Feb 05 2019
The Hotels and Resorts industry in New Zealand has benefited from a rise in real household discretionary income and a depreciation in the New Zealand dollar. The fall in the dollar has made outbound tourism from New Zealand more expensive, thereby encouraging increased domestic tourism. The falling dollar has also made inbound tourism to New Zealand cheaper, further boosting industry demand. Overall, industry revenue has grown at an annualised 7.3% over the five years through 2018-19, to reach $1.7 billion.
“While competition from Airbnb and serviced apartments has intensified, increased promotion by New Zealand’s Central Government has boosted growth from overseas tourism over the period,” said Senior Industry Analyst Matthew Reeves.
Operators in the Hotel and Resorts industry primarily generate revenue by providing accommodation services. Accommodation with a 4-Star rating or below from Qualmark accounts for the largest share this revenue. Many operators within this segment offer discounted prices for their rooms to increase revenue. However, this segment has faced external pressure over the past five years from accommodation-sharing networks such as Airbnb. On the other hand, revenue has increased from 4-Star Plus and above luxury accommodation, on the back of increased inbound tourism, particularly from China.
China is expected to remain the leading inbound tourist market for luxury hotels over the next five years. In order to accommodate this, luxury hotel operators are expected to expand their number of establishments. Despite this trend, industry consolidation is expected to increase over the next five years. In response to increased demand, the larger operators such as UK owned Millennium & Copthorne Hotels are expected to acquire some smaller hotels. Some small owner-operators are likely to exit the industry as a result of the increased external competition. These trends are likely to reduce industry enterprise numbers over the next five years. Industry profit margins are also projected to decline, as many of the remaining players will have to improve their service offering or lower their prices to more effectively compete.
Non-luxury hotels and resorts will have to introduce new technology to boost their competitiveness, both internally with luxury accommodation and externally. This includes the addition of smartphone docks, smart TVs and digital surround-sound speakers. Meanwhile, luxury-level hotels and resorts are likely to improve their technological capabilities so that they can further increase their share of industry revenue. One such example is the use of smartphone-enabled remote key check-in technology. The introduction of new technology is expected to reduce the need for certain categories of employees such as porters. Therefore, employment, as well as wages as a share of revenue are expected to decline over five years through 2023-24.
Tourism activity is expected to rise over the next five years. A further depreciation of the New Zealand dollar is forecast to make inbound tourism to New Zealand cheaper and increase the cost of outbound tourism. As a result, both international and domestic tourist visitor days are expected to rise. However, competition from both Airbnb properties, serviced apartments and cheaper outbound airfares is anticipated to constrain revenue growth. As a whole, industry revenue is projected to rise at an annualised 2.6% over the five years through 2023-24, to reach $1.9 billion.