"While we would have been pleased to join Jetstar's network this year, we are continuing to focus on areas of long-term growth. For Rotorua, this means increased capacity, as well as encouraging more travellers to connect via air - rather than road - to and from Auckland, and a direct link to Queenstown.
"Jetstar have reiterated that they would like to continue discussions with us, particularly around some of the opportunities that we highlighted in our proposal."
Rotorua Chamber of Commerce chief executive Darrin Walsh said it was disappointing as there was strong support from the local business sector.
"But, to be I honest, I had a gut feeling we weren't going to get it this time around," he said.
"A lot of our proposal was based on the potential Rotorua has, but what we really need is to have these developments under way, like our five star hotels, work around our spa and wellness centres ... and airlines will well and truly be looking here."
Rotorua Mayor Steve Chadwick said nothing more could have been done to entice Jetstar to Rotorua.
"We'll continue to keep that door open. We've already been bitten once, trying to give incentives, and what we needed was a sustainable business model that benefited Rotorua, ratepayers, tourists and visitors and it had to be sustainable, not dependent on ratepayers."
Destination Rotorua general manager Oscar Nathan said they were looking at the "long game".
"We're definitely still engaging with Jetstar and Air New Zealand, and any other airline, for an improved jet service capability."
Head of Jetstar New Zealand Grant Kerr visited Rotorua in June to hear the city's business case.
"The message we heard from Rotorua was that they would welcome a jet connection to Queenstown and supported a turbo aircraft operating in the region," Mr Kerr said.
"The four regions chosen was what we saw as the best opportunity for growth and once we establish that in December we will look to add further destinations ... we are really keen to come back and have those discussions in the future."
Nancy Bowers flies from Rotorua every month to visit her husband who works in Christchurch. She said she would welcome more competition as she was spending thousands each year on flights.
"It would have meant cheaper flights. I've been doing this for seven years now and always have to keep an eye on deals."
Rotorua mother Tania Squibb said her family would also benefit if Jetstar had chosen to fly out of Rotorua. Her husband regularly flies to Christchurch and Auckland for work.
"It would have been great, my family are in the South Island, we could go visit them more often," Mrs Squibb said.
Meanwhile, a third domestic airline is looking to compete in the region.
Kiwi Regional Airlines will start flights in October between Dunedin and Queenstown and between Dunedin and Nelson and Nelson and Hamilton.
"For future routes, Kiwi is already considering how we could service Invercargill, Tauranga and Rotorua, and we will talk to those cities about developing a working relationship," chief executive Ewan Wilson said.
