As New Zealand reopens to international travellers, Colliers National Director, Hotels – New Zealand and South Pacific, Dean Humphries, shares an insight into real estate activity across the Tasman.
The New Zealand Hotel sector continued its strong demand-led recovery in Q2 with a particular emphasis on higher volumes of international and corporate travellers. One of the main talking points has been the exceptionally strong room rates being achieved right across the country despite occupancy rates still being in a recovery phase.
Average room rates for all main centres for the month of June 2022 were all above the same period in 2019, pre COVID. The main mover was Rotorua at $191.83, up a staggering 60.4% followed by Wellington +19.2% and Christchurch +15%.
On the flip side of the equation the investment market has been impacted with a fresh set of headwinds in the form of increasing cost of capital and high inflation.
Despite a number of hotels being offered to the market and robust levels of international and domestic enquiry, many investors are taking a more reflective approach whilst they reassess their own internal return requirements and review the current global investment environment.
The good news is that investors typically pivot toward tangible assets in times of high inflation, so revenue and profitability can be protected. This is particularly relevant with hotel assets that have the ability to quickly pass through higher costs, and protect profits and investment returns, as we have recently seen with increased room rates right across the country.
We remain hopeful we will see more investment activity in H2 2022 as inflationary pressure starts to ease and the short/medium term cost of capital stabilises.
In summary, the New Zealand hotel sector is now on a clear recovery path with forward bookings for the forthcoming peak season (Q4 2022/Q1 2023) looking exceptionally strong.