A hotel expert says New Zealand hoteliers need to think about trebling room rates in tourist hot spots during peak months to encourage investment in new properties.
And the industry is citing an unlikely ally - Airbnb - as a means to relieve pressure and ensure visitors aren't deterred from coming to this country.
As tourism booms, hotel occupancy in key centres, particularly in Queenstown and Auckland is running close to capacity in peak months. AccorHotels here saw room revenue up 16 per cent over summer and there is concern in the industry that visitors could be shut out.
The government, through NZ Trade and Enterprise is just about to launch a global campaign to appeal to international hotel investors.
Stephen Hamilton, director of research firm Horwath HTL, said the solution to sluggish investment in hotels was "Economics 101.''
If demand exceeded supply hoteliers need to increase their rates even more.
"The need to have five years of growth at double digit growth need to double or triple the rates paid," he said.
Room rates have been rising strongly over the last three years in Auckland, last year rates were up 12 per cent or about $17.
The leisure market had recovered in the last five years and this year more than a million extra airline seats will be available to New Zealand.
"Nobody forecast this growth of leisure demand. Hotels are full, what a great problem to have.''
There are about 32,000 hotel rooms in the country and to keep up with a forecast increase in the number of overseas visitors from three to five million within the next decade, 57,000 would be needed.
Hamilton, speaking at an Auckland Airport international travel summit in Rotorua, said sometimes the accommodation shortage in summer meant groups who wanted to stay in central city hotels in would end up in the suburbs.
"It looks as if Auckland lost some market share because of a room shortage and prices in February.''
He said Airbnb was in its early stages in this country with only a few hundred listings in Auckland but could be a solution to the shortage - to a point.
"The capacity is already there - it's just a question of tuning it on. They can be part of the solution. It can compete off peak and this would compound the problem of hotel feasibility.''
Accor Hotels is New Zealand's biggest international hotel operator, managing 32 hotels in 12 centres around the country with 11 brands including Sofitel, Novotel and Ibis and this past summer's spike in revenue took it by surprise.
Its director of sales marketing and distribution NZ and South Pacific Sonya Rossiter said this past summer had exceeded all planning
"We were quite out, particularly in Queenstown. In the first quarter of 2016 we had to explain why were so far out in our budgets.''
Rossiter said the cost of building hotels in New Zealand was prohibitive, given high land prices. Many of the proposals developers approached her company with were not viable, she said.
New Zealand was doing well from its reputation as a safe country, a relatively low dollar and was being flooded with airline capacity, meaning seats were available and prices down.
She said there had been some anecdotal reports of Airbnb taking market share off hotels in the leisure market in Europe where the home stay service was more mature. Accor was getting into one branch of that market itself, earlier this year investing in boutique high end homestay company, onefinestay.