Aviation, tourism and energy writer for the Business Herald

Global search for hotel investors

A government agency-led hunt is on for foreign capital for New Zealand hotel investment to avert an accommodation crunch that could stymie tourism growth. Photo /Mark MItchell
A government agency-led hunt is on for foreign capital for New Zealand hotel investment to avert an accommodation crunch that could stymie tourism growth. Photo /Mark MItchell

A government agency-led hunt is on for foreign capital for New Zealand hotel investment to avert an accommodation crunch that could stymie tourism growth.

The tourism boom of the past two summers is putting intense pressure on accommodation and no-vacancy signs are up in tourist hot spots at peak season.

New Zealand Trade and Enterprise is leading a global search for funds to invest in the sector, crucial to sustaining the boom in tourism which is now New Zealand's biggest export earner. Tourism operators say the squeeze is not at crisis point, but given forecast numbers of travellers, more accommodation is urgently needed.

The NZTE initiative, codenamed Project Palace, will try to sell hotel projects to investors in Asia, the Middle East, pockets of the United States and Europe.

Head of capital at the agency, Quentin Quin, said staff around the world would target a slice of an estimated US$73 trillion ($105 trillion) investment capital.

It was working with the Tourism Industry Association, MBIE and Tourism New Zealand.

"We realise there's a significant constraint right across the nation not only for foreign tourists but also domestic travellers," he said.

"We've got major constraints in Queenstown, Christchurch, Rotorua, Auckland and we have had Wellington on that list as well, although the forecasts for future builds suggests the constraint will be unlocked."

Half of NZTE's 40-strong capital team are based in six regions around the world and from the middle of this year they would be taking hotel projects to potential investors, including sovereign wealth funds, institutional investors, property developers, hotel companies and hotel managers.

Quin said staff in this country were working with local bodies and regulators to ensure proposals were "shovel ready" before being promoted around the world.

"You can take it to investors offshore and tell them 'this is what it looks like and this is what the project needs. Here's the financial model, here's the future, here's the forecasts'."

Hotels could cost up to $200 million to build.

He said Project Palace was aimed at capitalising on already "significant interest" in the New Zealand hotel sector. "From a government perspective, we're in quite a unique position - nothing is going to get done by sitting still."

Tourism Industry Association chief executive Chris Roberts said the past two years of strong tourism growth had put pressure on.

"We're not full but that doesn't mean that in a particular week or location you might not be struggling to find a bed where you want to stay."

Hotel prices here jumped by 6 per cent in the past year, well ahead of average prices around the world, research from Hotels.com showed.

The latest hotel price index from Hotels.com shows the average price paid for a hotel room in New Zealand climbed to $173 a night in 2015, compared with $163 in 2014.

The growth in domestic hotel prices comes on the back of a record-breaking year for international visitors to New Zealand. In the year to the end of January 3.17 million visitors came here, up 10.7 per cent on the previous year.

A TIA hotel sector survey of three to five star hotels showed in March average occupancy was 88 per cent across the country and over 90 per cent in Auckland and Queenstown.

Roberts said a year-round occupancy of 80 per cent is seen as a "sweet spot" for a hotel to reach, to generate good returns and allow for reinvestment and improvements.

- NZ Herald

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