With the high (summer) season approaching, it won’t be too long before we start reading reports about the high hotel room rates and a shortage of hotel rooms in Auckland. This is likely to lead to the familiar calls for more hotels and acceleration of projects in the planning.
Amidst such sentiment, it is easily overlooked that there is a significant risk of a period of strong occupancy decline unless we see a dramatic stimulus in off-season demand or some developers reconsider their planned projects.
For the eight months to August, RevPAR for the major Auckland hotels declined by 4% compared to the same period last year.
Key contributing factors to this downturn were the absence of major events like last year’s British & Irish Lions rugby tour and the opening of more than 600 hotel rooms, increasing supply by approximately 9% over the period.
Hotel occupancy rates of 82.6% for this eight month period may be considered high but are the lowest since 2014.
Based on the number of new hotel projects under construction, announced or being considered, annual hotel occupancy levels could slip much further.
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