Tourism

Pink and blue skies light up a beach at sunset

Tourism is a leading export earner and driver of economic growth for New Zealand, directly contributing $12.9 billion or 5.6 percent of New Zealand’s GDP. 

New Zealand’s Tourism sector is currently in the midst of its strongest ever growth cycle, with several consecutive years of arrival growth and international visitor arrivals. In fact, international tourism expenditure has more than doubled since 1999.

Given its location, New Zealand is a niche tourism destination. The country is experiencing strong growth in visitor arrivals and hotel room nights; this growth is driven by increases in international air capacity, a growing domestic market, and the country’s global reputation as a beautiful, clean and friendly destination. 

The outlook for tourism continues to be bright, with official estimates of 4.9 million international visitors, and a projected annual international visitor spend of $15.3 billion, by 2023. Our spectacular landscapes and natural scenery are world-class and ensure our tourism value proposition remains strong – we know this is the most important reason why people choose to travel to New Zealand. 

As the Tourism sector grows, as higher-value visitor segments become the norm, and as New Zealand becomes known as a year-round visitor destination, it is important that New Zealand keep up with tourism numbers. 

The Government’s Investment Attraction Taskforce is committed to supporting tourism by contributing to the right infrastructure being developed – in particular, focusing on good quality hotels to ensure there is sufficient capacity to meet our tourism growth. 

As such, there are many opportunities for investors – including building the right type of accommodation across seven of our key commercial and tourism centres, to meet the expectations of our growing higher-value visitor segment.

 


Why invest in New Zealand’s hotel sector?

A shortage of hotel rooms during peak demand periods, combined with a reducing seasonality pattern and limited supply pipeline, is creating a need for additional hotel development in key markets like Auckland, Rotorua, Taupō, Wellington, Christchurch, Queenstown and Dunedin. 

Top visitor destinations demonstrate strong hotel trading fundamentals, reflected in impressive annual occupancy rates of around 80 percent and outstanding room rate growth.

Furthermore, New Zealand is a safe and stable investment destination that offers attractive returns for hotel investors, underpinned by strong tourism growth and GDP performance, a business-friendly tax environment, and prudent fiscal policy. 

Hotel Development Feasibility Study Grants

 

The Hotel Development Feasibility Study Grants programme is administered by New Zealand Trade and Enterprise (NZTE). The programme is used to support the development of new hotels suitable for New Zealand’s rapidly expanding international visitor market. 

It is available to qualified New Zealand and overseas businesses looking to develop or expand significant hotel operations in New Zealand that fit within NZTE’s criteria.

The Fund provides grants for pre-feasibility and/or feasibility studies so that potential investors can qualify substantial investment opportunities.

For more information, contact our Investment team.

Five reasons to invest
  • 1. First-rate demand drivers combined with superb international connectivity have fuelled a boom in international visitation

    International visitation growth is among the highest in Asia Pacific and visitor spend is increasing

    The New Zealand tourism sector is in its strongest ever growth cycle, driven by an extraordinary boost in international visitors. Visitor arrivals to New Zealand achieved a record 3.6 million in 2016, continuing to exceed official forecasts and representing a 42.8 percent increase from 2008.

    Visitors come to New Zealand to enjoy some of the world’s most spectacular landscapes and unspoilt natural beauty. New Zealand offers three Natural World Heritage Site designations, including the spectacular Milford Sound – often referred to as the eighth wonder of the world. A friendly, welcoming population, unique Māori heritage and indigenous culture, and a world-class hub for adventure tourism also rank as top tourism demand drivers.

    Superb international connectivity

    New Zealand’s infrastructure is world-class and enables excellent connectivity to the rest of the world from all of its major visitor hubs. This includes:

    • Five international airports, with 29 international carriers and 43 direct flight routes, serving major overseas markets
    • 30 regional airports, offering direct and efficient access around the country
    • The highest ratio of road per capita in the world, with 11,000 kilometres of state highways and 80,000 kilometres of local roads
    • 4,000 kilometres of rail track
    • 14 seaports, allowing for significant growth in the cruise line sector.

