A Wairoa motelier alleges a group of short-term guests at his lodge were "poached" by the chief executive of a contracting company they worked with, who offered cheaper rates at a private accommodation house.
Vista Motor Lodge owner Peter Nash said the contract workers staying at the lodge were in Wairoa working on the redevelopment of the town's medical centre, a project headed by Alexander Construction.
He said they were approached by Leigh Aitken, the chief executive of Quality Roading and Services (QRS), a Wairoa District Council controlled trading organisation, set up for civil construction, infrastructure and roading work.
"The CEO of QRS was over here one night talking to the workers and then the next morning the construction guys came in and said it was their last night because they had been offered a house to stay in, which was the CEO's."
Mr Nash said moteliers had to pay commercial rates whereas many bed and breakfast accommodation outlets operated privately did not, although both provided the same type of service.
"I just want a level playing field. If people are going to offer houses for short-term accommodation, they should be paying rates like I am."
Mr Nash is also vice-president of the Motel Association of New Zealand, which released a strong-worded statement criticising the 14 per cent rate increase Vista Motor Lodge had to pay to the Wairoa council.
"The Vista Motor Lodge now has an annual rates bill of $36,450, on a per unit basis this is about twice the national average," the association chief executive Michael Baines said.
"There's no way it can try and compete with someone offering a residential house with a fraction of the rates cost."
Mr Aitken said he and his wife built a new home on a lifestyle property in Wairoa and decided to offer their first home as a rental property.
"This residence has seen three residents since April 2011 and was never set up to compete with commercial (accommodation) operations in Wairoa."
Mr Aitken said contractors staying at the Vista told him they were finding it difficult to sleep because of the traffic noise from the neighbouring state highway.
"One of the workers approached me and asked if my house was available. I didn't poach any guests from the Vista, that's important to get that clear, they approached me."
Wairoa Mayor Les Probert said the association's criticism of the council and Mr Aitken was "appalling".
"Mr Aitken is a private individual who owns a house which he rents out and has got nothing to do with the way the council operates. I own a house in Napier and if I rented it out that would be my business."
Mr Probert confirmed Mr Nash had approached the council a few times to complain about the high level of rates.
"The council has responded and done what we can with the costs to his water and sewerage services at this stage.
"We are in the middle of a budget year and any other alterations can't be done until the next budget year."
Mr Probert recognised there were many people offering holiday homes for rent and the council would take a closer look at whether commercial rates should apply.