Surge in developments shaves occupancies and profits for hotel operators

Friday, 2 August 2019

Hotel operator Millennium & Copthorne Hotels New Zealand says increased competition in the hotel market across the country has resulted in occupancy declining slightly and pressure on room rates.

'To be competitive means reinvesting in our product and service standards and we are sensitive to customer demand and guest feedback,' managing director BK Chiu said.

Millennium & Copthorne was among several Auckland hotel owners and operators who took a judicial review against Auckland Council's plans for an additional rate against accommodation providers.

Auckland Council has spent $1.2 million in court defending the initiatives and the parties are waiting a High Court ruling on the legality of a two-year-old additional rate, which raises $14 million annually from hotels and motels.

**READ MORE:

* Controversial $200m Queenstown hotel approved without public hearing

* Auckland Council spends $1.2m defending new hotel rates  

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* Hotels - who are the biggest players?**

The Accommodation Provider Targeted Rate dispute was heard in the High Court in late May. A decision was expected before the end of the year but will not materially affect Millennium & Copthorne's financial position, Sim said. 

Millennium & Copthorne was continuing with refurbishments and work was under way at Millennium Hotel Rotorua, Millennium Hotel Queenstown, and the conversion of Kingsgate Hotel Greymouth to a Copthorne-branded property.

Chairman Colin Sim said the company's hotels were holding their own despite a more challenging market. 

Further improvements were being planned at other hotels. 

New hotels in Auckland contributed to the competition, and increasing costs in the sector were being felt. 

'But we are dealing with these challenges just like every other business in New Zealand and we are making the necessary adjustments.' 

The company's financial results for the remainder of 2019 would be in line with last year.

Average hotel occupancy across the group fell slightly to 82.5 per cent from 83.2 per cent in 2019 while revenue per available room was $135.85 compared with $133.12. Revenue from hotels for the six months to the of June 30, 2019 period was $64.46m, almost identical to the same period in 2018, for the 14 owned or leased and operated hotels, excluding five franchised and two managed hotels. 

The overall Millennium & Copthorne financial result was affected by slower section sales by the company's majority owned residential property developer CDL Investments, giving a profit after tax of $23.81m for the six months compared with $30.15m previously.

One of the biggest surges in hotel development has been in Queenstown where a $200 million complex to be developed by Graham Wilkinson has been approved for 393 rooms over seven storeys on Brecon St.

Bayleys Queenstown salesperson Stacy Coburn said 16 new hotels were on the drawing board to be built in the Lake Wakatipu area.

If all the mooted hotels came to fruition, and additional 2824 rooms would be added to Queenstown's inventory by 2025.

'Among them is another Safari Group property – the $90 million Ramada Kawerau River property which encompasses 87 hotel unites and 97 residential apartments. Construction there is on track to begin.'

Safari Group is currently seeking tenants for ground floor retail units within its 131-unit Ramada Queenstown apartment complex at 24 Frankton Rd due for completion in September. The Ramada Queenstown consists of freehold unit-titled apartment-style rooms, along with a gymnasium, and conference facilities.

Also up for grabs is a restaurant site and a retail outlet the 54-unit Ramada Remarkables complex at 24 Hawthorne Drive in Frankton, plus a foodservice premises within the 55-unit Wyndham Garden apartment complex at 32 Red Oaks Drive in Frankton.

Annual occupancy in Queenstown for the year to April 30 was 81 per cent – substantially up from the 65 per cent in 2010.