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Market Rises From The Ashes

Market Rises From The Ashes

The lucrative holiday and short-term rental market is back in business with a bang in the wake of Covid, Sally Lindsay discovers.

By: Sally Lindsay

2 December 2023

ABOVE This centrally-located three-bedroom Westmere property – marketed by The Stay Hub – is popular for its spa pool, expansive deck with sun loungers, BBQ and backyard.

Covid decimated the holiday and short-term rental market when international borders were closed. But in the past year it has come back strongly on the tail of growing tourism.

Stats NZ figures show 206,800 tourists visited the country in the year to August – up 77,000 on the previous August year – and 82 per cent of the 251,100 visitors who toured pre-pandemic in August 2019.

Of the tourist arrivals in August, 48 per cent were from Australia, compared with 49 per cent in August 2019; 9 per cent from the United States (6 per cent in 2019); 8 per cent were from China (12 per cent) and 4 per cent were from India (2 per cent in 2019).

Many tourists use Airbnb, and it has made a steady recovery since the pandemic, although the number of available places, in all but Tauranga, are below 2019 levels, while demand has been more subdued, with the exception of Queenstown.

AirDNA, which monitors New Zealand Airbnb and bookabach, says compared to a year ago Paihia is the only market that has seen a drop in supply and demand. Tauranga, Wellington and Queenstown have all had higher supply than demand, which pushed occupancy down slightly.

Compared to September last year, Rotorua had 22 per cent more listings, 6 per cent more occupancy, while the average daily room rate was 42 per cent higher. Tauranga had 41 per cent more listings than a year ago, a drop of 3 per cent in occupancy and the room rate was 4 per cent higher.

In Wellington occupancy rates fell 6 per cent, while the room rates were 6 per cent higher on 34 per cent more listings. Listings in Christchurch lifted 30 per cent, occupancy was up 3 per cent, and the room rate was down 1 per cent. In the country’s adventure capital of Queenstown occupancy was down 1 per cent and the room rate was up 4 per cent on a 13 per cent lift in available listings.

Room Rates

Since 2019 average daily room rates have risen 63 per cent in Paihia; 117 per cent in Rotorua; 57 per cent in Tauranga; 61 per cent in Wellington; 55 per cent in Christchurch and 36 per cent in Queenstown.

AirDNA says the rise in room rates has in part been boosted by the move from small, city centre apartments to larger, more rural houses and villas with more amenities, which typically charge more.

There has also been some effect from inflation. Year-on-year growth has slowed considerably since mid-last year, and in some markets where occupancy is under pressure, hosts have begun to reduce rates to be more competitive.

Auckland’s biggest short-term rental provider, The Stay Hub, says this year has been phenomenal in bouncing back from the pandemic.

The Stay Hub manages 200 properties across Auckland – a mix of holiday and short-term accommodation, with most in the CBD and half of those one-bedroom apartments.

General manager John Moffett says rental and revenue demand is showing a market score of 95 out of 100. The average daily room rate is up 40 per cent from 2021.

“It’s a seven day a week market – people coming to the city for business and work, concerts and those wanting a weekend away. Many are wanting one-bedroom apartments right in the city, although we do have two and three-bedroom properties close to the CBD in Ponsonby, Grey Lynn, St Marys Bay, Herne Bay and other areas, which perform well and often attract foreign travellers.”

ABOVE The first floor of this property is a separate unit being let to the short-term market. Located in St Marys Bay it has the harbour nearby.

Nightly rates across The Stay Hub’s properties vary, but a penthouse apartment was rented for $5,000 a night during the last high season. “As the market matures and there are more luxury high-end properties available, this sort of asking rent will not be out of place,” Moffett says. “This year $2,000 a night is not going to be unreasonable for an entire house with a swimming pool and other features.”

Possible earnings are a question often asked by people interested in offering their properties for the holiday or short-term rental markets. The Stay Hub, Christchurch Holiday Homes, bookahome and the Bed & Breakfast Association are getting enquiries daily.

Moffett says there is an influx of demand from people wanting to rent their properties as holiday or short-term accommodation.

ABOVE This modern apartment is in the popular seaside suburb of Mission Bay. With Auckland central a short trip away it provides for business and holiday stays.

Hard To Keep Up

“It is part of the business that is hard to keep up with. A lot of people are looking at it as an option for a multitude of reasons. They could be going overseas, converting it from a long-term rental, or need additional cash flow to pay extra taxes.”

