The New Zealand hotel industry has experienced a significant period of growth in revenue and profitability, but the outlook for further improvement in 2019 and beyond is uncertain.

Uncertainty about the rate of future growth and constantly changing market dynamics increases the need for current and potential future hotel industry investors to have a detailed understanding of the market.

International and Domestic Visitor Growth

2019 has seen a slower rate of growth in international visitors compared to recent years. This trend has not been limited to New Zealand – Australia has experienced a similar trend.

There was a total of $16bn of international visitor expenditure in New Zealand in the year ended March 2018, up 9.6% on the previous year, according to Statistics NZ. Domestic visitor expenditure increased by 6.5% to $23bn.

Tourism Industry Aotearoa (TIA) has recently updated the aspirational goal of visitor expenditure in 2025 from $41bn to $50bn, reflecting an increasing industry focus on targeting ‘value over volume’ – and the unprecedented level of expenditure growth over the past five years.

Australia is New Zealand’s largest visitor market, accounting for 24% of international expenditure in 2018. China, at 15%, is the second largest market. Approximately 60% of international visitor expenditure comes from our top four countries of origin (Australia, China, USA and the UK).

2019–2025 International Visitor Forecast

The Ministry of Business, Innovation and Employment (MBIE) is forecasting 4.25% average annual growth in international visitor expenditure, over the period 2019-2025, driven by a 3.98% increase in visitors and 4.28% increase in visitor days. These are lower growth rates than assumed in the 2018–2024 MBIE forecast.

The visitor arrival forecast for the year ending December 2019 is approximately 40% lower than the previous year’s forecast. In particular, the Chinese forecast for 2019 has been reduced from 11% to 3%, following a 0.8% decrease in the year ended March 2019. By comparison, Chinese arrivals into Australia over the same period grew by 2.4%.

US arrivals to New Zealand are forecast to grow by 5.5% per annum in 2019 and 2020 – the fastest-growing source market for these years.

There has been no short-term reduction in visitor arrivals as a result of a serious terrorism attack in Christchurch in March 2019. New Zealand has achieved an enhanced international reputation for effective political leadership and as a desirable place to live and visit.

New Zealand Economic Outlook

According to Statistics NZ, in the year ended March 2018, tourism contributed 6.1% of Gross Domestic Product (GDP). Economic growth in New Zealand remains moderate with 2.7% GDP growth in 2018, underpinned by domestic consumption and tourism.

Read the full report here