I must admit that I haven't spoken to any of our "motella" colleagues in Queenstown for some time, however it is clear that they have been feeling pain.
The decline in overseas numbers including the tour and coach markets combined with the over-speculation of accommodation development has been a double whammy for Queenstown.
In most surveys you will find tariff is down the list of what a potential guest will consider when making an accommodation selection. We believe this to be a Pollyanna view that is far from reality. From our experience, we have found that location is the number one factor that is closely followed by tariff.
Tariff comparisons are commonly used by potential guests to determine quality and service levels offered by accommodation providers. Most consumers realise that a $165 motel room is better than a $125 room that is far better than a $85 room. They inherently realise that more often than not, price will determine quality.
The important distinction here is not the actual dollar value, but the comparison with other accommodation choices available. Some guests are happy with the cheapest in town, others prefer mid-range, while some prefer the top end.
Often the actual dollar value is academic. Mid to high end properties reducing tariff en masse are not distinguishing themselves and are doing themselves no favors. There is a huge opportunity-cost of giving away profit to potential guests that would have been happy to pay more.
The herding mentality of the accommodation industry in some areas is dragging the entire industry down to unsustainable levels.
In good economic times, tariff will be widely spread with obvious distinctions between high and lower quality properties. The potential guest will easily second-guess quality and service levels by comparison and will inevitably choose an accommodation option that will meet their needs.
In not so good economic times, the spread of tariff offered by accommodation providers are clustered closely together as higher quality properties directly compete with lower quality properties. This makes it difficult for the guest to easily second-guess quality and service levels by comparison and consumer dissatisfaction can prevail.
The Hotel Price Index, which looks at hotel tariff for October to December 2008 compared to the same period the year before, revealed that Queenstown hotel prices declined by 35 per cent being the most in Australasia.
By Felicity Wolfe 18 May 2009
A price war has erupted among Queenstown accommodation providers as hotels try to keep rooms full during a recession-affected shoulder season.
The hotels.com annual hotel price index showed in March that Queenstown hotel-room prices had dropped on average from $256 a night to $164, or 35%, against the worldwide average of a 12% reduction.
Queenstown Lakes District Council holiday parks manager Greg Hartshorne said the park was now competing with hotels and serviced apartments offering discounted room rates.
Moteliers in the area are also struggling as hotels and apartments offer cut-price rates.
While hotels discounting their rooms over the slower months had "always gone on", Mr Hartshorne told the Queenstown Times 2009 was "the first time it has ever been as bad as this".
"People drive into Queenstown and see signs advertising newly-built apartments at $88 [a night]," he said.
The Queenstown Lakeview Holiday Park and the Arrowtown Born of Gold Holiday Park would not be cutting their rates, although Mr Hartshorne said they regularly offered a 10% discount to people who stayed for four or five consecutive nights.
The reductions were also affecting the resort's motel industry, Moteliers Association of New Zealand chief executive officer Michael Baines confirmed.
"Yes, and we have also had comments from around the country," he said.
While accommodation prices were holding steady in many areas, he said there had been pressure in Auckland, Rotorua, Christchurch and Queenstown - the places with the highest numbers of hotel beds.
He described a market where camping grounds were competing with hotels for customers as "ludicrous" and "bizarre".
While he understood hotels had staff to think of, and wanted to fill empty rooms, he said once prices were lowered it was hard to raise them again.
"It is like going from a highly-valued product to . . . bargain basement," Mr Baines said.
"They might be busy and full but they will be going out of business."
Rather than dropping prices to unsustainable levels, he believed hotels - and members of his association - should be trying to maximise the value of what was offered.
"It's the value that counts, not the price," Mr Baines said.
Mr Hartshorne hoped Queenstown's accommodation market would return to normal pricing when visitors arrived for the winter ski season but said once expectations were lowered, it was hard to raise them again.
In January, Queenstown industry groups Destination Queenstown and the Lakes District branch of the New Zealand Hotel Council asked local hotels not to lower their prices.
Hotel Council regional chairwoman Victoria Shaw was unavailable for comment on Friday
Source: Click HERE
