Covid 19 coronavirus: Hotel revenue plunges by 40 per cent

Hotel occupancy is down to about 50 per cent around the country. Photo / File

Hotel room revenue across the country has plunged by more than 40 per cent, as room occupancy is half of what it was last year.

Data from New Zealand's largest and longest-running hotel benchmarking programme shows what a tourism group says is the devastating impact of the Covid-19 pandemic.

The Tourism Industry Aotearoa Hotel Data Survey became Hotel Data New Zealand (HDNZ) in 2020 and covers almost three-quarters of all hotel rooms in New Zealand.

HDNZ chief executive Chris Roberts says the data includes hotels providing border isolation services, but that has only softened the blow.

For four years leading up to 2020, average hotel occupancy had been around 80 per cent - until the Covid-19 pandemic hit and borders were closed.

"Average occupancy in 2020 barely made it to 50 per cent. The average rate for a hotel room also slipped, and these combined factors resulted in a 40 per cent fall in the average revenue per available room (RevPAR), to just $91.17."

At those revenue levels, the majority of hotels which remained open in 2020 were operating at a loss.

The plunge in income was felt across all regions and all hotel categories.

For example, 3-star hotels saw RevPAR fall from $95 in 2019 to $50 in 2020; while for 5-star hotels RevPAR declined from $214 in 2019 to $123 in 2020.

Regionally, the biggest decline was in Queenstown, where average hotel occupancy fell from 82 per cent in 2019 to 42 per cent in 2020, and RevPAR fell from $207 to $96.

Auckland was the only region in the country to maintain a RevPAR above $100, but at $103 this was down from $161 in 2019.

A group representing those in the hotel sector says plummeting hotel revenues came as no surprise – as forward bookings for December and January showed hoteliers what was coming.

Hotel Council Aotearoa says it has been repeatedly warning government ministers, politicians and agencies how "pivoting to domestic" would not, on its own, be sufficient to shore up the sector.

A lot of hotels offered a product that was geared towards international travellers. Domestic travellers had different needs, typically requiring less in the way of service add-ons and often travelling in highly seasonal patterns - weekends or school holidays only.

"It has been a fast downward spiral since Covid first hit in February. With border closures came the loss of effectively all international visitation at New Zealand's hotels," said James Doolan, Hotel Council Aotearoa's strategic director.

Whenever a hotel room is left unoccupied, or if rates are significantly discounted for the domestic market, that foregone revenue is permanently lost and cannot be recovered later.

Doolan said there was no such thing as "pent up demand" for a hotel room-night that has already passed.

Revenue was only part of the picture, he said.

Hotels are capital and labour intensive. Hotel property-related and finance costs continue to accrue, as in normal times.

While 31 hotels were operating as managed isolation and quarantine facilities, other properties were suffering.

"New Zealand's hotels are essential infrastructure playing a critical role in our tourism industry. Without international-standard hotels, New Zealand will not win our fair share of high-value overseas visitors once borders eventually reopen," said Doolan.

"Hotels have responded to Covid without any industry-specific support, but we're now almost 12 months in and the full extent of the problem remains poorly understood outside the hotel sector."

Rather than helping hotels survive until borders re-open, some local authorities were instead looking at ways to increase hotel-specific costs and taxes, which is extraordinary given the continuing operating challenges that hotels faced.