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News release

Auckland

New Zealand hotel investment has strong outlook

Robust trading drives increased investor interest


​The New Zealand hotels market had a strong 2014 with active interest from overseas buyers combined with most major city hotels experiencing an increase in occupancy, revenue per available room (RevPAR) growth combined with improved Average Daily Rate (ADR).

Auckland, Queenstown and Wellington have all experienced growth in hotel occupancy, RevPAR and ADR in recent times.

This has led to increase overseas buyer awareness in recent months with approximately $NZ90 million of hotels sold with the Chateau on the Park (sold for $NZ35 million) and the Hotel Grand Chancellor ($NZ23.3 million) the two biggest deals completed.

"Last year we saw strong interest from Asian buyers in the New Zealand Hotel market and that has continued in the early part of 2015," Stephen Doyle, Executive Vice President – Strategic Advisory JLL's Hotels & Hospitality Group, said.

"For the remainder of this year we expect only a few buyers to be actively marketing their properties, and as a result of that, we believe that targeted approaches will be directly made from interested parties."

A strong New Zealand dollar did not deter international or domestic travel in 2014 with Auckland hotels experiencing record occupancy levels of 82.2%, the highest levels in 15 years.

"The ADR also improved by 5.1% to $NZ147 resulting in RevPAR growth of 9.7% to $NZ121," Mr Doyle said.

"There has been limited new supply on the market and in the last five years Auckland hotels have experienced RevPAR growth of 5.3% per annum. Occupancy has risen by more than 10% during the same time period.

"We expect a solid start for both RevPAR and ADR in Auckland hotels due to 2015 due to New Zealand co-hosting the Cricket World Cup and maybe a boost in the middle of the year with the FIFA U-20 World Cup being hosted here."

Queenstown was another city to experience increased occupancy levels rising from 66.6% to 73.4% over a 12-month period while ADR grew 3.4% to $NZ149 resulting in strong RevPAR growth of 13.9% to $NZ110.

"With a more positive domestic and international economic outlook emerging, coupled with no new hotel room supply since 2011 and limited additional supply forecast in the short to medium term, the Queenstown market is in a growth phase as demonstrated by average annual RevPAR growth of 10.4% recorded between 2012 and 2014," Mr Doyle said.

Occupancy in Wellington hotels rose from 70% in 2010 to 75% in 2014, while 2014 occupancy levels in Wellington only marginally improved to 74.6%, ADR grew by 3.1% to $NZ148 resulting in RevPAR growth of 3.8% to $NZ110.  

"Assuming the sound demand fundamentals continue, together with the manageable levels of forecast new hotel room supply, Wellington accommodation market is expected to remain relatively steady in the range of between low to mid-70% level in 2015, together with modest ADR growth," Mr Doyle said.

While hotels in Christchurch has recorded lower occupancy levels in 2014, declining to 73% along with ADR easing by 2%, this trend is not expected to continue.

"The decline in overall trading performance was less severe than anticipated given the extent of new room supply entering the market in 2014, and in particular, room supply that was introduced to the market during the second half of 2013," Mr Doyle said.

"In the short term, we expect occupancy levels and ADR's to continue to ease in the Christchurch hotel market as the market continues to absorb unprecedented levels of new supply.  We expect Christchurch occupancy to return to pre-Canterbury earthquake long-term trend levels, over the next five years."

With the New Zealand Prime Minister also the Minister for Tourism, the international and domestic tourism push will continue and combined with hosting international sporting tournaments, there is no reason to believe that 2015 won't be a solid year for the hotel industry.