Foreign investors keener to buy rooms than build

The Carlton Hotel is the latest of eight New Zealand hotels sold to Australian, French and Asian property investors for $278 million in the past year.

Foreign investors are buying New Zealand hotels at a record rate, but are not interested in building new accommodation.

Australian, French and Asian property investors spent $278 million buying eight hotels in the past year.

The trend towards buying existing hotels rather than building new ones was gaining momentum, said Mike Batchelor, executive vice-president of Jones Lang LaSalle Hotels in Brisbane.

Batchelor represented the seller in the record-breaking $96 million sale of Auckland's Carlton Hotel this week.

That price meant each room in the 455-room hotel cost the buyer just over $210,000. But new hotels cost more than $400,000 a room to build, Batchelor said, an amount which made the investment prohibitive.

He rejected suggestions by Air New Zealand chief executive Rob Fyfe this month that a lack of five-star hotels was deterring wealthy tourists from coming to New Zealand.

Fyfe complained about the hotel shortage to an American Chamber of Commerce meeting.

He spoke of a "woeful shortage", and asked why top American accommodation brands such as Raddison and Four Seasons were not in New Zealand.

"That's a very short-sighted view," Batchelor said. Fyfe did not appreciate the cost of building new luxury hotels and the lack of return because of low room rates.

Terry Ngan of hotel, tourism and leisure consultants Horwath Asia Pacific said the average room rate for all regions was $133, up 5.3 per cent on the past year.

Room rates were low in Auckland, he said - at least $20 cheaper than in Sydney. But that showed room rates had the potential to increase.

The Carlton was sold on Monday to to the ASX-listed Abacus Property Group.

It was sold with vacant possession and operators expected to bid for the management contract include Sheraton, Marriott, InterContinental and Sofitel.

Batchelor said hotel deals done recently showed how much interest Australian and Asian investors had in buying existing hotels but how little appetite they had for development.

Ngan said the Carlton sale price allowed a new manager to get a realistic return on an investment. The deal also provided a good opportunity for a manager to operate a five-star Auckland hotel, he said.

Some of the largest international chains had no presence in New Zealand because of the high cost of land and construction, he said.

Tourism Auckland chief executive Graeme Osborne, said the city did not have a desperate hotel shortage and its vast serviced apartment supply enabled it to cope with sudden visitor influxes.

Cruise ships and motorhomes helped supply accommodation for one-off events such as last year's Lions tour, he said.

Figure from Horwath Pacific show more new hotels are being built in Wellington and Queenstown.

SNAPPING UP NZ HOTELS

* Duxton Wellington, 192 roomsSold to Thai buyer for $45.5 million in June last year.

* Intercontinental Wellington, 231 roomsSold to Australian buyer for $61 million in September last year.

* Portland Hotel, Wellington, 108 roomsSold to Australian buyer for $13.25 million last December.

* Centra Auckland Airport, 242 roomsSold to Singaporean buyer for $17 million in December.

* Chateau Blanc Suites, Christchurch, 38 roomsSold to Australian buyer for $8.4 million in February.

* Chateau On the Park, Christchurch, 193 roomsSold to Australian buyer for $27 million in March.

* Grand Mecure Puka Park, Coromandel, 48 chaletsSold to French buyer for $10 million-plus in June.

* Carlton Hotel, Auckland, 455 roomsSold to Australian buyer for $96 million this week.