grow at current levels.

“In fact, in Auckland where rooms are in critically short supply, hotel inventory has been shrinking with a number of hotels closed for refurbishment and up to 500 serviced apartment units having been taken out of the short-stay accommodation pool and put towards alternative uses by private investors and first home buyers.

“The current inventory has in fact shrunk from 9500 rooms to around 9200 over the past two years at a time when the market is in desperate need of more short-stay accommodation.”

Humphries says about 1300 rooms are under construction and forecast to come on stream by 2020.

However, a further 3000 rooms need to be added to the Auckland market to ensure future demand levels are met.

Humphries notes recent government reports suggest a further 9700 new hotel rooms are required in the five main tourism markets by 2025, with a likely shortfall of 4500 rooms based on current supply forecasts.

But despite the strong message, many developers are reluctant to build new hotels, he says.

“There are a number of issues holding developers back, including high construction costs, the increasing level of difficulty in acquiring adequate development funding, challenges in securing suitable sites, and a general lack of sector experience and knowledge,” Humphries says.

“In addition, the proposed ‘targeted rate’ proposed by Auckland mayor Phil Goff will almost certainly act as a deterrent for new developments moving forward.”

Humphries says the growing presence of Airbnb may alleviate some of the supply issues in the short term.

“However, Airbnb alone will not be adequate to cater for demand over the medium to long term.”

Humphries says a range of solutions need to be reviewed immediately to ensure future growth in visitor arrivals can materialise in line with forecasts.

“New Zealand needs to actively promote new hotel developments to potential investors and developers, and encourage tourists to visit regional markets such as Northland, Hawke’s Bay, Nelson and Dunedin, where short-stay accommodation is more readily available.

“Local and central government also need to look at introducing incentives to promote new developments.”

ENDS

About Colliers International:

Colliers International Group Inc. is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 10 consecutive years, more than any other real estate services firm.

Founded in Australia in 1976, Colliers International is the largest locally formed real estate services firm with professionals worldwide. Find out more at www.colliers.co.nz

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