The future of New Zealand’s hotel industry is promising but the opportunity for a tourism rebound relies on a successful vaccine rollout and a corresponding loosening of border restrictions, speakers found at the New Zealand Hotel Investment Forum this month hosted by Andrew Monteith, Partner at MinterEllisonRuddWatts, JLL New Zealand Hotels & Hospitality Group Director Nick Thompson.

Andrew Monteith, Partner at MinterEllisonRuddWatts, says the recent news of New Zealand’s plans to review the current border restrictions and MIQ requirements in Q1 2022 is encouraging news for a battered hotel sector.

“A strong message from the industry participants at the Forum was that prioritising vaccination of our general population is critical as, simply put, there is no Plan B for New Zealand,” says Monteith.

“The pandemic and closed borders has had a devastating impact on New Zealand’s hotel sector. The rise in domestic tourism has been fantastic to see, but that alone won’t be enough to support New Zealand’s hotel sector for much longer. Hotels are expensive infrastructure assets with substantial overheads including a large workforce with a diverse range of skills.

“The Forum participants recognise that vaccination requirements, testing regimes and managed isolation requirements will be a feature of travel for a long time to come.  However, recalibrating our border controls to enable safe international travel while managing the general health risk to the population is crucial now to support our starved tourism economy.  The Hotel sector is looking forward to working more closely with Government and local authorities to assist in the success of the proposed changes.”

Data collected by the Ministry of Business, Innovation and Employment shows 11 percent of New Zealand’s tourism accommodation was either closed or had no guests in June.

Despite this, JLL New Zealand Hotels & Hospitality Group Director Nick Thompson says the market for hotels has remained active with investors holding long-term investment objectives in the knowledge there are always cycles in the market.

“We’ve seen multiple transactions across all value ranges with high-net-worth individuals prevailing in the lower end while international private equity firms dominate the upper end. Lenders are saying they are well and truly open for business for the right deals,” says Thompson.

“There is effectively a bottomless pit of capital knocking on New Zealand’s door looking for a new home, which to date hasn’t been able to get in. The biggest issue of getting this capital into New Zealand is that the existing stock remains tightly held among long-term investors. The future is looking positive, we just need to ensure the industry is able to collaborate with Government.”

Thompson says while the current environment remains challenging for hotel operators, the long-term picture is looking positive but depends heavily on collaboration with Government.

“The hotel industry relies on people coming from overseas. These are people who have no say in local or national elections, which means the concerns of New Zealand’s hotel sector are often overlooked when it comes to proposed rate hikes and levies notwithstanding the current economic and operating environments faced by the sector,” says Thompson.

“Further Government regulation has the potential to put the future of New Zealand hotels in jeopardy, but now that we do have a plan for gradually opening the borders in place, the hotel industry must keep open lines of communication with Government to ensure further decisions affecting the hotel sector are based on a clear understanding of its challenges and capability to assist.”

JLL and MinterEllisonRuddWatts together hosted the New Zealand Hotel Investment Forum on Thursday.

Panels of front-line experts discussed key issues and opportunities for 2021 and beyond, as well as strategies to successfully navigate the current hotel environment.

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