New Zealand's Project Palace seeks hotel investors

Auckland

New Zealand's hotels are operating at close to capacity thanks to a tourism increase, and the country's government is seeking foreign capital to open new properties before the boom goes bust for lack of room. 

New Zealand Trade and Enterprise is leading a global search for funds to invest in the sector. The initiative, codenamed Project Palace, will try to sell hotel projects to investors in Asia, the Middle East, pockets of the United States and Europe.

Head of capital at the agency, Quentin Quin, said staff around the world would target a slice of an estimated $73 trillion investment capital. It was working with the Tourism Industry Association, MBIE and Tourism New Zealand. "We've got major constraints in Queenstown, Christchurch, Rotorua, Auckland and we have had Wellington on that list as well, although the forecasts for future builds suggests the constraint will be unlocked," he said.

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Quin said that staff in New Zealand were working with local groups and regulators to ensure proposals were "shovel ready" before being promoted around the world. Hotels, he added, could cost up to $200 million to build.

New Zealand's Numbers

Last week, Tourism Industry Association chief executive Chris Roberts said that the trend in commercial guest nights reflected growth in the tourism sector. 

Statistic New Zealand's Accommodation Survey shows that national guest nights for February were 7 percent higher than in February last year. The company's business indicators senior manager Neil Kelly said that guest nights had been rising for about two years, and that all 12 regions saw more guest nights for February and all four accommodation types had more guests.

Compared to last year, North Island guest nights in February were up 6.5 percent, and South Island guest nights were up 7.8 percent. A TIA hotel sector survey of three- to five-star hotels showed in March average occupancy was 88 percent across the country and over 90 percent in Auckland and Queenstown. Roberts said that a year-round occupancy of 80 percent is seen as a "sweet spot" for a hotel to reach, to generate good returns and allow for reinvestment and improvements.

As of February, overall national guest nights had increased 5.2 percent year-over-year.

"We need to plan with how we can cope with growth in the long term," Roberts said, emphasizing that while the industry needs an increase in investment, growth must be managed carefully. "We don't want a cycle of boom-and-bust," he said. "We want supply to stay just ahead of demand."

China to the Rescue? 

Prime Minister John Key may have some particular investors in mind. Key is leading a 40-strong delegate trade mission in China focusing on upgrading New Zealand's free trade agreement with the country, and is reportedly presenting investment opportunities to China's "heaviest hitters." 

At a Chinese business networking event in Beijing, answered questions about improving trade between the two nations. "We're a fast-growing economy, we want to to develop great international relationship and we also want to have a higher standard of living," Key said. "We fundamentally don't have enough private-sector capital of our own to fund that growth."

Sources: New Zealand Herald, Stuff, Stuff

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