    New long-haul aviation technology, increased competition among airlines, and lower fuel prices have made it easier and more affordable for people to travel to New Zealand. Ultra long-haul direct routes such as Dubai to Auckland have improved accessibility from visitor markets including Europe, the Middle East, and India. 

    Current statistics demonstrate the significant capacity increases New Zealand’s aviation sector is undergoing:

    • 10.5 million airline seats to New Zealand by the end of 2017, 23.9 percent  growth in capacity since 2015
    • Four new international long-haul routes to New Zealand launched in 2017 to better serve China, Hong Kong, and Qatar. New carriers include Tianjin Airlines, Hainan Airlines, Sichuan Airlines, and Qatar Airlines
    • 24 percent  growth in inbound seat capacity for 2016 and 2017.
     
  • 2. Australian and Chinese holidaymakers are leading the influx of international visitors

    Strong demand from key feeder markets

    Australia and China are New Zealand’s largest international visitor markets, representing more than half of all international visitors in 2016. Australia is the leading international source of hotel room night demand in Auckland, Wellington, Christchurch, and Queenstown. 

    Over 1.4 million Australian visitors came to New Zealand in 2016. This represents 40.3 percent of total international visitor arrivals and year-on-year growth of 6.3 percent. Chinese visitors totalled 409,000 in 2016, representing 11.7 percent  of the international market. Year-on-year growth was 14.9 percent, which followed the astonishing 34.4 percent year-on-year growth achieved in 2015. New Zealand’s other top feeder markets are the United States, the United Kingdom, and Japan.

    Annual Chinese visitor arrivals are expected to increase 172.8 percent from 409,000 in 2016 to 1.1 million by 2025. Factors such as improvements in the duration of the Chinese visitor visa and enhanced air service agreements underpin China’s forecasted growth. The enhanced air service agreement will increase the maximum allowable flights from China and allow Chinese airlines to operate between airports in New Zealand during the course of their international service. Australian arrivals are expected to grow 29.6 percent to 1.8 million by 2025.

    Holidays and ‘Visiting Friends and Relatives’ are the prime purpose for visiting New Zealand

    The Holiday and ‘Visiting Friends and Relatives’ (VFR) segments currently represent 81.2 percent of arrivals. Holidaymakers, a significant income source for hotels, are anticipated to be the strongest growth generators over the next nine years. The holiday segment is expected to increase 62.7 percent to 3.0 million by 2025. The VFR segment is estimated to increase 39.9 percent to 1.4 million by 2025.

    FIT travellers represent a strong and growing New Zealand visitor segment, which is being is boosted by the increasing adoption of a more independent travel style by Chinese and other international visitors. FIT visitors typically spend more money than other visitor types, leading to higher hotel room rates.

    Business travellers account for a small but important part of New Zealand’s visitor economy. Multi-day international business events encourage high-value visitors due to greater length of stay and higher average expenditure per stay. The average international business delegate spends 5.8 nights in a respective event destination, longer than all other visitor categories, and has a greater propensity to stay in hotels.

  • 3. New Zealand's regional diversity provides clear tourism routes and a captive market for hotel investment

    New Zealand’s impressive regional diversity and compact size with clear infrastructure routes makes tourism flows more predictable. This presents an opportunity to invest in established tourism routes such as Auckland, Rotorua, Taupō, Wellington, Christchurch, Queenstown, and Dunedin. All international visitor arrivals by plane enter New Zealand through airports servicing these destinations.

