No prospect of a hotel glut in Auckland, real estate firm says

Wednesday, 17 October 2018

An artist's impression of the Horizon Hotel, a 300-room, 5-star hotel at the Sky City New Zealand International Convention Centre in Auckland.

Leading real estate firm Bayleys argues a glut of hotels in Auckland is unlikely, following others warning that might happen.

Bayleys said in its 'Marketbeat' research newsletter that a lot of the talked about Auckland hotel projects would not go ahead in the short term but were likely to be staggered over a longer period.

Recently international hotel consultants Horwath HTL raised the red flag about a looming oversupply of hotels in Auckland.

Consultant Wim Ruepert said there might be a need for more rooms during the high season or when there were special events but from April to August hotel occupancy dropped significantly in Auckland.

* Convention centres to become the golden egg for hotel industry

* New Zealand can't afford to ease up on hotel development

* Auckland and Queenstown hotels bursting but Christchurch visitors take bypass south.**

He was looking at the issue from the perspective of investors and operators. There was no room for wishful thinking by developers to assume that annual occupancy levels over the past 10 years would continue above 80 per cent.

Foundation work at The Pacifica in central Auckland.

Similarly, Christchurch hotel operator, Bruce Garrett, managing director of The George Hotel, warned that recent occupancy figures in Christchurch had been the lowest for five years.

Bayleys Research said a booming tourism sector and extended period of undersupply had resulted in some of the tightest conditions in the Auckland hotel sector.

The measures of hotel performance were strong and set to stay that way, as the Auckland central city hosted a growing list of international events over the next few years, including the America's Cup and the APEC summit, both in 2021.

Developers were responding with six hotels under construction which would add 963 rooms in the next two years.

Another four projects were tipped to proceed over the next 12 months adding another 1149 rooms.

An illustration of One Queen Street, in the foreground, a hotel development being proposed by Precinct Properties for downtown Auckland.

Another 25 projects were also mooted but unlikely to go ahead anytime soon due to supply constraints in the construction sector and a tighter funding market.

Bayleys said the reality was that any additional stock was likely to be staggered over a much longer timeframe.

Longer term the forecast growth in international arrivals and a growing array of events in the Auckland central city especially when the NZ International Convention Centre was opened would warrant continued growth in the CBD's total hotel stock.

The Ministry of Business Innovation and Employment (MBIE) forecasts showed robust growth out to 2024 in international visitors. They were forecast to reach 5.12 billion in 2024, from 3.73 billion in 2017, and their spend was expected to rise to $14.75 billion in 2024.

While Australians were expected to remain the largest group of tourists, Chinese visitors were likely to double to 800,000 over the next seven years.

Auckland was the main point of entry and exit from New Zealand and would be a big beneficiary of the tourism growth.

Auckland Tourism Events and Economic Development agency ATEED was forecasting the number of international visitors to Auckland to rise from 2.6 million now to between 3.4 million to 4 million by 2024.

Existing hotel stock was under pressure and annual occupancy rates were at exceptionally high levels in all quality accommodation. Average room rates in all star grades and market segments had experienced solid growth for the past four years.

Bayleys Research said Auckland CBD had about 5300 rooms in 31 locations and another 2750 serviced apartment rooms.

The new 963 hotel rooms over the next two years would ease pressure.

Auckland CBD accommodation under construction

*Four Points by Sheraton, 4-star hotel, 255 rooms, due to open 2018.

*Park Hyatt, 5-star hotel, 195 rooms, due 2019.

*Sofitel So, 5-star hotel, 130 rooms, due 2019.

*Horizon Hotel, 5-star hotel, 300 rooms, due 2019-20.

*The Pacifica, 5-star hotel, 35 rooms, due 2020.

*Ramada Victoria Street, 4-star serviced apartments, 48 rooms, due 2019.

Auckland hotel projects likely to go ahead in the next year

*One Queen Street, 5-star hotel, 244 rooms.

*Mills Lane- EVEN+ Holiday Inn. 4-5 star hotels, 490 rooms.

*Indigo Hotel, 4.5 star, 225 rooms.

*Sudima, 4.5-star hotel, 190 rooms.