The resort was missing out on valuable tourism dollars because it did not have a convention centre, he told guests at a National Party breakfast co-hosted by the Queenstown Chamber of Commerce at the Hilton Queenstown.
Mr Key, who is also Tourism Minister, was in the resort for last night's opening of the Queenstown Winter Festival. The resort should look to Auckland for inspiration.
"You need something down here - you've got a lot of people that would come here.
"They want an excuse to come here and, unless they can run a convention, you're not going to [bring] them into town.
"You need to give them a reason - that's why the convention market is important."
Mr Key used the example of the controversial large-scale convention centre proposed for Auckland, at no cost to taxpayers or ratepayers. SkyCity Casino could spend $350 million building the $3500-seat centre.
In exchange, the company has asked the Government to consider changing laws covering its licence so it can have more gaming tables and poker machines at its casino.
When asked about the issue yesterday, Queenstown Lakes Mayor Vanessa van Uden said the community was "ideally placed" to consider it, with the council's long-term plan due to be completed by July 1 next year.
The lack of a large-scale conference centre was highlighted when the resort last month hosted Trenz, the country's major tourism conference. The four-day event brought together about 540 New Zealand tourism operators and international travel and tourism buyers.
It was held at the Queenstown Events Centre, where a marquee was erected over the car park to provide extra room, as there were no venues large enough.
"I don't think it comes as a surprise to anyone that we need to have something that meets that market. We are reasonably limited there," Ms van Uden said.
The draft master plan for Pokapu Kawarau Remarkables Centre, made public in May 2006, initially proposed building on both sides of Ballarat St, between Stanley and Henry Sts.
While there was an outcry at the cost, the argument was not about whether one was needed: "We need to be a bit wiser about it. We're at the point where something that we're looking to the community to fund with debt ... is not the only option," she said.
"I don't think we need the size of what Auckland is proposing, but we've got a whole market here - business customers are good people to have visiting us.
"We need to seriously consider what we need to do ... but with a mind that's open to all sorts of options," Ms van Uden said.
The council would need to look at the "most appropriate options" - for example, if it was an arts centre and convention centre, or just a convention centre, where it could be located, whether the time was right and how to do it "without making a working party ... and causing a palaver".
"I think what we need to do is make sure we're in the position not to miss the opportunity with the long-term plan.
"One way or another, we need to ... have that discussion."