Sue Harrison, of Christchurch Holiday Homes and bookahome for properties outside Christchurch, says not every property suits the holiday home market. Her companies manage about 75 properties around the country, mainly privately-owned standalone homes, and use Airbnb, Booking.com and Expedia.

“Properties that are near amenities, sports and events stadia, airports, or offer extra rooms for a family travelling with Grandma, for example, or allow pets, are going to be well positioned to achieve 70 per cent occupancy on average and 100 per cent in the high season. The property also has to be easily serviceable, furnished to a high standard with everything right down to the last plate.”

The Bed & Breakfast Association says it has had a trickle of inquiries from people wanting to set up their homes to cater for guests, especially since the pandemic decimated the sector.

President Ann-Marie Fleming says it is not as easy as it sounds. “A bed and breakfast needs to be a quality property, with quality fittings and linen, and other top-notch amenities.”

A quality assessment programme is offered by the association, which goes in depth into best practice for B&Bs beyond that of new operators, including needing to make contact with local and regional tourism organisations and, more importantly, international selling agents in Europe and North America, which is where much of the sector’s trade comes from.

Many of the association’s members have the space for one or two B&B rooms, but then they have to also contend with local council by-laws.

Red Tape

Some councils require food and other licensing. For example, Christchurch City Council now requires a resource consent if a property is rented for more than 60 days as short-term accommodation or to more than eight guests in one booking. The minimum consent fee is a one-off $1,000, but Harrison says because the application is so complicated it needs a planning consultant and that can end up costing about $3,000 extra.

The rules are the result of mediation between Christchurch City Council and other parties after Airbnb appealed earlier council plans requiring anyone leasing a property for short-term visitor accommodation to obtain consent.

Airbnb New Zealand and Australia manager Susan Wheeldon​ previously described the proposed rules as some of the “most restrictive and outdated home sharing laws in Australasia” when they were announced last year.

Every week Harrison is looking at properties around the country, often with just photos and information from local booking agents and discusses with owners their suitability for holiday accommodation. “There are many steps to the process, and we don’t recommend people’s own homes become holiday rentals unless they are prepared to move out completely and take their personal effects.”

Moffett says during the high season – November to February – room rates can be raised exponentially, and an owner can earn the most.

“Although Auckland’s CBD and city fringe suburbs achieve consistently high results, short-term rentals outside the CBD can perform just as well year-round, and in some periods even better.

“Takapuna and Devonport do exceptionally well, along with St Heliers, Orakei, Half Moon Bay, and areas in and around Auckland’s eastern coast. Pricing optimisation is key to incremental financial gains in the short-term market. Room rates can be increased around seasonal changes, events and demand.”

ABOVE High-end Christchurch properties are spacious and often come with a pool or spa.

The High-End

Christchurch luxury properties can rent at $2,000 a night, but Harrison says they are “very high-end” and spacious with a swimming pool and often a spa. When compared to Airbnb that has some short-term accommodation for $100 a night, Harrison says those property prices seem excessive. “What people forget is Airbnb’s service and other fees. They can easily add up and suddenly the $100 a night apartment is costing in reality $200 a night.”

The Bed & Breakfast Association’s members, catering mainly to the international market, host travellers at anything from $600-$1,000 a couple per night at a luxury Auckland property to $300-$600 at a rural West Coast B&B. While association members do have properties in the country’s cities, many are rural retreats offering something different.

B&Bs are the country’s longest serving short-term accommodation providers, beyond the traditional baches, and were going strong well before Airbnb started.

Fleming says it is a fairly stable sector, with many members in the business for several years, and they have built up good contacts with international markets and booking agents – a must for those wanting to be in the sector.

“It’s a great lifestyle option for people who love hosting visitors and making them feel welcome in New Zealand.”

Since the borders opened and tourism started humming, many members are reporting tourists are staying longer and travelling more slowly, which Fleming says is obviously what short-term operators want in times of regenerative tourism. “People are keen to come here to stay in beautiful properties in some of the most wonderful parts of the country and meet Kiwis in their own homes.”

She says there is a definite possibility of sector expansion, certainly “when we’re wanting people to travel more slowly, we’re targeting those high value visitors”.

ABOVE Park views with a central Christchurch location.