New Zealand Hotel Outlook 2024

After a faster-than-expected rebound in domestic demand, New Zealand is witnessing the strong return of overseas tourists, bolstering the country’s hotels sector.

The resurgence in overseas visitation is driven by increasing airlift capacity, with international visitors reaching over 76% of pre-pandemic levels through 2023. This positive trend is expected to continue as new carriers resume direct flights to New Zealand, setting a strong foundation for the market and indicating a bright future for the industry.

Hotel trading has shown significant strength, highlighted by strong average daily rate (ADR) and revenue per available room (RevPAR) growth. The focus now shifts to increasing occupancy to complement the recovery in trading. A new rate ceiling has been set, and further uplift in occupancy will be crucial for the industry's continued success.

While there has been a substantial increase in new hotel supply over the past five years, the supply cycle is beginning to slow. This slowdown is advantageous for the market as it allows for a quick absorption of new quality product. Elevated construction and labour costs are redirecting focus towards refurbishment and conversion projects, rather than new developments.

These positive factors all point to the hotel investment market experiencing continued improvement as the market stabilises. Despite a relatively subdued 2023, JLL’s research points to a bounce-back in investment activity in 2024. Transaction volumes are projected to exceed NZD$250 million, supported by offshore capital, as investors seek stable, long-term performance and a potential hedge against inflation.

Looking ahead, New Zealand is well-positioned to attract international visitors and continue its economic growth. The country's commitment to preserving its unique scenery, fostering business-friendly environments, and ranking highly on international measures of safety and adventure tourism make it a compelling destination for travelers and investors.

We expect a steady rise in hotel occupancy throughout 2024, driven by improved airlift capacity and increased inbound visitation. Additionally, the value-add opportunities in refurbishment and the conversion of struggling office assets present an avenue for further growth.

As we navigate the challenges and opportunities of the post-pandemic era, the New Zealand hotel industry is performing well, which should give owners and investors optimism about the future. The industry's resilience, coupled with strong performance indicators and growing investor interest, points towards a bright year ahead.