New Zealand’s relatively small hotel and accommodation inventory are under severe pressure after an unprecedented tourism boom according to Dean Humphries, national director of Colliers International’s Hotels division.

“The massive increase in international tourists over the last three years, a 26 percent increase or nearly 700,000 additional visitors per annum, has caught many in the industry by surprise leading to a critical shortage of hotel rooms in some of New Zealand’s key tourism destinations,” said Humphries.

“It would appear we simply don’t have the resources to build hotels at an adequate pace to satisfy the growing demand, and this is leaving the tourism industry in a precarious position.”

Nick Thompson, director of Colliers International’s newly created Tourism and Leisure division specialising in accommodation assets of under 80 rooms, said the major shortage across the accommodation sector is expected to reach peak levels with the onset of three major sporting events in NZ next year.

The shortage of rooms is most noticeable in Auckland and Queenstown, which will likely see their existing hotel inventory run at close to maximum occupancy during the upcoming summer period.

“It’s getting harder and harder to find appropriate sites to develop new hotels, and the cost of building them is rising rapidly on the back of an increasingly constrained building industry,” said Humphries.

High quality hotel building costs have escalated beyond $6,000/sqm and along with high land values, and design/consent fees, the feasibility of new hotel developments is very marginal right now.

Solutions need to be found and Humphries has suggested encouraging tourists to travel to regions that do have accommodation capacity or considering alternative building solutions such as modular or prefabricated construction techniques, something that has been adopted in Asia and Europe.