New Zealand
Hotel Industry Conference
2008

 

New Zealand Hotel Industry Performance and Profitability,
presented by Stephen Hamilton, Horwath HTL Limited

Stephen Hamilton's presentation addressed the following topics:

  • Key messages from 2008
  • What the Lincoln University 'Enhancing financial and economic yield in tourism' report tells us
  • The impact of seasonality on profitability in the hotel and tourism industry
  • Two scenarios for the future
  • What those scenarios mean in terms of investment
  • Financial benefits of working on the shoulder season

Key points made in his presentation included:

  • 5 key messages in 2008: The investment climate; Investors are now more cautious; Risk has been re-priced; It is now a more rational market; there are challenges ahead for inbound tourism but also some opportunities.
  • Refer to the Lincoln University ‘Enhancing financial and economic yield in tourism’ (Nov 2007) report.
  • The Ministry of Tourism summary report shows average financial yields for: hotels (4%); motels/motors inns (5.3%); backpacker/youth hostels (6.7%); campervan parks & camping grounds (3.7%); lodges & boutique accommodation (3.6%) and hosted accommodation (2.7%). (Note: This is based on the Dept of Statistics’ entire accommodation sector database.)
  • A more detailed report shows the average financial yield across around 1,600 accommodation businesses 1999-2003 was 4.86%. (Note: More detailed report excludes outliers so the results are slightly different to the results in the summary document.)
  • Detailed report shows average financial yields in the hotel sector of 5.5% 1999-2003. This includes average financial yields in the bottom decile of -6.07% and an average of +17.08% in the top decile. So, average financial yields may be low but there are some strong performers.
  • Two scenarios for the future.
  • Scenario 1: Assumes international visitor arrival growth continuing at 6% per annum to 2015 and similar seasonality patterns as experienced by the industry over the 9 years 1997 to 2006.
  • Scenario 2: Assumes international visitor arrival growth of 4% per annum to 2015 and less seasonal fluctuation, with relative growth in occupancies in the shoulder months of Sept/October and March/April.
  • Working from a 2006 base, Scenario 1 shows average annual occupancies would fall. There would be an average daily rate increase. Total Auckland hotel profit would be $224 million. But the industry would need to invest almost $1 billion in the Auckland hotel industry alone.
  • Scenario 2 shows that if we spread demand into the four shoulder months, we would have higher average annual occupancies. The average daily rate and total hotel profit could be higher. Total investment required would be just $330 million in Auckland. This is just one third of the amount required under the higher growth scenario.
  • Working on the shoulder season would be of substantial benefit to the New Zealand hotel industry.

 

Please click here to download a copy of Stephen Hamilton's presentation.
 


For details of the
6th Annual
New Zealand Hotel
Industry Conference on
31 May 2012
  please click here  


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