Boom time for backpackers

By ANNE GIBSON Property editor

When Campbell Shepherd is asked about the idea of opening a new backpacker lodge, he tells people the horror stories first.

Like the one about the Dutch guy who was staying in an Auckland hostel, met a couple of kiwi mates in town, brought them back to his room and together they decided to have a few laughs.

They cut the security netting from around the top of the seventh floor and threw a keg of beer off the side into the lane below.

Then there's the German chap who decided to commit suicide in one of the rooms by slashing his wrists.

Or perhaps the story of the pranksters who opened the riser main at the top of the stairs, pumping water into the lift shaft and causing thousands of dollars worth of damage.

"These are the sort of people we're dealing with - it's a big game to rip you off, " says Mr Shepherd.

"We're dealing with guests who will haggle over 50 cents or $1 off the room price, but will then go and spend $200 on a bungy jump."

Despite the problems of running a lodge, the backpacker business is booming, with a 15 per cent increase in visitor numbers for the 12 months to September last year. Backpackers spend $672 million a year, Tourism New Zealand says. New Zealand had 350 backpacker hostels in 1999. Now we have 440. Much of the growth in has been in Auckland, which has about 25 hostels.

Force Corporation sold its St James picture theatre complex on Queen St last month for $8.5 million. The complex, which includes the Odeon, Westend and Regent theatres, has a three-level office block above it - ideal for a backpackers' hostel.

This week, Auckland Central Backpackers said it had paid $7.4 million for 229 Queen St, an 11-storey office block which it will convert into a 500-bed backpacker hostel, with the option of a further 400 beds. It also leased a floor in The Strand Arcade as its main communal areas.

The Fort St/Shortland St area of downtown Auckland has given rise to backpacker lodges, as guests pay as little as $16 a night to bed down in a central-city location.

Backpackers who once stayed in Parnell or Ponsonby are now opting for a downtown bed, Mr Shepherd says, adding that location is the key to success.

Mr Shepherd was invited to address the Property Council's investment seminar in Auckland last week . His speech, entitled Kick Back and Watch the Growth - Leisure Investments, outlined trends in the burgeoning budget accommodation industry.

Mr Shepherd is managing director of Auckland Central Backpackers, which has lodges in Fort St in the city, Rotorua and Paihia. It leases floors above De Bretts Hotel in Auckland and has an interest in a Great Barrier Island hostel.

Property investors see the backpacker business as an attractive new market for older central-city office blocks.

But Mr Shepherd warned the Property Council seminar about the expense of converting office buildings, saying that any change in use brings with it the need to upgrade earthquake and fire safety standards, and get resource consent from the council for the building's conversion and operation.

The pioneer of the business was the Youth Hostel Association, which has 4500 hostels in 60 countries, including 57 in New Zealand. YHA plans to expand its Auckland and Wellington hostels, having notched up 500,000 bed nights in the past 12 months.

Australia gets 450,000 backpackers a year. We get 193,000, Mr Shepherd says.

Tourism Board figures showed that in 1997/98, New Zealand had 162,000 backpackers, rising to 165,000 in 1998/99 and 169,000 in 1999/2000.

For 2000/2001, the figure jumped to 193,000. The rise is partly attributed to the tourism boom generated by the Sydney Olympic Games.

The main motivation for backpackers to come here is a verbal recommendation from a friend or family, followed by the lure of New Zealand images.

In the 1970s, backpackers had to respect curfews, sleep in spartan single-sex bunk rooms and do the morning chores before leaving.

Avoiding the term "hostel" with its slightly negative connotations, Mr Shepherd prefers to refer to the backpacker business.

The industry really took off in New Zealand between 1991 and 1995 "when annual growth rates were over 20 per cent a year, between 5 and 8 per cent higher than the overall growth in tourism arrivals".

Saving money on food, transport and accommodation is a backpacker's aim, opting to spend instead on leisure pursuits - tandem sky diving, bungy jumping and nature walking.

Ten years ago, Auckland Central Backpackers was selling beds for $5 a night and offering a free breakfast and airport transfer. Now, rates have risen to between $15 and $18 a night.

"Every time a new premises comes on the market, they drop the price and use that to generate volume," Mr Shepherd says.

The tactic forced other operators to drop their prices to keep them in line.

Three-quarters of the backpackers staying at New Zealand lodges have tertiary qualifications and although the business is dominated by young people, guests span all age groups. Mr Shepherd's oldest guest was in his 80s.

Half the international backpackers staying at New Zealand lodges come from Britain or Ireland. Holland, Denmark, Sweden, Canada, Germany and the United States all generate between 3 and 5 per cent of our clientele, with New Zealanders making up 10 per cent of all guests.

Projections are for the backpacker market to grow 5 per cent a year.

About 95 per cent of lodges here are run by owner/operators. Mr Shepherd is often asked about the viability of the business and tells people that the industry is a "24/7" business, likely to place strain on the owner/operator.

He notes the trend for hostels to provide double rooms. "Did you know that 83 per cent of backpackers have a sexual encounter on their travels? So if you want to spice up your sex life, go backpacking!"

Keypoints:


The backpacker business is booming.

Numbers increased 15 per cent in the year to September.

* More central-city office blocks are being converted into hostels.

* Backpackers pay as little as $16 a night to stay on Queen St.

* Most come here from Britain and Ireland.

Links:


Auckland Central Backpackers

YHA New Zealand