20 July 2024
No market for new Invercargill hotel, ILT boss says
“I can assure you that occupancy rates do not justify a new hotel.”
That’s according to Invercargill Licensing Trust chief executive Chris Ramsay, who was talking about the new 150-room Distinction Invercargill hotel being built in the city.
Based on the trust’s own hotel occupancy rates, Ramsay said he didn’t see a market for the new hotel.
The 78 extra rooms added to Invercargill in 2022 with the opening of the Langlands Hotel was already having a negative impact on the Kelvin Hotel, he said.
However, Distinction Hotels Group owner Geoff Thomson said the business remained comfortable with its decision to open the new hotel in lower Esk St.
“We don’t believe we’ll have any difficulty growing our market, or even theirs.”
Ramsay was addressing business leaders at a Westpac Smarts event hosted by the Southland Business Chamber this week.
The ILT recorded year-to-date average occupancy rates of 55% across its three hotels and two motels.
Historically, the trust looked for averages of 65% before it would consider adding more rooms in Invercargill, Ramsay said.
An independent report prepared by Horwath HTL for the Hotel Council Aotearoa found revenue per available room for major New Zealand hotels dropped 11.5% in June, year on year. Nationally, occupancy rates fell to 58%, the lowest since July 2022.
Ramsay noted that the hospitality industry in general was “doing it bloody tough”.
At a board meeting earlier this month, he told board members that the ILT had recorded turnover levels lower than 2022 – when the country was under Covid-19 traffic light settings – in two of the previous five weeks.
It meant ILT was getting more aggressive with its promotions, Ramsay said. The current “Great Pub Cash Giveaway” campaign, for example, was the first time ILT had run a competition like this, he said.
“That’s sort of an indication of how tough it is out there and how we are trying to respond.”
The new hotel meant the trust would “get more aggressive in what’s already a competitive market”, he said.
While it was exciting for any city to get a new hotel, Ramsay said the ILT already worked with the same tour operators as Distinction.
“There’s not going to be a huge influx of buses we’re not already getting,” he said.
But Thomson said Distinction Hotels would be targeting new business from tourists who wouldn’t usually visit Invercargill.
There was huge demand for a hotel that could accommodate inbound tour groups, he said.
“Coach tours, which we specialise in, require a reasonable number of rooms.”
The Invercargill-born hotelier believed there was huge potential to grow the tourism market in the region.
“Southland and Invercargill have so much to offer from a tourism point of view. It’s a no-brainer.”
Thomson also pointed out that the hotel would not be open before the incoming tourism season, giving the ILT time to build promotions.
New Zealand’s tourism industry was expected to begin bouncing back to pre-Covid levels by the end of 2025.
The immediate past president of Hospitality New Zealand’s Southland branch, Graham Hawkes, said there was such a thing as too much competition.
More competition required more aggressive marketing, he said.
This could result in businesses being forced to drop prices and would possibly take business away from smaller accommodation providers, Hawkes added.
Source: The Southland Times – 20 July 2024