What’s next for travel and tourism in New Zealand?
Following the toughest years for tourism in our lifetime, New Zealand is positioned to bounce back and maintain a sustainable industry. We look at what's ahead for one of the country's prized sectors.
After being closed for almost two years, the re-opening of New Zealand’s international borders was a critical milestone in the recovery of our tourism and hotel sectors. While it’s been a bumpy ride, the long-term outlook appears positive, says Nick Thompson, Senior Vice President of Hotels and Hospitality at JLL NZ.
Working closely with our Capital Markets team in New Zealand and the Hotels and Hospitality team across Asia Pacific, Thompson has a breadth of insights with regards to domestic and international tourism.
While it has been the toughest years for tourism in our lifetime, New Zealand is well positioned to bounce back and maintain a sustainable industry.
When comparing the hotel market to commercial property, a key differentiator is that hotel investors have a long-term view. Typically, they also own the business and physical assets, which can be more volatile and riskier, but more rewarding down the track. “While [the pandemic] was certainly challenging and placed significant pressures on cash flow, people viewed it as a point in time,” says Thompson.
As levels and restrictions were loosened, travel uplift was observed at each stage, highlighting that the need and desire to travel persists. This encouraged businesses to be resilient in the face of adversity.
“Throughout the pandemic, investors remained interested in the sector without significant discounting, which was evident in the wide range of ongoing transactions.” It also helped that the industry was supported through increased domestic demand and MIQ facilities.
“With Australia a few months ahead of New Zealand in its recovery journey, we have the benefit of being able to see what the short-term outlook for activity looks like,” says Thompson. He predicts domestic travel will continue to lead the revival and international travel will steadily pick up in the second half of 2022. “We’ve seen daily international arrivals increase a staggering 1,679 percent since the start of the year.” Globally, there’s already an improvement on pre-pandemic numbers.
New Zealand is viewed as a safe destination to invest, even if investors can’t necessarily see the assets, as was the case during the pandemic. “It’s distanced from political unrest, is a westernised country, English speaking and an easy country to navigate,” explains Thompson. “While it’s a long flight for travellers, this means they generally stay longer, often for a month-long period, which is attractive for investors.”
1,679% is the daily increase of international arrivals since the start of 2022.
As the gateway to New Zealand, with 70 percent of international travellers landing here, it’s observed the most significant increase in new hotels.
The capital’s very stable corporate market creates security for investors, although the majority of travel activity occurs Monday to Thursday. Low weekend demand has always been the city’s biggest challenge.
While undeniably hit the hardest over the past 24 months, due to its reliance on international tourism, our number one leisure destination is gearing up for a significant increase. “Over the coming months, we’re expecting a big surge in activity, especially from Australia.”
Over a decade on from the earthquakes, Christchurch is becoming a city of growth. “It hasn’t been a destination of choice due to the ongoing construction,” says Thompson. “However, new anchor projects, like the $475 million Te Pae Christchurch Convention Centre that opened this year, are stimulating a strong rebound.”
The biggest obstacle for all cities will be staffing - a challenge shared across the globe. Thousands of vacancies and higher levels of sickness have spurred a labour crisis.
In the first year of the pandemic we lost 65,000 jobs across the tourism industry and we’re now struggling to win back those laid off when borders closed. Many landed more secure roles in other industries and are reluctant to return to a profession that was so vulnerable.
Among the predictions for the future of tourism, Thompson anticipates significant advances and uptake in technology. “The pandemic and its subsequent consequences, like staff shortages, has driven technology demand.” We expect many hotel owners will move towards new tools to better respond to change and improve efficiency.
“Automation technology like check-in facilities, similar to those used at airports, will help businesses.” There are significant transactions coming up this year, signalling the start of a new lifecycle for the hotels sector. “We’ve forecast over $100 million worth of real estate transactions in New Zealand for 2022.”
The resilience of the hotel investment market, proven in its toughest years, is a clear sign that things can only get better from here.