New Zealand hotel market is a star performer

12:00 PM Tuesday June 16, 2015 Dean Humphries (national director, hotels New Zealand & South Pacific for Colliers International)

Auckland achieved revenue per available room growth of 20 per cent.

The New Zealand hotel and tourism market has witnessed unprecedented growth in the first quarter of 2015, with many regions reaching historically high occupancy levels together with surging room rates and corresponding growth in revenue per available room (RevPAR).

Underpinning this positive performance has been a continuation of strong inbound visitation numbers reaching a record 2.95 million in the year ending March 2015, a seven per cent increase over the past 12 months.

Domestic demand has also been robust with GDP growth of three per cent in the year ending December 2014 together with a continuation of positive business sentiment right across the country.

At the other end of the spectrum, we are witnessing historically low levels of new hotel development, and a contraction of room inventory in regions such as Auckland, where serviced apartments continue to be purchased and taken out of the short term letting pool by residential owner occupiers and investors. This has culminated in a ‘perfect storm’ for those lucky enough to own hotels.

Auckland and Queenstown have been the star performers achieving RevPAR growth of 20 per cent and 18 per cent respectively in the first quarter of 2015 compared to the same period in 2014.

Rotorua has been the surprise package with occupancy increasing by eight per cent this quarter to 87.3 per cent which assisted in RevPAR growth of 17 per cent year to date March 2015.

Wellington and Christchurch also showed double digit RevPAR growth over the same period.

The Cricket World Cup had an obvious impact on demand in some regions, but most commentators agree demand is improving across all key segments with FIT and Corporate sectors leading the way.

The short to medium term outlook continues to be strong with limited new room supply across the country, strong forward bookings and increasing airline capacity across many existing and new carriers, including the recently announced Air New Zealand link to Houston, USA, and an alliance between Air New Zealand and Air China which will see daily flights from Auckland to Beijing by the end of 2015.

Buyer demand is also at an all-time high with an increasing number of investors wanting to purchase hotel assets. We have seen three large hotels exchange hands in the past six months and buyers now outnumber sellers by five to one.

It is likely we will see more assets being brought to the market as vendors now start to take advantage of higher property values based on long term sustainable growth in revenue and profitability and a strengthening in yields.

Colliers International recently published its New Zealand Hotel Market Snapshot report containing the above information in more detail and including an overview of hotel transactions that occurred in New Zealand during 2014 and early 2015.

This opinion piece was brought to you by Colliers International.The rest of the report can be accessed from: 
Colliers.co.nz