Quinn Wilson, co-owner of Queenstown Paraflights, reacts to New Zealand borders reopening. Video / James Allan
The return of Australian tourists and school holidays can't come quickly enough for the struggling hotel sector.
Figures from Horwath HTL show the Omicron outbreak and related restrictions continue to stall any meaningful recovery of hotel performance in New Zealand.
Last month's revenue per available room (Revpar) was just 28per cent of its pre-pandemic level in March 2019, according to Hotel Data NZ.
The figures show Revpar has plummeted from just under $200 in March 2019 to just over $50 in the same month this year.
Occupancy levels varied from a low of 22 per cent in Queenstown to a high of 54 per cent in the Nelson/Marlborough region, averaging 33 per cent across the country's main hotel markets.
These results, which exclude MIQ hotels, are the worst March results since the outbreak of the pandemic in 2020 in all but one of the regions.
At 36 per cent, Wellington recorded its lowest occupancy since the lockdown in September 2021, despite the end of the three-week protests at Parliament on March 2.
"A strong hesitancy to travel in the business, government and leisure markets exacerbated the continuing lack of international visitors. Self-imposed restrictions by businesses and government departments, combined with the red alert level and capacity restrictions impacting meetings and events, continue to cause a reluctance to travel amongst many New Zealanders, especially those who are most likely to use hotels," Horwath HTL says.
Anyone who is travelling are in line for bargains.
Most MIQ hotels are being returned to the market. Photo / Dean Purcell
As a result of low demand, the average daily rate (ADR) dipped 5 per cent below 2021 levels and was 19 per cent below the (pre-pandemic) rate reported in March 2019 as hoteliers attempted to attract customers.
"While most hotels have striven to maintain rate integrity, several value-add offers on special deal websites suggest this may be difficult to sustain. Some large discounts have been offered, equivalent to more than 60 per cent off the normal room rate, including by some five-star hotels, indicating the risk of a further average rate decline until reasonable levels of hotel demand return."
Minimum wage increases effective from April, and inflation forecasts of around 7.5 per cent, will put further pressure on the cashflow position of many hotels.
Recovery of demand has been much slower after the Delta outbreak and August 2021 lockdown, compared to after the first lockdown in 2020. Since August 2021, hotels have achieved just 31 per cent of their pre-pandemic Revpar, the equivalent to a 69 per cent drop in revenue.
Horwath HTL says this is despite a net decrease in room supply of about 2700 rooms, with hotel extensions and new openings since March 2019 being outweighed by rooms taken off the market for use as MIQ facilities.
Most of the first group of 21 MIQ hotels (4408 rooms) decommissioned in March are expected to return to the market by mid-June after deep cleaning, catch-up maintenance and selective replacements of furniture and fixtures.
A group of eight hotels (1209 rooms) is expected to return to market around July/August, while the remaining four hotels (777 rooms) will be retained for MIQ purposes for the time being.
The firm believes the imminent opening of the border to Australia on April 12 and other visa-waiver countries from May will provide only limited relief for hotels over the next three months.
At pre-Covid levels, visitors from these countries historically contributed less than 20 per cent of hotel guests during the June quarter.
It is expected business travel will remain below pre-pandemic levels for quite some time and that the border opening will provide the incentive for more New Zealanders to travel overseas, the latter perhaps creating some opportunities for airport hotels.
''We expect that any significant recovery in hotel demand will only be experienced once more business and government travellers regain the confidence that it is safe to travel, and indoor gathering restrictions are removed, allowing for the resumption of larger meetings and conferences.''
With a meeting capacity for around 31,000 attendees in 137 conference hotels, this is an important demand driver for the hotel industry, Horwath says.
While several operators are reporting an increase in the number of inquiries for small to medium conferences, most meeting/conference organisers will require greater certainty before they will confirm larger future events.
Likewise, providing certainty for cruise ship operators will be critical to securing the return of this demand segment in the immediate future, Horwath says.
With 322,000 cruise ship passengers in the year to June 2019, many of whom got on or off ships in New Zealand, this is also an important demand segment for hotels, particularly in Auckland as a gateway port for fly-in and fly-out cruise passengers.
''Early signs from Australia, where restrictions and uncertainties have eased, suggest that pent-up demand could translate into a solid bounce back in these key market segments.''
The Government here is still considering restrictions on the maritime border, which it says is more complicated than at airports.
