Americas Cup to provide well timed boost to Aucklands hotel market
America's Cup to provide well timed boost to Auckland's hotel market
| 29 November 2017
Occupancy and room rates to rise as demand exceeds supply during peak of the regatta
A new report released today has confirmed Auckland’s hotel sector is due to receive what could be a timely boost to occupancy levels leading to a short term spike in room rates when the city hosts the 36th America’s Cup in 2021.
The report by international real estate services company CBRE is the first in a series looking at the potential impact of the event on Auckland’s commercial property market and local economy.
Prior to the 2000 America’s Cup, the report notes a falling occupancy rate was revived with the start of the Louis Vuitton Challenger Series in October 1999. The boost to occupancy countered a decline in room rates that occurred during the period prior to the regatta.
With an additional 3,195 hotel rooms planned to be constructed in Auckland over next four years, another period of declining occupancy rates is forecast by the time of the 2021 America’s Cup with increasing supply in excess of forecast demand growth.
Peter Hamilton, Director Hotels, Valuation and Advisory Services from CBRE New Zealand says while not as severe a decline in occupancy as was being experienced in 2000 its forecasts indicate that Auckland occupancy levels could fall from the 80-85% range to the 75%-80% range in the lead up to the America’s Cup.
“The supply pipeline is already active with up to 3,200 additional rooms planned in the city, and without the impact of the regatta would likely be resulting in moderating occupancy levels by the end of 2020. The America’s Cup is timed ideally to provide a demand boost to bridge what otherwise could be a period of softening conditions in the Auckland hotel market."
Hamilton says the boost in occupancy is important as hotel markets often react to falling occupancy levels by decreasing average daily room rates (ADRs) with hoteliers competing for guests on price.
“On the basis of increasing occupancy and the Auckland hotel market’s experience from both the previous America’s Cups and the Rugby World Cup it is expected ADRs will be well maintained in the lead up to the 2021 America’s Cup with a significant boost experienced across the event.
Hamilton says unlike the Rugby World Cup however which saw huge price hikes just for a short period over the event, it is unlikely that hoteliers will be able to increase room rates in a similar vein with ADR increases likely to be more sustained.
“Nonetheless, despite the forecast moderation leading up to the regatta, the hotel market is expected to be in a better shape at the time of the event than it was either for the 2000 or 2003 cup defences. This will improve the industry’s prospects to boost room rates beyond the experience of the previous regattas.”
Supply and demand
Based on visitor surveys from the 2003 regatta, over 10,000 international spectators and visitors (race participants, syndicate support staff, friends or relatives of race participants, media crews) and 42,560 domestic visitors came to Auckland specifically for the America's Cup, resulting in an estimated extra 214,569 room nights sold during the event.
On the supply side, for the 2021 regatta the report notes that an additional 3,195 hotel rooms are planned to be built in the city in time, with a probability forecasted figure calculated in the report suggesting 2,580 rooms (81% of the total supply being planned) will actually be constructed.
With hotel room demand forecast to increase by 5-7% per annum during the next three years regardless of the Cup as the international and domestic tourism markets continue to grow, Hamilton says by the time February and March 2021 comes demand should actually exceed supply, even with the total estimated rooms planned being available.
“On face value the analysis shows that there is likely to be a shortage of hotel accommodation in Auckland during the 2021 America’s Cup. However, it is expected that the residential apartment market will provide the required additional capacity through the likes of Airbnb together with other commercial accommodation providers such as serviced apartments and motels.”
Zoltan Moricz, Head of Research, CBRE New Zealand says that there is certain to be favourable economic impact to come from Auckland hosting an event of the magnitude of the America’s Cup on the waterfront once again.
“There are few other global events that entice people in their thousands to stay in one city for an extended period and be centred around a single venue, in this case the Cup Village. For example, the 2011 Rugby World Cup saw matches in 12 different cities over a 2-month span, and the Olympics lasts just 16 days in several locations. As a result, Auckland’s hotel sector is expected benefit significantly from the volume of spectators brought in by the next America’s Cup.”
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com..