New Zealand's hotel market is attracting strong investor interest, as the availability of quality assets offered for sale in Australia and around the Pacific region continues to dry up.

Hotel property in New Zealand is currently offering attractive yields as well as opportunity for income growth through increased room rates in the short to medium term.

During 2005, almost 1,000 guest rooms were transacted at an average price of approximately NZ$143,000 per room.  "In what has historically been a tightly held hotel investment market, four major hotel transactions (above NZ$5 million) were recorded during the year worth approximately NZ$140 million," said Mr Mike Batchelor, Executive Vice President, Jones Lang LaSalle Hotels.

Foreign investors accounted for all of the four major hotel transactions in New Zealand during 2005 with investment funds the being the dominant purchaser type.  "Given the ever-growing pool of superannuation contributions, investment funds are expected to be the dominant purchasers again during 2006," said Mr Batchelor.

This was further evidenced through the sale of Chateau on the Park Christchurch last month to Sydney based Abacus Funds Management for a reported NZ$27 million.  Chateau Blanc Suites sold to a private Sydney developer for just under NZ$10 million. 

"Traditional investors such as Asian-based hotel companies and local Australian and New Zealand investors were still active participants but have struggled to compete on price with this new wave of capital," said Mr Batchelor.  

The appeal of hotel assets in New Zealand is expected to continue to strengthen as available stock is offered to the market.  "Australian investors are attracted by the added benefit of not having to pay land tax or capital gains tax in New Zealand," said Mr Dean Humphries, Advisory Director, Jones Lang LaSalle.  He added, "This also means investors are able to buy at slightly higher initial yields."

"New Zealand is perceived to have a stable economy, transparent legal system and sound tourism fundamentals over the medium term," added Mr Humphries.

Hotels in New Zealand are trading well with occupancy levels ranging from 70% - 80%.   However, room rates are still at historically low levels, in many instances now only returning to levels achieved 10 years ago.  "This is part of the attraction to investors - with room rates expected to grow steadily over the medium term and in turn improve property values," said Mr Batchelor.

The four major hotel transactions in New Zealand during 2005 included the sale of the InterContinental Hotel Wellington (as part of the IHG portfolio sale) to Eureka Funds Management; The Duxton NZ Portfolio; The Portland Hotel Wellington, and; the Centra Hotel Auckland Airport.

Jones Lang LaSalle Hotels, the world's leading hotel investment services firm, is uniquely positioned to provide both the depth and breadth of advice required by leading hotel companies and hotel investors globally.   www.joneslanglasallehotels.com