A Rotorua hotel director says he was asked if the hotel could be a managed isolation facility for returning Kiwis but declined out of concerns it would affect the hotel's image.
Director of Rotorua's Quest Hotel Glenn Tasker said he had been approached twice but declined both times.
He said he believed the situation was not good for the town and would tarnish the Quest brand and the hotel's reputation.
This view was shared by several accommodation providers and showed an "undersupply" of willing takers in the city, he said.
Tasker said he was lucky to be in a position where he did not have to take them in for financial reasons and he understood why it was the only option for some providers.
His comments came just before the Government confirmed a third Rotorua hotel would be used for managed isolation.
As of Monday the Rydges will join the Ibis and Sudima to house returning Kiwis.
Returning Kiwis must be in managed isolation for two weeks. If they test positive for Covid-19 they are moved to quarantine in another city.
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When asked how many local providers had been approached to become managed isolation facilities and how many had declined, a Covid-19 response group spokesperson said discussions with potential managed isolation facility providers were confidential. In a previous statement from the Covid-19 response team, a spokesman said they were expecting more New Zealanders to return over coming weeks and months and were planning for their arrival.
"At this point we cannot speculate on the exact number or the exact location they will isolate in but we will look to release information as it becomes available," they said.
"None of the hotels being used for quarantine or managed isolation are currently open to other guests. The Government holds exclusive use of the hotel facilities.
"The people of Rotorua have been incredibly welcoming and generous in their hospitality for returnees – including provision of gift packs, and offers of support, manaakitanga and aroha."
A Rotorua Chamber of Commerce survey in June showed 43.7 per cent of the responding business owners feared the facilities would damage the city's tourism reputation, reduce visitors, and damage businesses which relied on domestic visitors to survive over the next few months.
But 37 per cent said they would support the managed isolation in the city if they could be assured safety protocols were working effectively, and people were communicated with in advance.
The survey aimed to get a snapshot of how businesses were feeling about hotels in the city being used to isolate returning travellers.