Hotel prices are sliding in Auckland. Photo / Michael Craig
Hotel room rates have fallen in many parts of the country during the past year.
Average daily room rates have dipped from $209 to $202 in the past 12 months with Auckland hoteliers hardest hit.
Room rates in the city have fallen from $212 to $195, according to figures in a Horwath HTL report for April and May.
Auckland hotels also experienced a 2.1% drop in occupancy due to increased supply.
Based on reported occupancies, which represent approximately 73% of all Auckland hotel rooms, the firm calculated the number of rooms sold in Auckland had increased by around 3% compared with the same period last year.
Compared with 2019, the number of rooms sold in Auckland hotels has risen by approximately 7%.
The supply increases in Auckland over past years caused a ‘‘significant’' average daily room rate (ADR) decline of 7.9% due to heightened competition and fewer high-occupancy nights, which typically drive peak pricing.
Central city hotels face additional challenges, including ongoing construction, safety concerns, a weak retail environment, lack of major events, economic pressures reducing consumer spending, and fewer office workers, Howarth HTL said.
Wellington hotels continue to be affected by government spending cuts, particularly around contractors and consultants.
ADR has declined year-on-year for the past eight months, down from $202 to $191. The opening of the Tākina Conference and Exhibition Centre helped nearby hotels but has not greatly boosted the overall market as the Te Pae Convention Centre did for Christchurch.
But Queenstown hotels performed strongly.
Chinese visitors contributed 60% of the total growth in room nights.
Domestic demand also increased by 7%.
While overall occupancy levels were still below pre-Covid levels, room nights sold were approximately 11% higher than in the same period in 2019, after a 25% increase in supply.
Queenstown was one of the only two markets to report an increase in ADR – up from $250 a night to $254.
Christchurch had a 13% increase in room nights sold and a 3% growth in ADR (up from $180 to 186), resulting in a 15% revenue per available room RevPAR growth.
Operators reported steady volumes of general business and leisure travellers, along with strong event-related demand from the Te Pae Convention Centre, benefiting hotels within the central area, the report said.
Hotels in Rotorua reported a 5% increase in room nights sold, driven by a rise in visitors from China and other Asian countries such as India. However, domestic room nights decreased by 17%.
Revenue Per Available Room (RevPAR) - the indicator of hotel profitability - for the main New Zealand hotels during April and May 2024 declined by 1.6% (from $135 to $133) compared with the same period last year according to the numbers from Hotel Data New Zealand (HDNZ) and only just exceeds pre-Covid levels.
The outlook is soft, as fewer Kiwis will travel.
With around 65% to 70% of room nights demand in New Zealand being domestic during the off-season, most New Zealand hotels were significantly impacted by current economic conditions, despite the ongoing increase of international visitors.
In the meantime, no major events are planned during the winter months (unlike last year’s FIFA Women’s World Cup) and much of global travel will be directed towards European sporting events such as the FIFA Euros and Olympic Games.
‘‘For many hotel operators, the forecast for the next few months reads more like a blizzard warning than a holiday getaway,’' Horwath HTL said.
International tourist numbers are running at 81% of pre-Covid-19 levels.
But the recovery has been hit by March reductions in flights, which led to a drop in visitors from several countries, especially the United States.
Visitors from China reached 74% of 2019 levels, bolstered by the resumption of Sichuan Airlines flights from Chengdu.
According to Auckland Airport, air capacity from China is expected to increase by 15% during the winter compared to 2019.
Chinese visitors accounted for around 47% of the increase in room nights sold during April-May 2024 compared with the same period last year.
Hotel Council Aotearoa strategic director James Doolan said since before borders reopened, the organisation repeatedly warned tourism recovery after Covid would be a marathon, not a sprint, requiring careful management.
“New Zealand competes with many wonderful global destinations to attract free-spending international tourists.”
Auckland Council has instead chosen to stop investing in event attraction and destination marketing, even though Auckland is the arrival port for 70% of international visitors.
Central government has also reduced funding for our national tourism marketing agency, Tourism New Zealand.
For hotels and other tourism businesses, costs are increasing everywhere – not just rates, government charges and border levies, but also wages, insurance, interest rates and food costs.
‘‘Airline capacity has not yet returned to pre-Covid levels and some domestic routes are expensive with little or no competition. All of this makes New Zealand a more expensive destination in a world of great choices.’'
The council is worried about the International Visitor Tourism and Conservation Levy (IVL), which could increase from $35 to up to $100.
The council favours an increase to $50 or $70. But it says the IVL ‘‘is proof that repeatedly latching onto convenient/expedient’' part-solutions is not serving New Zealand well in the long run.
“Once again, we called on government to work with industry on wholesale reform of tourism funding and incentives.
“Tourists already pay their way in New Zealand through massive contributions to GST, but central and local government are under-investing back into the industry,” Doolan said.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
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