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Domestic hotel nights spike, room rates resilient

Most of New Zealand’s key hotel markets saw a significant spike in domestic guest nights in the third quarter of 2020 compared with the same period last year, despite the impact of Auckland’s second COVID-19 lockdown.

That’s according to Colliers International’s latest New Zealand Hotel Market Snapshot, which also shows average daily room rates have shown surprising resilience during 2020.

National director of hotels at Colliers Dean Humphries says whilst it has been a challenging year for the hotel sector there are some promising signs emerging.

“The COVID-19 pandemic continues to have a significant impact on the global tourism industry, and New Zealand is no exception.”

Dean says occupancy rates declined significantly in the second quarter of 2020, with all regions recording historic lows.

“Occupancy started to rebound in early June after the six-week national lockdown ended, underpinned by strong demand from Government-contracted hotels utilised for 14-day mandatory isolation, together with a notable increase in domestic leisure and corporate activity.

“Further improvement was witnessed in July on the back of the winter school holiday period, with all markets except Christchurch recording occupancy levels above 50 per cent.

“Levels then moderated in August, with the exception of Christchurch, primarily as a result of Auckland’s second lockdown, which restricted all travel in and out of our largest city, before rebounding again in September.

“All key markets in the country recorded a significant increase in domestic guest nights in the third quarter of 2020 compared with the same period in 2019, noting mandatory isolation of returning Kiwis played a significant role in this.”

The South Island was the biggest winner, with domestic guest nights up 86.2 per cent in Queenstown and 62.3 per cent in Christchurch.

Rotorua was the top spot in the North Island, with domestic guest nights up 56 per cent, followed by Auckland on 41.4 per cent, while Wellington took an 8.8 per cent hit due to a small number of isolation facilities in the capital.

Dean notes that whilst domestic demand has been strong, without international demand, hotels are still only operating at overall occupancy levels generally below 50 per cent.

He says the sector has yet to witness any significant downward momentum in room rates.

“This was primarily due to Government-contracted business across some 32 hotels throughout many of the main regions in the country, representing 7200 rooms. Stronger patterns have also been evident during the weekends and school holiday periods.”

The average daily rate across all key markets was on par with that of 2019. Rotorua was the standout performer, with average daily rates increasing 13.5 per cent in the year to September.

Looking ahead, Dean says the continuation of a self-imposed border control/isolation regime and strong domestic demand will pave the way for the New Zealand hotel sector over the next six months.

“The recent announcement of Australia opening up state borders to New Zealanders suggests a reciprocal trans-Tasman bubble may be forthcoming in the short term.

“Nevertheless, any wider opening of New Zealand’s borders to international travellers is unlikely to occur until 2021; at which point will quickly become the driving force behind a wider recovery of the hotel sector.”

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