What a month it’s been for hotels. In the last month, the Herald has covered a number of new hotel announcements – an Indigo Hotel on Albert St, a Sudima Group hotel by the International Convention Centre, a TFE Hotels operation in Britomart, an Accor hotel at 500 Queen St and, out in Karaka, a Hilton one.
That’s just in Auckland, but the Herald also reported on a not-yet-named hotel in Whangarei, and Sudima also announced another hotel in Kaikoura in June. There’s also plenty going on in Queenstown. All these and more are shown on the RCG Development Tracker page.
As Aucklanders, we’ll probably never stay in most of these Auckland hotels, and it might seem like it’s not worth caring about. However, tourism is a big thing in our economy, and it affects us all to some extent!
Although these hotels were all “announced”, or at least reported on, in a short space of time, they’re at quite different stages of the development process. Some of them have resource consent approved, and some don’t. All the hotels above have operators signed up, but there will also be other planned hotels that don’t. Some of the hotels above are starting construction straight away (such as the Britomart hotel) whereas others are probably at least a year away.
And some of these hotels might not get built at all, with the plans just quietly falling off the radar instead. That’s okay, and that’s what I’d expect to see. Not all developments proceed! But it’s good that lots of hotels have been announced, because it’s likely that a fair few of them will proceed.
Why were so many hotels announced in a month? Partly because one announcement led to another, and then the Herald went looking for more planned hotels to report on. But it’s really a reflection of hotel economics, and operator confidence, and the market shifting so that hotels look more attractive to developers than apartments do.
I’ve written a few posts on tourism in the past. The short version is that (international) tourism in NZ grew really strongly from 1998-2002, and more steadily through to 2007. Then the GFC hit, and tourism stayed pretty depressed through to 2013. Tourism spending then boomed from 2014 through to the present day. Today, tourism is still very strong, with a positive outlook, and the main bottleneck is a shortage of hotels.
We all know that holidays get really expensive in peak times – airfares and hotel prices shoot way up. That’s a case of volatile “demand” colliding with fixed “supply”. Developers will only build new hotels when there’s a healthy demand outlook, and the hotels can expect to charge high prices (on average) throughout the year, and over the long term. They’ve been burned before; after the GFC, hotels had to drop their prices, and the industry was arguably oversupplied for quite a few years.
Since 2016, Auckland has been starting to add more hotel rooms again, albeit pretty slowly.
That’s a reflection of demand being much higher, and hotels being able to charge higher prices as a result. All of a sudden, Auckland hit the point where it was feasible to develop new hotels again, and that’s what we’ve seen.
In addition to the new announcements above, there are various hotels under construction already – in Wynyard Quarter, by the International Convention Centre, the Sofitel So on Customs St (which will finally open in October), and the Four Points By Sheraton on Queen St (which is already open).