Queenstown takes center stage in New Zealand hotel transactions

(Queenstown breaks records with the largest sales volume and the biggest individual transaction.)

Queenstown, New Zealand, took the lead during the country's most buoyant period of hotel transactions in a decade, notching up both the largest sales volume and the biggest individual transaction.

Colliers International’s hotel sales survey found more than NZD $500 million of hotel inventory changed hands in 2015/16, the strongest period on record since 2005/06. Queenstown accounted for over 30 percent of the total sales volume, with nine sales over the 24-month period totaling some NZD $173 million.

The destination also notched up the largest single hotel transaction of the last decade, with the 273-room Novotel Lakeside Queensland changing hands for NZD $91 million. Wellington was second in total sales volume, with five transactions worth NZD $133 million accounting for 26 percent of the total. Auckland came in third with NZD $94 million of sales, followed by Christchurch with NZD $78 million.

Dean Humphries, national director of hotels at Colliers International, said in a statement that the strong figures reflect high levels of confidence in New Zealand’s hotel sector.

“Investors are clearly recognizing the huge economic benefits of New Zealand’s tourism boom,” Humphries said. “There was a record 3.5 million visitors to New Zealand last year, and the government is forecasting 4.5 million annual visitors by 2022. That growth has driven record trading numbers in gateway cities like Auckland and tourist hot spots like Queenstown. As a result, investors are benefiting from strengthening investment yields.”

According to a statement from Humphries, yields have compressed in the order of 100 to 200 basis points across the five main tourism markets, with the strongest yields being achieved in Auckland and Queenstown.

Almost two thirds, or 65 percent, of hotel transactions were completed via public marketing campaigns, with Colliers International brokering over 90 percent of those deals. New Zealand-based investors bought approximately NZD $200 million of hotel assets in 2015/16, accounting for fewer than 40 percent of transactions by value. The biggest source of foreign capital was Hong Kong, accounting for 30 percent of the total sales by value, followed by Singapore with 18 percent of total sales.

Humphries said investors shouldn’t expect the market’s buoyancy to continue this year. “We anticipate sales activity will be significantly reduced as investors choose to hold onto assets to take advantage of the strong trading conditions," he said. “There will still be investment opportunities, however, particularly as we expect hotel development activity to increase.”

Humphries also said that new development opportunities will be driven by the tourism boom and a projected shortfall of 4,500 hotel rooms across the country’s five largest tourism markets by 2025. “We expect the majority of development activity will occur in Auckland, Christchurch, Queenstown and Wellington,” he said. “We’re already seeing new opportunities arise, such as the One Market Square development at Auckland’s Viaduct Harbor.”

Viaduct Harbour Holdings appointed Colliers International to undertake a global search for a development partner to build a 165-room luxury hotel on the site, which was previously occupied by the Simunovich Fisheries building.

Other major, publicly announced Auckland hotel projects include:

  • Four Points By Sheraton, a 255-room hotel in a refurbished 21-level office tower on Queen St
  • Sebel Hotel, a new 152-room, six-level hotel on Lakewood Court, Manukau
  • SO Sofitel, a 130-room hotel on the former Reserve Bank site on Customs St East
  • Park Hyatt, a new 190-room hotel on the former Team New Zealand site in Wynyard Quarter
  • Ritz-Carlton, a new 300-room hotel to be located on Albert Street
  • Pullman Hotel, a new 250-room hotel to be built beside the Novotel at Auckland International Airport