    • Auckland: New Zealand’s largest and most multi-cultural gateway city in a magnificent seaside setting
    • Rotorua: Geothermal natural hot springs town and centre of indigenous Māori culture
    • Taupō: Nature’s ultimate playground and ski resort destination
    • Wellington: Capital of New Zealand and celebrated art, cultural and creative hub
    • Christchurch: Rapidly re-emerging gateway to the South Island
    • Queenstown: The Southern Hemisphere’s premier four-season resort destination
    • Dunedin: A region of unique landscapes and fascinating cultural history.
  • 4. The surge in visitation is driving record hotel operating performance and the strongest average daily rate (ADR) growth across major Asia Pacific markets

    Historically high hotel occupancy is forecast to continue 

    Auckland achieved occupancy of 90 percent in the March 2017 quarter-end, and 86 percent in the March 2017 year-end, with little seasonality. Similarly, Queenstown achieved occupancy of 89 percent in the March 2017 quarter-end, and 82 percent in the March 2017 year-end. These represent outstanding results, given the average occupancy rate ceiling is generally considered to be 90 percent.

    The hotel demand and supply imbalance means there is little scope for occupancy rates to increase during peak periods, particularly in Auckland, Rotorua, and Queenstown. Instead, off-peak demand is expected to grow, increasing year-round occupancy rates. 

    Growth in room demand is generally projected to outpace the supply of new rooms in each region to 2025. As a result, occupancy is projected to remain elevated in regions experiencing historically high occupancy and increase in regions with scope for growth. Occupancy projections to 2025 suggest Auckland and Queenstown will achieve the highest annual occupancies of 87 percent and 85 percent respectively.

    Rising occupancy rates will drive further increases in ADR

    High occupancy rates have led to significant room price increases across most regions. Queenstown has led the way with ADR reaching NZ$199 for the March 2017 year-end, a phenomenal 29.7 percent growth over the last two years. Auckland has achieved similar growth, with ADR reaching NZ$180 for the March 2017 year-end, 26.8 percent growth over the past two years. Rotorua and Wellington have both seen double-digit growth over the same two-year period.

    ADR is expected to continue to grow in all regions driven by increasing occupancy and higher-value international guests. Queenstown and Auckland are predicted to achieve the highest ADR during the forecast period, reaching NZ$270 and NZ$237 by 2025 respectively. The new hotels that are built will likely command a premium in the market, further reinforcing overall ADR gains.

    Auckland is a standout performance across all major Asia Pacific markets

    The surge in international visitation to New Zealand has resulted in Auckland becoming one of the strongest performing markets in Asia Pacific. Hotel occupancy in Auckland is on par with the likes of Sydney and Melbourne, which are experiencing similar patterns of tourism growth to New Zealand. CBRE research illustrates Auckland achieved the highest growth in ADR across all major Asia Pacific markets in the first half of 2017. In addition, since 2011, Auckland has generated the second highest ADR growth in Asia Pacific; second only to Osaka, where occupancy has consistently remained around 90 percent over the past three years.

     
  • 5. Additional hotel development is required to maintain a sustainable balance between demand and supply

    With demand growth predicted to outpace the supply of new rooms, the existing gap between hotel room demand and supply will continue expanding. In 2016, the New Zealand Government commissioned an independent report by Fresh Info and Colliers, which found:

    • An estimated 9,700 new hotel rooms were required by 2025 across Auckland, Rotorua, Wellington, Christchurch, and Queenstown to meet forecast visitor demand, while still maintaining 2015 occupancy - historically a strong trading year
    • A significant shortfall of up to 4,526 hotel rooms by 2025 across these regions, after considering the expected room development pipeline and historic growth rate of room supply.

    Along with a slight softening of domestic demand as international visitors compete on price as hotels remain full during peak periods, the estimated shortfall across Auckland, Rotorua, Wellington, Christchurch, and Queenstown is 2,390 hotel rooms – that is, the extra rooms required over and above expected room supply growth. Including Taupō and Dunedin, the shortfall is estimated to be 2,605 hotel rooms.

Hotel Investment Prospectus

Find out more about our hotel sector

For more information contact:

  • Dylan Lawrence, General Manager, Investment 
  • Janice Tay, Investment Manager, Investment

 You can also view and download the investment prospectus.