MBIE's tourism infrastructure report

By On 01st December 2016

MBIE recently (August 2016) published a useful ‘insight’ document “Tourism Infrastructure”, the first in a series of such documents to be published over the next 18 months.

The report addresses capacity issues and constraints across a number of key areas in the tourism industry including air travel and tourism accommodation infrastructure.

In the area of tourism accommodation, this report complements the “Regional Hotel Market Analysis and Forecasting” report published by NZTE in May 2016. Both reports identify accommodation capacity constraints in peak demand months, especially in Auckland and Queenstown. The NZTE report addresses the key reasons for current accommodation constraints better than the MBIE report which identifies a number of factors which could explain a ‘delayed response’ in investment in new hotel capacity. But financial feasibility and economic return on investment challenges are not identified as factors.

In relation to Queenstown, the report states that “hotel construction has not yet responded to [an] increase in demand, with no new hotel built since 2011, which may be a consequence of the lack of land around the Queenstown CBD.” There are several hotel projects currently under development and planning in and around the Queenstown CBD, there is further land available in the CBD, and ample land is available in the wider Queenstown area. There is much interest in and planning for new hotel investment throughout Queenstown. There had been no investment since 2011 because in that year there was both a significant increase in supply at the top end of the hotel market and a decrease in demand as a result of changed visitor patterns following the Christchurch earthquakes. This resulted in a poor financial performance in many Queenstown hotels, a situation which took at least four years to reverse.

The report comments that “high occupancy rates are generally a good thing” and goes on to explain the qualified opinion by saying that “occupancy rates significantly above 80 per cent can lead to higher room rates and may make it difficult for tourists to find accommodation at all” and that “it may be an indicator of inadequate infrastructure investment in regions, or a lack of planning and / or development of alternative strategies.”

What the report could have said is:

  • high hotel occupancies and prices during the peak visitor season are an inevitable consequence of a growing and successful tourism industry,
  • high annual occupancies are to be encouraged on a sustained ongoing basis,
  • significant increases in room rates need to be achieved and sustained if further capital is to be attracted into hotel investment rather than other forms of property investment,
  • the current investment outlook is increasingly positive, government welcomes this, and does not want to stimulate an oversupply of hotel accommodation which will inevitably reverse all of the positive trends.

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Stephen Hamilton

Stephen jointly established the specialist tourism and leisure consulting practice, Horwath HTL (formerly Horwath Asia Pacific Limited) in 2002. With thirty years consulting experience in the New Zealand tourism industry, Stephen has also undertaken engagements in Australia, Fiji and the Cook Islands.

Stephen’s enthusiasm and in-depth knowledge of the New Zealand tourism industry adds value for clients, by providing a well-balanced and sound approach to their specific needs and assisting clients to progress their business with quality information for decisions and strategies.

Stephen assists lenders, investors, funding sponsors, and purchasers/developers in both the public and private sectors, with the ability to quickly ascertain what financial and market analysis or research will be of most benefit.

Stephen’s service lines include market demand analysis, financial feasibility analysis, market research, economic impact analysis and strategy development.

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