Commercial accommodation providers will take their fight against Auckland City's proposed targeted rate to the council tomorrow, claiming new hotel projects are at risk because of it.

But Auckland's mayor Phil Goff said today he's seen no evidence of any hotel developments in danger of being canned, rather there had been several new ones just announced.

Goff wants to raise nearly $27.8 million a year from the accommodation sector in the city to help pay for promoting tourism and major events in the city.

''I absolutely expect the industry to come out with this sort of statements. The fact is they don't want to pay an extra targeted rate - I understand that.''


At present ratepayers cover that cost and Goff says money the council is saving would be better spent on infrastructure projects such as roads that tourists and tourist operators benefit from.

He said the impact of the rate amounted to between $6 to $10 per guest a night and the accommodation sector had been big beneficiaries of the tourism boom.

''Overwhelmingly, outside the industry, people have said to me 'fair enough - they get the benefit they should meet the cost'.''

He said it was not equitable for ratepayers to pay to promote tourism. Costs could be passed on to consumers.

But CP Group, the largest hotel owner and developer in the country, says that four new hotels totalling 600 new hotel rooms in Auckland were at risk of not proceeding if the rates increase was implemented.

The company says this would mean over 600 full-time, part-time and casual jobs and over $200 million in the building industries will be lost to the Auckland economy during the next two years.

The rate has an immediate impact on both the underlying value of existing accommodation assets and the feasibility of new projects.

Other accommodation and tourism groups are furious at the plan which they say unfairly targets them at a time when the Government is trying to encourage new hotel investment through a Ministry of Business Innovation and Employment push.

Tourism Minister Paula Bennett has said the Government was not in favour of the rate but those decisions were for Auckland Council to make.


Tourism Industry Aotearoa chief executive Chris Roberts is first up at the hearing before the council's finance and performance committee tomorrow.

He said of a total annual visitor spend in Auckland of $7.5 billion, just 9.3 per cent ($697m) is spent on commercial accommodation, according to MBIE figures he cited.

Accommodation providers were being asked to pay all of the cost of promotion agency Auckland of Auckland Tourism, Events and Economic Development but would only get 9 per cent of any benefits. Rates would go up an average of 150 per cent for providers.

"The rate has an immediate impact on both the underlying value of existing accommodation assets and the feasibility of new projects. Developers are already reviewing their plans. If it goes ahead, this rate will be a major deterrent to much needed new hotel development in Auckland," he said.

CP's director of hotel operations Terry Ngan has more than 30 years' experience in the Auckland hotel industry, said hotels were already charging the maximum room rates possible and a further increase to pass on the rates increase was not possible.

He said occupancies in Auckland hotels and room rates had peaked, and during the past three months slipped to below the previous year, with average room rates not increasing as budgeted.

Auckland hotels had enjoyed strong increases in annual room rates and profitability in the past two and a half years, totalling 30 per cent, but this had been after six years of zero or low growth.

Ngan said Lincoln University research showed return on investment of hotels averaged 4 per cent a year.The head of another major hotel group, Udai Sarin, said one 110-room project his firm had been working on with a developer was in danger of being canned because of the "political risk".

He said banks were already nervous about funding hotel developments and the rate would make this worse. If it was imposed in Auckland, other councils around the country could do the same.

"If hotels were that profitable everybody would be doing it," said Sarin.

Goff said the council is targeting accommodation providers as guests were overwhelmingly from outside the city.

The council was not proposing to charge other businesses that benefit, such as restaurants, cafes and taxis, because most of their customers were Auckland residents.

''I'm not setting out to punish the (accommodation) industry, I'm simply saying you've got to pay your fair share.''