Major Milestones Boosting Hotel Sector Confidence

Just over 12 months on from the onset of Covid-19 and the first national lockdown, New Zealand’s hotel sector at last has some positive factors to focus on, according to the latest research report from hotel property specialists – Colliers.

Dean Humphries, National Director of Colliers Hotels notes that it has now been 12 months since Covid-19 impacted the wider tourism and hotel sector.

“While much has happened during this time, it is fair to say that the wider sector has been negatively impacted, as with all markets globally, with hotel revenue (RevPAR) falling to levels we have not seen for many decades.

“Fortunately, this pandemic is a 1 in a 100-year event, so a speedy recovery is imminent over the next 12-18 months, especially now we have more clarity around some key demand factors in our sector that will provide increasing confidence in the hotel sector moving forward.

“A global vaccination programme is well underway, particularly in our key inbound markets, and a bi-lateral travel bubble with Australia will commence on 19 April, the later providing considerable pent up demand from our largest and most important inbound tourism market.

“Tourism New Zealand has estimated that 800,000 Australians are actively looking to travel to NZ in the first six months of the bubble translating to a spend of circa NZD1 billion.

According to the latest Colliers report, occupancy rates declined significantly across all major markets in the past 12 months.

As at March 2021, Auckland had recorded the highest annual occupancy of 50% followed closely by Christchurch and Wellington (48.3% and 45.7% respectively), with Queenstown recording the lowest annual occupancy of just 33%.

Average Daily Rate (ADR) showed a much wider variance over the past 12 months with Rotorua recording an increase of 15.4% to sit at $162 and Christchurch remaining unchanged from pre-Covid levels at $158.

Auckland recorded a modest fall of 8% to sit at $178, with Wellington falling 16.5% to $149 and Queenstown declining 27.9% to sit at $179.

Despite our borders being closed, a record 1447 new hotel rooms were completed nationwide in the 12 months to March 2021, with a further 2359 rooms still under construction, a legacy of the pre-Covid tourism boom. Approximately 70% of the rooms under construction are in Auckland.

From a hotel investment perspective, hotel yields continue to remain at historic lows on the back of the low cost of capital and wider yield compression across other asset classes.

Recent sales of the 82 room, 5-star Sofitel Queenstown and 65 room Discovery Lodge Queenstown support firming yields and minimal downward pricing movement from pre-Covid levels for quality strategic assets.

Humphries notes that New Zealand’s positive response to the pandemic over the past 12 months means that we remain clearly on the global stage, as a ‘low risk/safe travel destination’ with many watching with interest to see how our wider hotel and tourism sector will emerge in the post-Covid recovery phase.

“New Zealand has a unique opportunity to excel in the next phase of the recovery process, with the global vaccination programme well underway in most of our key inbound markets and of course the imminent opening of the bi-lateral travel bubble with Australia. We currently predict a wider tourism recovery will be in full swing by Q1 2022.

“With New Zealand already considered a premium tourism destination and global investment safe haven, the focus on our country’s hotels will be in a strong improvement in underlying performance, along with prudent operational management and ownership structures. This will ensure our hotel assets continue to remain highly sought after by a mixture of domestic and offshore investors.

Colliers is a leading diversified professional services and investment management company. With operations in 68 countries, our more than 15,000 enterprising people work collaboratively to provide expert advice to maximise the value of property for real estate occupiers, owners and investors. Founded in Australia in 1976, Colliers is headquartered in Toronto, Canada and is listed on the NASDAQ and TSX (CIGI). Learn more about how we accelerate success at corporate.colliers.com

Founded in 1989, Colliers New Zealand has more than 600 staff in 27 locations. Our services include commercial, industrial and retail sales and leasing, capital markets, valuation, research, strategic advisory, real estate management, corporate solutions, building surveying, residential projects, and rural and agribusiness sales and valuation. Find out more at www.colliers.co.nz

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