Is The Motel Industry in Crisis Yet?

The latest accommodation survey results for October 2010 have been released today by Statistics New Zealand and further underlines worrying trends for the motel industry. 

Total guest nights in October 2010 have decreased by 1.7 percent compared with September 2009. 

In the battle of the two islands, the North Island recorded a 0.5 percent decrease in guest nights while the South Island achieved a 5 percent decrease in October 2010 compared to October 2009.

Eight out of the 12 regions recorded less guest nights in October 2010 than in October 2009. 

In September, Canterbury with the earthquake on 4 September and subsequent aftershocks were able achieve a small increase in guest nights. Sadly in October, Canterbury lead a downward trend in guest nights for the South Island as international guest nights fell significantly, by over 27,000 in October 2010 compared with October 2009. This was partly offset by an increase of 10,000 for domestic guest nights.

The regions showing the largest decreases were:  

• Canterbury, down 4.2 percent
• Wellington, down 4.2 percent
• West Coast, down 9.9 percent.

The regions recording the largest increases were:  

• Auckland, up 1.8 percent)
• Bay of Plenty, up 2.3 percent) 
• Northland, up 3.6 percent. 

International visitor guest nights across New Zealand in October 2010 decreased by 5.7 percent compared with October 2009 and this largely accounted for the overall fall in guest nights. 

Domestic guest nights recorded a modest rebound by increasing 0.9 percent in October 2010 compared with October 2009. 

In spite of another soft month, hotels have once again solidified their dominance by being the only sector to record an increase in guest nights for the fourth consecutive month. Hotels recorded an impressive 4.3 percent increase in guest nights in October 2010 compared to October 2009.

The three other accommodation types in the survey all recorded decreases in October 2010:

• Motels, down 5.4 percent
• Backpackers, down 5.7 percent
• Holiday parks, down 3.8 percent.

Hotels achieved the highest occupancy rate (56.1 percent) of all the accommodation types in October 2010, followed by motels (45.9 percent), and backpackers (34.8 percent). 

While there are pockets of strong motel businesses, there is a worrying trend of the motel sector as a whole is rapidly loosing market share. Last month we asked the question "are we being too hysterical if we start calling this a crisis?"

In spite of the euphoria surrounding the Rugby World Cup, the motel industry still has the long tail of the recession to contend with next year.  We reckon that the motel industry needs to take positive action, accept accountability and investigate the reasons why they are bleeding market share...