Prime Minister John Key has warned that some areas in New Zealand could "run out of space" for tourists in the high season.

Key told a Tourism Industry Aotearoa conference at Te Papa that the shortage of hotel beds in Auckland meant his own staff struggle to book rooms when they travel with him.

"We will run out of space, if we are not careful, in summer," Key, also Tourism Minister, told the audience.

"Tourism New Zealand for instance doesn't do any advertising over the summer season. It doesn't need to."


Citing government work to drive investment in new hotels, Key said the squeeze was particularly bad in Auckland.

"My staff live in Wellington. Increasingly we are finding it incredibly difficult at any time of the year to get a hotel room in Auckland. They are booked out. Some of these hotels are running pretty close to 100 per cent occupancy."

Prime Minister John Key. New Zealand Herald photograph by Mark Mitchell.
Prime Minister John Key. New Zealand Herald photograph by Mark Mitchell.

A total of 26 additional hotels, above and beyond what is already planned, will be needed over the next 10 years, across the country's tourist hotspots, a government-commission report released in May concluded.

There is a shortage of hotel rooms during high-demand periods in all the centres, particularly in summer and autumn.

International visitor arrivals, particularly from China and Australia, will be a major driver of hotel demand, with numbers forecast to grow 5.4 per cent each year.

Today, Key said record tourism numbers were also putting pressure on infrastructure, and there was no doubt more hotels needed to be built.

The Government is waiting for recommendations from a group of private sector players led by Air New Zealand.

Key has previously said funding ideas, including a tourist tax or levy, would be considered, and today said he had received an oral briefing on the report, which looked at how other countries paid for tourism infrastructure like toilet blocks and carparks.


That included charging tourists to enter national parks, or introducing taxes including on hotel beds, tourism levies or a departure tax, Key said.

"If you go to Singapore and you pay your hotel bill, it's always plus, plus, plus. You go to LA, for instance, and what you see there is there is actually a tourism levy that they put on."

Hikers at Lake Waikaremoana, one of New Zealand's great walks. Picture NZME.
Hikers at Lake Waikaremoana, one of New Zealand's great walks. Picture NZME.

On a possible departure tax, Key said it would be possible to only charge foreigners, "but there is an argument that you charge everybody".

"In reality, it's very hard to believe that small charges like a departure tax or a bed tax would have any great impact. They don't stop most people going around the world."

However, Key said it could affect how much money people spent in New Zealand, and there was an argument that the Government collected enough from tourists in the form of GST.

If new charges were introduced, the tricky part would be deciding how the money generated would be split around the regions, Key said.

The Green Party in August announced its policy for a "Taonga Levy", which would nearly double the tax foreign tourists pay at the border to fund conservation efforts and regional tourism.

Key also used his speech to announce new funding as part of the Tourism Growth Partnership, which provides up to $8 million in contestable funding each year.

About $3 million will go to a new astronomy centre at Lake Tekapo that is a joint venture between Earth & Sky and Ngai Tahu Tourism, and $475,000 will help fund a suite of luxury glass cabins, called PurePods, at remote locations around the country.