Hotel shortage putting tourism at risk, says Colliers

Auckland's supply of hotel rooms is shrinking while demand continues to increase, putting New Zealand's tourism growth at risk, says commercial real estate company Colliers International.

The "looming hotel crisis" comes after New Zealand's biggest year for tourism to date in 2016, which saw 3.5 million visitors, said the company's national director of hotels Dean Humphries.

With that number forecast to increase to 4.5m by 2022, "we simply don't have enough hotel rooms in our current inventory to cope with this level of growth in the tourism sector", Humphries said.

"If immediate solutions are not found, it is unlikely we will continue to grow at current levels.

"In fact, in Auckland where rooms are in critically short supply, hotel inventory has been shrinking with a number of hotels closed for refurbishment and up to 500 serviced apartment units having been taken out of the short-stay accommodation pool and put towards alternative uses by private investors and first home buyers."

The current inventory had shrunk from 9500 rooms to about 9200 over the past two years.

Humphries said about 1300 rooms were under construction and should be in use by 2020.

However, a further 3000 rooms were needed in Auckland ensure future demand was met.

"There are a number of issues holding developers back, including high construction costs, the increasing level of difficulty in acquiring adequate development funding, challenges in securing suitable sites, and a general lack of sector experience and knowledge," Humphries said.

"In addition, the proposed 'targeted rate' proposed by Auckland mayor Phil Goff will almost certainly act as a deterrent for new developments moving forward."

Humphries said the growing presence of Airbnb may alleviate some of the supply issues in the short term.

"However, Airbnb alone will not be adequate to cater for demand over the medium to long term."