No room at the inn

I do a heck of a lot of travel with my job. It is very unusual for me to be in Wellington for a whole week at any one time and my role takes me all over New Zealand, visiting our 12 offices regularly. Over the past 18 months or so, I have noticed that it is not uncommon for the person that looks after my travel bookings to come back to me and say that my usual hotel in either Auckland or Christchurch (in particular) is fully occupied and do I have another preference?

It is clear to me that our accommodation infrastructure in New Zealand is starting to creak. There has been a huge increase in tourism and often hotels are now booked out with large tour groups who have flown directly into, say Christchurch, to travel around in those large, organised groups. Christchurch has the added disadvantage of still playing catch up from the 2011 earthquakes and this has placed added strain on a city that is now bulging with tourists.

After the GFC, new hotel developments in New Zealand stalled very quickly and were no longer seen as a viable investment proposition in the New Zealand property market. Demand has meant that these developments are now on the right side of the yield ledger again and there is increased activity in this sector. In addition to new developments, a number of hotels have been refurbished, like the recently completed InterContinental in Wellington and the Sudima Christchurch Airport Hotel. Add to this the introduction of new budget accommodation offerings such as the Jucy Snooze range of hotels and the future looks bright for tourist accommodation in New Zealand.

Through discussions with people in the development industry and our own clients, the word on the street seems to be that there is currently strong offshore interest in investing in New Zealand hotels, especially in Auckland, but the pickings are pretty slim. Investors like the idea of buying into existing hotels that can show strong cashflows, without taking on the risk of a new player in what is known to be a notoriously boom and bust industry.

So, at the moment, it seems that there is a bit of a time lag between supply and demand, but the hospitality industry is on the right track to correct that lag. If you have any interest in feasibility and development modelling of hotel developments, then don’t hesitate to drop me a line.