Huge hotel shortfall predicted


Finding a hotel room in Queenstown, let alone one that won’t break the bank, is going to be a big challenge over the next 10 years.

An independent report into the level of supply and demand for New Zealand hotels, commissioned by government and tourism bodies for ‘Project Palace’, suggests Queenstown will suffer the most of five ‘focus’ regions.

The local hotel market could reach “critical capacity status” as soon as this coming summer with occupancy rates already running at record highs and only a small number of new rooms scheduled to come onstream over the next 18 months.

Specifically, the report notes there are only three small hotels, providing 189 rooms, under construction in Queenstown.

On top of the resort’s existing 3234 rooms, as of last December, the report says a further 2100 may be required over the next 10 years.

However, taking into account eight proposed developments, and long-term trends in hotel development, it estimates only 679 more rooms will be added during this period, “which leaves a potential shortfall of up to 1421 rooms”.

It suggests annual hotel occupancy will rise from 79 per cent, last year, to an unprecedented 85 to 90 per cent in 2025 with room nights rising 65 per cent from about 920,000, last year, to more than 1.5 million.

The combination of continued visitor growth, and “a heavily constrained supply pipeline”, could see hotel operators charging “excessive room rates during peak periods”.

The average daily rate of $168 per room, for example, could rise to $279 by 2025.

The consequences of record tariffs and occupancies could include a reluctance by hotels to upgrade or refurb, lower-yielding segments like tour groups and air crews moving to suburban locations or nearby towns like Cromwell, and the loss of major events and business events to other cities and countries.

The report says the ability to develop more hotels is dependent on a number of constraints like financial feasibility, site availability and building costs.

“In addition … we note that there is a severe housing shortage for hotel staff in Queenstown.

“Finding ways to overcome these challenges will be a critical success factor for the hotel sector, the tourism industry and Queenstown’s overall economy.”

As for ideas for increasing the “supply pipeline”, the report suggests a range of ideas.

These include a public/private partnership to open up strategic sites for hotel development, conversions of commercial buildings, expansion of existing hotels and more development where land prices are less expensive, like Frankton and Fernhill.

It also predicts there’ll be an increasing reliance on other types of short-stay accommodation like motels, budget stays, campervans and the likes of Airbnb.