Auckland, 6 July 2014 –Improving market conditions are laying the foundation for a new wave of investor interest in the New Zealand hotel sector according to a new report from CBRE Hotels.
Issued to coincide with this week’s NZ Hotel Industry Conference, CBRE’s Q1 Hotel Dynamics report highlights significant hotel revenue growth in Auckland and Wellington of 7.9% and 4.6% respectively over the past 12 months.
Authored by CBRE Hotels’ newly appointed New Zealand Hotels Valuation Director Peter Hamilton, the report shows that relatively low supply increases combined with an improving economy and increased visitor arrivals, have put upward pressure on national hotel room rates. This is also driving strong growth in RevPAR (a key measure relating to revenue per available room).
“National occupancy levels have improved since the bottom of the cycle and average daily room rates have now surpassed the previous peak in 2008,” Mr Hamilton said.
As at March 2014, the national average daily room rate (ADR) in New Zealand was $141.27, relative to the 2008 peak of $138.42. Occupancy levels increased 2.3 percentage points over the 12 months to March to reach 73.2%.
Ken Smith, Pacific Regional Director for CBRE Hotels, said the report also highlighted a number of key trends in individual markets such as Christchurch and Queenstown.
“In Christchurch, tourist numbers have recovered, with tourism once again the dominant source of room demand following a sharp decline immediately after the 2011 earthquake,” Mr Smith said.
“Following the earthquake, hotel room supply is currently 41% of the pre-earthquake levels and the resulting room shortage led to a dramatic increase in occupancies, room rates and hotel revenue. New hotel construction and the re-opening of damaged properties have led to a 7% drop in occupancy levels over the past 12 months. However, the average occupancy is still above the national average at 75% and average daily room rates are continuing to grow, albeit at a slower rate.”
The report also highlights that strong inbound tourism from Australian and growing numbers of Chinese tourists have helped to support growth in the Queenstown market. Combined these two groups represent one in three visitors to Queenstown, New Zealand’s premier tourist destination.
“Occupancies and room rates have each improved with RevPAR growing at 7% over the past year,” Mr Smith said.
“While we are a long way short of the peak occupancy rate of over 75% a decade ago, the new hotel stock in Queenstown lays a fantastic foundation for market growth. Other drivers will be the increase in airline seat capacity that will accommodate 80,000 additional international visitors over the next 12 months as will the possible development of a convention centre, which would drive demand outside of the busy summer and ski season peaks.”
CBRE Hotels Senior Director Wayne Bunz said the stronger overall fundamentals in the New Zealand market, as highlighted in the Dynamics report, were also driving increased investor interest, particularly from Asian-based buyers.
“The improving economy, increased visitation, attractive investment yields and limited new hotel stock have made this market particularly attractive to Asian investors who have been increasingly active in Australian market over the past two years and are now broadening their focus,” Mr Bunz said.
“We attended 18 meetings in Asia last month and for the first time we had several groups seeking out New Zealand opportunities.”
Mr Bunz said international investors, mostly Asian based, had tipped over $3 billion into existing Australian hotel property in recent years. In the first half of 2014, CBRE Hotels had transacted circa $300 million in hotel sales, including the Park Hyatt Melbourne, Hotel 1888 in Sydney and Oaks on Lonsdale in Melbourne, all three of which were acquired by Asian buyers.
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