Hotel developers rush to Queenstown

Last year hotel developers were racing to get projects off the ground in Auckland. If the first quarter of this year is anything to go by, the race is now on to build hotels in Queenstown.

According to the Queenstown Lakes District Council, more than 3000 hotel rooms were either under construction, consented or in the consenting process by the end of 2018.

In the first months of 2019, there have already been a string of projects either revealed or given the green light.

Auckland developer Tony Gapes filed resource consent applications for two seven-storey hotel buildings on Gorge Road adding 400 rooms to Queenstown's construction pipeline.

A five-star 130-room hotel developed by Singapore-based Well Smart Investment Holding was granted resource consent despite objections from other hotels in the area.

Brecon Street Partnership also submitted resource consents for a 468-room development across four buildings. The council had issues with what would have become the town’s biggest hotel, reaching up to 27.7 metres tall, so Brecon Street Partnership has reapplied for resource consent, submissions for which closed on 4 April.

Now, most recently, Chinese-owned Qianlong Farms has lodged resource consent for a 182-room hotel in Remarkables Park.

What’s drawing these developers in?

Last year, hotel developers had been drawn to the Auckland CBD at an unprecedented rate.

“Performance metrics are exceptionally strong and look set to stay this way especially as the central city plays host to a growing list of major international events over the next few years including the America’s Cup and the APEC summit, both in 2021,” said Bayleys Real Estate.

The rush to develop in Queenstown is similar, in that the town has seen a surge of visitors in the last decade. However, unlike in Auckland, Queenstown attracts guests all across the year. While December and January are the region’s busiest months, July, August and September also draw in a lot of visitors, particularly domestic guests.

Most importantly, guest night are continuing to rise in Queenstown. For the year ended January 2019, guest nights in Queenstown rose 3.1 percent year-on-year, totalling 3,691,388. International guest nights rose 2.3 percent, and domestic guest nights increased by a dramatic 5.1 percent.

Occupancy rates peaked in 2017, reaching 79.5 percent, almost 10 percent higher than the national average that year.

While the overall occupancy rate has since fallen from 71.2 percent to 69.3 percent by January 2019, this can be attributed to the accommodation supply growing by 4.4 percent in 2018.

However, while the average major hotel in New Zealand increased its ADR by 9.2 percent in 2018, Queenstown's ADR by increased 15.7 percent. By February 2018, Queenstown had firmly become the town with New Zealand’s most expensive hotel rooms, with an average daily room rate of $225.

As far back as 2016, New Zealand Trade & Enterprise reported on a critical shortage in hotel rooms in the Queenstown area. At the time Queenstown was regularly having months with occupancy rates over 80 percent which led to an 11 percent average daily rate growth that year.

The accommodation shortage got so bad in 2018 that tourism companies began purchasing residential rental properties for their workers to live.

With rising visitor numbers, an impressively high average daily room rate and an accommodation undersupply there is no surprise that developers are rushing to the region.