Horwath HTL’s Hotel performance report for October 2023 has continued to present a mixed bag of wins and challenges.
According to data by Hotel Data New Zealand (HDNZ) The Revenue Per Available Room (RevPAR) metric, a crucial indicator of the industry’s health, shows an 8% year-over-year increase, largely owing to higher occupancy rates. However, this growth appears subdued when set against a backdrop of stagnant Average Daily Rates (ADR).
Comparing those figures with those of 2019, this shows only a 2% average increase in RevPAR with some notable regional differences. This modest rise highlights the slow yet steady recovery path the industry is treading, four years post the global pandemic and disruptions.
The financial landscape, however, isn’t all rosy. A significant surge in operating costs, marked by a 20% increasing rise in Consumer Price Index (CPI) inflation since the fourth quarter of 2019, has squeezed profit margins. Further worsening this is the over 28% hike in minimum wage since 2019, making operational sustainability a tightrope walk for many businesses.
Regionally, the performance is varied. Wellington’s hotels, with a 70% occupancy rate, faced a 15% decline in ADR, reflecting reduced government activities. Auckland, despite witnessing an impressive 73% occupancy, couldn’t match its 85% high in October 2019. This decline is the result of a 25% increase in hotel supply over four years and a dip in domestic leisure travel, even though there has been strong business-related demand.
Christchurch is still a bright spot, with hotel occupancies rebounding to 2019 levels, in part due to the Te Pae Convention Centre, which opened in December 2021.
The international travel scene still offers a glimmer of hope, with visitor arrivals reaching 85% of the pre-pandemic numbers. However, a slight downturn in October’s figures calls for cautious optimism. The upcoming summer season, highlighted by increased air capacity from North America, looks promising. Yet, the total capacity hinges on Australian flights, expected to lag behind their 2019 levels.
New Zealand’s hotel industry is still on a path to recovery, but that journey is marked by rising costs and regional disparities. The industry continues to remain resilient, adapt and evolve as it looks forward to what is ahead.
