Queenstown hotel rooms the most expensive, Christchurch still struggling to lift rates

Thursday, 22 February 2018

The opening of the Distinction Hotel will add another 179 rooms to Christchurch's accommodation sector.

With its latest revamped hotel just weeks away from re-opening, Christchurch is struggling to improve returns for investors.

The 179-room Distinction Hotel expects to welcome its first guests in early March after an extensive makeover of the former Millennium Hotel in Cathedral Square.

The opening of Christchurch's convention centre is expected to renew interest in hotel development because it will attract visitors in the off season.

A further 350-plus rooms are under construction, and at least three other hotels have been mooted.

CBRE's latest hotel market report suggests it will be difficult to get future developments over the line until the Christchurch convention centre is closer to completion and demand for beds rises.

Queenstown's average daily room rates were the most expensive in the country last year at $225.

* Hotel rates and revenue rising as occupancy hits a 10 year high

* Tourism industry told peak hotel room rates are too cheap**

According to Tourism Industry Aotearoa data, the Christchurch hotel occupancy rate dropped slightly last year to 76 per cent, the lowest of the five main tourist centres.

The city's average daily room rate of just under $159 was well behind Queenstown ($225), Auckland ($210), and Wellington ($177), but ahead of Rotorua ($131).

Nationally the hotel occupancy rate was just over 80 per cent and the average daily room rate was $190, up 11 per cent.

CBRE's hotels and leisure director Peter Hamilton said it was difficult to get new hotels to stack up financially in Christchurch.

The city's lower priced land helped offset the higher costs of meeting seismic requirements, and there was a lot of interest in modular designs that were faster and cheaper to build.

'But that doesn't change the fact that [Christchurch] occupancy figures are still in the mid 70 per cent range and new hotels are not going to help that.

'The key for Christchurch is driving demand to make hotels stack up, rather than turning to cheaper ways to build them.'

ChristchurchNZ business development manager Caroline Blanchfield said the number of international air crew and package tours staying in the city had an impact on the average daily room rate.

Guest nights in Canterbury hotels rose almost 6 per cent last year and Tourism Industry Aotearoa's local hotel spokesman Michael Patterson said the last two months had been very busy.

The Under 19 World Cricket Cup matches made a noticeable difference in January and the Golden Oldies Sports Celebration would bring 5000 people to Christchurch in April.

Patterson said events were key to attracting more visitors, and once the convention centre opened in 2020 it would lift custom over winter.

Hamilton said Rotorua had reversed a decline in room rates by holding more events and the market there was really starting to take off.

Although Queenstown hotel rates were the most expensive in the country, its share of the group tour market rose by 22 per cent last year, and tours now accounted for about a third of all room nights

'The buses pile into Queenstown as part of a standard tour and the market has grown, despite the Chinese shifting from tour groups to independent travel.'

'Traditionally tours used to be cheap visitors for hotels, and package tours would be paying less for a lot of rooms, but [Queenstown has] managed to grow the rate significantly.'

Auckland's average daily hotel room rate jumped 14.5 per cent last year and some domestic visitors were choosing to make day trips, or look for accommodation elsewhere, he said.

'Some (international) tours that used to come into the city now cannot afford to stay in hotels, or can't find rooms, so they're shipping straight down south, heading to Rotorua or Hamilton from the airport.'

Hamilton said investor interest in the New Zealand hotel market was coming from Asia and Australia, real estate investment trusts and existing hotel owners.

Government rebuild agency Otakaro will put a prospectus online this week in hopes of finding a developer prepared to build a 200-room hotel next to the Christchurch convention centre and a spokesman said there had already been strong interest, both local and from overseas.