They evicted 23 of the backpackers, mostly German and French travellers, who had now moved on to other hostels around the country.
The tourists had been staying in Te Puke for a couple of months, working at local kiwifruit orchards and had been good guests until that point, she said.
A guest who woke up to the smoke and left the hostel called the couple to alert them to the incident.
"There was a horrible smell."
The full extent of the damage was not yet known.
The guests shared photos on social media and Mrs Wallace-Hutchins wondered what inspired people to brag about damage they inflicted.
"Who burns a Christmas tree days before Christmas and endangers the lives of people and brags about it?" she asked.
Te Puke firefighters were called to the fire at 2.54am but only stayed for 14 minutes.
Chief fire officer Glenn Williams said the fire was extinguished by the time the crew arrived.