Queenstown's hotel market could reach ‘‘critical capacity status'' as soon as this coming summer, a new report says.
An independent report into the level of supply and demand for New Zealand hotels, commissioned by government and tourism bodies for "Project Palace'', suggests Queenstown will suffer the most of five focus regions.
The resort's occupancy rates are already running at record highs and only a small number of new rooms are scheduled to come on stream over the next 18 months.
Specifically, the report notes only three small hotels, providing 189 rooms, are under construction in Queenstown The four star, 54-room Ramada Hotel & Suites Queenstown at Remarkables Park opened its doors on Wednesday.
On top of the resort's 3234 rooms, as of last December, the report said a further 2100 may be required over the next 10 years.
However, taking into account eight proposed developments, and long-term trends in hotel development, it estimates only 679 more rooms will be added during this period, "which leaves a potential shortfall of up to 1421 rooms''.
It suggests annual hotel occupancy will rise from 79%, last year to an unprecedented 85% to 90% in 2025, and room nights will rise 65% from about 920,000, last year to more than 1.5million.
The combination of continued visitor growth and "a heavily constrained supply pipeline'' could result in hotel operators charging ‘‘excessive room rates during peak periods''.
The average daily rate of $168 per room, for example, could rise to $279 by 2025.
The consequences of record tariffs and occupancies could include a reluctance by hotels to upgrade or refurbish, lower-yielding segments like tour groups and air crews moving to suburban locations or nearby towns such as Cromwell and the loss of major events and business events to other cities and countries.
The report said the ability to develop more hotels was dependent on a number of constraints like financial feasibility, site availability and building costs.
"In addition ... we note there is a severe housing shortage for hotel staff in Queenstown.
"Finding ways to overcome these challenges will be a critical success factor for the hotel sector, the tourism industry and Queenstown's overall economy.''
As for ideas for increasing the "supply pipeline'', the report suggested a range of ideas.
These included a public-private partnership to open up strategic sites for hotel development, conversions of commercial buildings, expansion of hotels and more development where land prices were less expensive, such as Frankton and Fernhill.
It also predicted there would be increasing reliance on other types of short-stay accommodation, such as motels, budget stays, camper vans and the likes of Airbnb.
- Philip Chandler
