Rotorua's average hotel room rates have climbed more than 7 per cent in the last year, but still lag behind the country's main tourism centres.
According to data released by Tourism Industry Aotearoa (TIA) and Colliers International on hotel occupancy rates and average room rates to the year ending March 2017, Rotorua's average nightly hotel room rate climbed 7.4 per cent to $123.92 in the past year.
But, this is still well behind room rates for Queenstown at $202 a night, Auckland at $191 a night, Wellington at $169 and Christchurch at $159.
Tourism Industry Aotearoa regional chairman for Rotorua hotels Blair Chalmers said Rotorua hotel rates had traditionally been behind the national average due mainly to oversupply of motel rooms.
"We are the only region with more motel rooms than hotel rooms, so if you are coming to Rotorua as a family the mentality of Kiwi families is it's motel over hotel, so we had always had to look at packages and those sorts of deals.
"It's what people are prepared to pay because they have so many alternatives."
Mr Chalmers said Queenstown had an advantage over most places in New Zealand in that it had a very short quiet season going from the summer high season to ski season in a matter of weeks, so there was always big demand there.
"But in the last six years we have grown quite significantly and are tracking the right way and making better gains than some other regions... and the growth for the next three to four years is looking good.
"The benefit for Rotorua is we have room for expansion, while Auckland and Queenstown don't have that much capacity," he said.
Colliers International national director of hotels Dean Humphries said New Zealand's ongoing tourism boom was continuing to drive unprecedented growth in hotel occupancy and room rates.
He said Auckland and Queenstown were leading the way and better results had been recorded in the January to March period with Queenstown reaching 90 per cent occupancy at an average daily rate of $240.
Auckland recorded occupancy of 91 per cent and an average daily rate of $225.
"Moderate to strong growth was also recorded in other regions, although occupancy rates appear to have generally plateaued in most main centres."
He said the second quarter of 2017 was also likely to be a record breaker, with strong demand anticipated.
"Auckland has been hosting the World Masters Games, which has helped to drive up occupancy rates with the 25,000 participants visiting the city.
"This will be closely followed by the upcoming British and Irish Lions Tour in June/July.
"More than 20,000 fans are expected to visit our shores during the month-long tour, which will create a spike in hotel performance, as last witnessed during the previous Lions tour in 2005 and the Rugby World Cup in 2011."
However, a number of key challenges such as site availability, protracted approval processes, lack of development funding and constraints in the construction sector still made many projects difficult to convert, he said.
Hotel room prices on the up
Occupancy rate: 79.3 per cent; up 2.6 per cent
Average daily rate: $123.92; up 7.4 per cent
Rooms: About 1900; no change
Occupancy rate: 86.6 per cent; up 2.6 per cent
Average daily rate: $191.18; up 13.3 per cent
Rooms: About 9200; up 106 rooms at two new hotels
Occupancy rate: 78.9 per cent; no change
Average daily rate: $169.48; up 5.8 per cent
Rooms: About 3500; down 98 due to partial closures after November earthquake
Occupancy rate: 75.4 per cent; down 3.5 per cent
Average daily rate: $159.69; up 3 per cent
Rooms: About 2100; up 52 rooms at one new hotel
Occupancy rate: 81.9 per cent; up 2.2 per cent
Average daily rate: $202.29; up 15 per cent
Rooms: About 3200; up 54 rooms at one new hotel
Source: Tourism Industry Aotearoa/Colliers International. To the year ending March 2017.