The New Zealand tourism industry is not ready for overseas investment, according to Tourism New Zealand chief executive Stephen England-Hall.
While there might be a strong appetite for investment, particularly in the hotel sector where there are accommodation supply pressures, there is a market failure around the readiness of NZ businesses to attract investors and receive significant capital investment, said England-Hall.
Speaking in Auckland at the PATA & ATEED Tourism Leaders Forum, the TNZ chief said this was one of the learnings that had come out of Project Palace, the government initiative to attract overseas foreign investment into the hotel sector as visitor numbers boom.
He said: “One of the learnings out of Project Palace is that we are not investment ready. NZ has a lot appetite for investment and we have actually quite a lot of opportunities for investment but they are not investment ready.”
England-Hall said the tourism industry could look to the technology industry to learn how to conduct capital raising and how to prepare as an industry for significant capital injections.
He added: “At the moment we are a sub-scale investment opportunity which is fragmented, and there isn’t sufficient readiness in the system.
“Sufficient readiness is not that we want to build a hotel because there is demand, it is that we know where the hotel location is, we have got blueprint plans approved by the council, we have got a contractor lined up who can start on Tuesday and we have got a business plan for marketing.
“That is what they [investors] want. So I think we can try and do some work to try and bring some maturity into the sector.
The former Loyalty NZ boss went on to say that he is currently having conversations with New Zealand Trade and Enterprise about how to create an investment-ready portfolio within the tourism sector in a similar way to Australia.
“The conversation I am having with the NZTE team at the moment is how can we have an investment-ready portfolio. How do you have not just hotels but other types of tourism businesses ready to receive investment.”
He added that as a government organisation it was TNZ’s job to intervene where there is a market failure.
“Right now there is a market failure there so how do we help move that forward, but as soon as that starts to move we should get out of the way and the market can carry on.”
Tourism Industry Aotearoa chief executive Chris Roberts added that Project Palace would be considered a success if a new hotel investor decides to come to NZ.
He said: “NZTE will hopefully land a major new hotel investor someone who is not in the country already who will come in and build half a dozen hotels– that would mean Project Palace succeeded.
“Most of the development we are seeing at the moment in the hotel space is from existing developers who are prepared to expand existing portfolios. The problem is scale. How does NZ have the scale for a brand new investor to come all the way down to this end of the world and decide to invest when they have got the rest of the world to choose from?”
ATEED chief executive Nick Hill added that his organisation “does quite a bit of work within our business attraction and investment group to talk to investors about what the opportunities are” on top of the NZTE program.
He added: “I think you have seen now quite a bit of investment into Auckland hotel rooms, there are new rooms being built, so there has definitely been some success in facilitating investment.”
Project Palace was launched in the middle of 2016 to attract investment to five cities comprising Auckland, Rotorua, Wellington, Christchurch and Queenstown. An update to the supply and demand research in July saw that group expanded to take in Dunedin and Taupo.