Exclusive: New Zealand property outlook for Q4 ‘hopeful’
As New Zealand reopens to international travellers, Colliers Country Manager, Hotels – New Zealand and South Pacific, Dean Humphries, shares insight into real estate activity across the Tasman.
The New Zealand hotel sector continued its strong demand-led recovery in the second quarter, with particular emphasis on rising international and business traveler volumes. One of the main talking points was the exceptionally high room rates achieved across the country, despite occupancy rates still recovering.
Average room rates for all major centers for the month of June 2022 were all higher than the same period in 2019, pre-COVID. The main mover was Rotorua at $191.83, up a staggering 60.4%, followed by Wellington +19.2% and Christchurch +15%.
On the other hand, the investment market has been hit by a new set of headwinds in the form of rising cost of capital and high inflation.
Despite a number of hotels on offer in the market and high levels of international and domestic surveys, many investors are taking a more considered approach while reassessing their own internal performance requirements and examining the current global investment environment. .
The good news is that investors typically turn to tangible assets during times of high inflation, so revenue and profitability can be protected. This is particularly relevant with hotel assets that have the ability to quickly pass through higher costs and protect profits and investment returns, as we have recently seen with rising room rates across the country.
We remain hopeful to see more investment activity in the second half of 2022 as inflationary pressures start to ease and the short/medium term cost of capital stabilizes.
In summary, the New Zealand hospitality sector is now clearly on the road to recovery, with upcoming bookings for the next high season (Q4 2022/Q1 2023) looking exceptionally strong.