The squeeze on accommodation in tourist hotspots is getting tighter, causing critical constraints in some centres.

An analysis of the hotel sector finds unprecedented demand for rooms in Auckland and warns that chances of finding one will get even tougher next year when major events come to the city.

One sector leader says New Zealand risks losing visitors if hotels are not built urgently.

In Queenstown fewer than a third of the required rooms will be built over the next 10 years.


Throughout the country an extra 26 hotels are needed over the next decade to cope with the visitor boom driven by New Zealand's growing international appeal and the proliferation of air services.

New Zealand Trade and Enterprise has in place a programme,"Project Palace", to try to lure overseas and domestic investment in hotels and commissioned the research to quantify the extent of hotel supply problems.

The research focused on Auckland, Rotorua, Wellington, Christchurch and Queenstown and shows that, if demand and supply estimates are borne out, the shortfall in new hotel rooms is expected to be up to 4526 across these centres by 2025, over and above new hotels currently planned.

Margins in hotels have been notoriously tight in New Zealand and low occupancy during off-peak times of the year, the sector's vulnerability to travel slumps and high development costs have deterred investment here over the past decade.

The report finds the ability to deliver new hotels is heavily dependent on managing a number of constraints, including financial feasibility, site availability, resource and building costs, finance and timing delays.

Lesley Immink, the chief executive of the Tourism Export Council, said the report validated what inbound tour operators had been saying for the past few years.

Lesley Immink, chief executive of the Tourism Export Council. Photo / Supplied
Lesley Immink, chief executive of the Tourism Export Council. Photo / Supplied

"Inbound tour operators have been experiencing unprecedented demand for accommodation throughout New Zealand and additional hotels are needed as quickly as possible to help alleviate the pressure from international travel sellers and consumers wishing to travel to New Zealand," Immink said.

"Most itinerary requests include Auckland and Queenstown so this is where some urgency is required so that full itineraries can be completed to ensure the business is not lost to other country destinations."


High occupancy rates are leading to significant price rises already with average daily rates up 9 per cent across the five focus regions from $140 in 2014 to $152 last year.

Within the next nine years average rates will increase in Auckland from $153 to $220 and in Queenstown from $168 to $278.

With no new supply forecast in Auckland over the next 18 months the sector would reach "critical constraint status" with events such as the World Masters Games in April, the Lions rugby tour in June-July and the Rugby League World Cup in November.

Economic Development Minister Steven Joyce said it was the first time data on the effect that the tourism growth projections would have on hotel occupancy had been quantified.

NZTE, Tourism NZ and the Ministry of Business, Innovation and Employment are working with local government and the private sector to identify sites for more hotels in each of the five locations studied and to pave the way for attracting new investment in hotel development.

NZTE will be using the research as the basis for a prospectus that outlines the business case for investment in New Zealand hotels to domestic and international investors.


The report also notes that Airbnb will have only a limited impact on hotels in the short to medium term and at the moment is absorbing some of the latent demand hotels can't accommodate during peak periods.