A new report from Horwath HTL is examining the future of New Zealand's tourism and hospitality sectors. The good news is the metrics have been strong over the past year, but with falling visitor numbers, the good times may not last.
According to the report by Stephen Hamilton, a managing director at Horwath's Auckland office, the country's hotel industry has experienced a significant period of growth in both revenue and profitability, but the outlook for further improvement in 2019 and beyond is uncertain, particularly when it comes to the rate of future growth.
This year has seen a slower rate of growth in international arrivals compared to recent years, and the visitor arrival forecast for the full calendar year is approximately 40 percent lower than the previous year’s forecast, according to Horwath HTL. In particular, Chinese arrivals for the year are likely to fall from 11 percent to 3 percent following a 0.8 percent decrease year-to-date in March. By comparison, Chinese arrivals into Australia over the same period grew by 2.4 percent.
Notably, New Zealand has not faced a short-term reduction in visitor arrivals as a result of the March terrorist attack in Christchurch.
Hotel Market Performance Overview
The slowdown in international visitor arrival growth, combined with an increase in hotel room supply, have affected both average achieved occupancies and room rates.
The average occupancy rate (AOR) of member hotels in the Tourism Industry Aotearoa (the independent association that represents all sectors of New Zealand's tourism industry) was 78 percent year-to-date for April, down from 82 percent in the previous year. Wellington’s average occupancy was steady, but all other areas experienced a reduction in AOR.
Horwath HTL noted the average daily rate (ADR) was $176 for the year ending in April, down from $191 for the preceding year. ADR fell in only two centers–Auckland and Christchurch. Auckland is the largest hotel market in New Zealand, accounting for 32 percent of total hotel room nights sold in 2018. Queenstown had the next largest market share with 13 percent of room nights.
Revenue per available room (RevPAR) fell nearly 3 percent during that time, with the decrease largely caused by the performance of Auckland hotels. Several regional locations reported increases in revenue, to which Horwath's Hamilton credits several factors:
• Increased dispersal of visitor demand (especially group tour demand) to other regions, partly as a result of high hotel prices in some main centers (notably Queenstown and Auckland) and more active regional destination promotion;
• Some displacement of domestic guests by international guests paying higher prices; and
• A relatively low increase in room supply.
By year's end, nine hotels with a total of 947 rooms will have opened in New Zealand’s main visitor hubs. A further 17 hotels with 2,158 rooms are scheduled to open during 2020.
Auckland’s softer hotel performance in first half is expected to continue in the short term, partly as a result of the significant increase in room supply in 2019–2020. The rooms-supply increases in other cities are less significant and not anticipated to affect hotel performance as much as Auckland's.
The long-term outlook for the New Zealand tourism and hotel industry is for continuing growth in demand. The opening of major new conference centers in Auckland, Wellington and Christchurch will make it possible for New Zealand to host larger international conferences, driving destination marketing and economic development agencies to focus on event attraction—especially during the shoulder and off-seasons.
The major challenge facing the industry, Hamilton said, is the imbalance between the timing of new hotel room supply and the rate of increase in visitor night growth, particularly in Auckland.