New Zealand’s hotel demand & supply outlook generally stable but risky

By On 06th September 2012

Auckland May 31st 2012

Limited growth in New Zealand’s key hotel demand segments over the last 8-10 years at the same time as a significant expansion in room supply which was mainly driven by property developers have been some of the key issues affecting this market according to leading hotel consultant Stephen Hamilton. Mr Hamilton, a Director of Horwath HTL in New Zealand, a member of the world’s oldest and largest hotel consulting network, was making a presentation, at the 6th Annual New Zealand Hotel Industry Conference held at the Pullman Auckland, and co-hosted by Horwath HTL.

Mr Hamilton’s presentation, ‘Hotel Demand & Supply – Outlook for Major New Zealand destination’ used past and actual tourism forecasts to highlight the trends & challenges that the New Zealand Hotel Industry has been faced with. These trends have included effectively no growth in International Business/Leisure and Domestic visitor nights, as well as the fact that very few hotels which have opened have been developed and owned “in one line”. As a result, overall hotel room supply has increased while there has been almost no increase in total hotel demand over the same period.

The majority of new hotel / apartment developments have been at the top-end of the market, which has caused increased pressure on room rates in all segments of the market.

Looking at the hotel performance trends over the last 5 years in terms of RevPAR, Stephen said: “Significant changes in room revenue have significant impacts on hotel profitability. So the strongest improvements in hotel profitability in 2011 would have been in Christchurch (for those hotels still trading after the devastating earthquake in February 2011 reduced major hotel capacity by 70%), Auckland (where hotels benefitted mainly from rate premiums achieved during the Rugby World Cup (RWC)) and Wellington (which was supported partly by RWC events, but also showed consistent improvements in occupancy and rate last winter…)” Concerning visitor demand outlook, he added: “the overall message is, unless major strategic changes are achieved in inbound international visitor nights, future hotel demand in New Zealand will remain relatively flat for the next few years.”

Mr Hamilton concluded his presentation by looking at each of New Zealand’s key centres in terms of a SWOT analysis & key assumptions in terms of hotel demand drivers. In summary he said: “Christchurch and Wellington are the better centres for 3*-4* hotel performance in the next few years. For those mid-market hotels exposed mostly to the international inbound visitor market, it’s likely to be quite a challenge to achieve increases in RevPAR – with the greatest challenge being in Auckland mid-market hotels.”

About Horwath HTL

Horwath HTL (Hotels Tourism and Leisure) is one of the world’s pre-eminent consulting specialists in the hotel, tourism and leisure industries, providing unequalled experience and expertise for client projects around the world through a combination of detailed local knowledge and international understanding. Horwath HTL is currently the world’s largest consulting organisation specialised in hospitality, with 50 offices in 39 countries.

Horwath HTL is a member of Crowe Horwath International, a professional association of accounting and management consulting firms founded in New York in 1915. Crowe Horwath International is currently ranked among the top ten international professional service groups with offices in close to 400 cities in 88 countries.

If you have any questions, please contact James Chappell, Global Marketing Director at jchappell@horwathhtl.com  or Stephen Hamilton at shamilton@HorwathHTL.com .

 

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