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Queenstown's hotel shortage might be tarnishing New Zealand's reputation as a tourist destination.
A senior manager at an inbound tour company said large groups unable to book accommodation at the resort were choosing to bypass the country altogether.
The manager, who asked not to be named, said: "I believe it will dampen growth into New Zealand.''
They added: "Queenstown is short three 250-room hotels now.''
Tourism Export Council chief executive Lesley Immink called the situation a "crisis''.
"We're losing business from NZ and the South Pacific because if they can't get accommodation in Sydney, Auckland or Queenstown they can't complete their itineraries and they're actually going elsewhere.''
Ms Immink said tour group bookings were up 30% and an average group had lifted from about 30 people during the global financial crisis to 40 or 50.
Queenstown was bursting at the seams, she said, and perhaps needed this "consolidation'' of visitors.
"You can't even look after your local infrastructure development, let alone thinking about the new tourism development.''
The country was in a tourism boom.
It had three million international visitors for the first time in the year to July, she said.
Night flights would land in Queenstown this winter and the resort stood to benefit from Auckland's extra air links to Asia.
February had become a super-peak in Queenstown, as the traditional bustle of visitors from Western countries coincided with Chinese New Year.
Destination Queenstown chief executive Graham Budd said the issue of tour groups snubbing New Zealand because of Queenstown's hotel shortage was mainly about timing. Large groups often travelled in peak periods.
He said independent travellers could usually find rooms, but might baulk at prices charged this week.
Mr Budd said the resort desperately needed more four-star-plus hotel rooms.
Given the rapidly growing, year-round demand in Queenstown he "wouldn't disagree'' that 750 hotel rooms were needed immediately.
But he maintained the town was "nicely busy'' this week, with a rush of tourists in town for Chinese New Year.
Everyone he talked to - bars, restaurants, accommodation houses - had a bumper summer.
Local Hospitality NZ branch president Chris Buckley, a publican, said Queenstown had to take the good with the bad.
With more people in town there was more money spent, "which is a huge bonus for everyone''.
Two small hotel developments in Queenstown are under way, a 54-apartment Ramada Hotel at Remarkables Park and a 54-room boutique hotel in Henry St.
Swiss-Belresort Coronet Peak and Rydges Lakeland Resort have announced costly upgrades.
A large development site at the top of Shotover St, with unconsented plans for a 202-room hotel, has just hit the market.