Since Airbnb launched in New Zealand in 2015 and turned the holiday and short-term rental sector on its head, guest nights have rocketed.

By the end of 2015 there had been 132,000 guest nights in short-term and holiday accommodation. This year this type of accommodation made up a quarter of all tourist guest nights in New Zealand.

However, data gleaned from AirDNA by Infometrics shows that how the market performs varies widely from area to area and not all the action is in significant tourist hotspots.

For example, in South Wairarapa, Kapiti Coast and Waikato districts, short-term rentals made up more than 30 per cent of total guest nights in the year to August. For these areas tourism is a relatively small sector, with less than 20 guest nights per year for every permanent resident.

In the biggest tourism destinations – Auckland and Queenstown-Lakes District – short-term rentals accounted for 16 per cent and 13 per cent of total guest nights respectively.

On a per-resident basis, Westland, Queenstown-Lakes, Kaikoura and Mackenzie are the country’s most significant tourism hotspots, with more than 80 guest nights per year for every permanent resident. In all four hotspots, short-term rentals account for less than 20 per cent of total guest nights.

While guest nights are slowly returning to pre-pandemic levels, more granular AirDNA data for Airbnb and Bookabach, supplied specifically to Property Investor, shows available properties for people to put their heads down are still low compared with 2019.

While Auckland had a lift to 6,967 available monthly listings in November, 27 per cent over the past year, they are still 16 per cent down on 2019 levels; Christchurch had 2,579 listings, a 25 per cent increase, but 12 per cent dip on 2019; the Far North had 1,578 listings, a 12 per cent lift, but a drop of 1 per cent on 2019.

Queenstown had 2,014 listings, a 12 per cent increase, but a 5 per cent decline on 2019; Rotorua had 1,171, rise of 13 per and a drop of 6 per cent on 2019; Tauranga had 1,935 listings, an increase of 19 per cent on last year and an increase of 25 per cent on 2019 listings; and Wellington had 3,221 listings, a rise of 16 per cent and 4 per cent more than in 2019.

Supply Recovery

AirDNA’s research shows four of the seven short-term rental markets have not returned to pre-pandemic supply levels.

In Christchurch, Rotorua and the Far North District, supply recovery has been slow, which has also slowed the return of demand. However, these areas now have higher occupancy rates than in 2019, likely due to the reduced supply.

Listing growth picked up over the past year in all six short-term rental markets analysed, but supply has outpaced demand growth, causing occupancy rates to drop significantly year-on-year. Occupancy is down 4-13 per cent year over year, with Tauranga City and Wellington experiencing the steepest declines.

Many of these properties rely on international tourists as guests, and the number of visitor arrivals from overseas sit at only 85 per cent of pre-pandemic levels. In the August year, 3.23 million international visitors arrived. Most were from Australia – up 81,000 to 1.33 million; China – up 156,000 to 244,000; and the United States – up 59,0000 to 358,000. In the June year international visitors contributed $11.6 billion to the economy, also about 85 per cent of that spent before the pandemic.

After a harsh winter, short-term rental operators around the country are hoping occupancy figures will rise over the summer.

International tourists staying at home and Kiwis also either not holidaying around the country as extensively as they have over the past two years, planning shorter stays or spending less, have put a dampener on the short-term rental industry.

One hostel industry advocate says occupancy levels collapsed across the country in May in probably the worst winter on record for the past decade, and it has been a hard slog since then. Compounding the woes was the lack of snow for ski fields for most of the winter.

A bit of growth is expected by The Tourism Export Council of New Zealand over the summer, even though it’s seeing a softening in forward bookings.

Although the first two seasons after the pandemic showed double digit growth, the council has downgraded its forecasts for the next two seasons. It had predicted 3.9 international visitors next year, but that has now drifted out to 2026.

Not helping is the government’s decision to lift the international visitor levy from $35 to $100 in October. Feedback from India and China has not been complimentary about the country’s competitiveness for the international traveller.

Tourism Industry Aotearoa is seeing signals of 2 per cent growth on last summer for international visitors, but it’s still early days.

Looking Up

Queenstown-based Divine Property Management director Katrina Roberts says winter was flat compared with last year.

Roberts’ agency handles hundreds of short-term and holiday rentals in the resort town and she says while Australians still turned up for the skiing, Kiwis decided to head overseas as other resorts, particularly in Japan, were seen as offering better value for money and the ski conditions were more stable.

Summer bookings are looking up, but they are coming in a lot closer to arrival dates than the agency has previously seen. “Our average lead-in time is traditionally over 60 days, now it’s getting close to 40 days and we’re finding we’re discounting probably a bit more than we have previously to get those forward bookings.”

Summer and winter are two distinct markets for Queenstown, with winter attracting longer-term stays of five to 10 days because of the skiing and summer short-term stays of two to four days as visitors often travel to other places.

She says summer occupancy is still tracking very similar to last year, but revenue is not quite as high because forward bookings get a more premium rate than last-minute discounted bookings. Revenue per room is down about 10-15 per cent.

The new IRD rules dubbed the “app tax” (meaning Airbnb has to collect and pay 15 per cent GST) has had a big effect, Roberts says.

“Owners and property managers are getting their heads around how to price their properties with the GST, because booking.com included it in their advertised prices but Airbnb puts it on top of the advertised price. There has been a swing to booking.com from Airbnb, which has traditionally been our biggest market.”

Demand is still there from owners wanting to convert their properties for short-term rentals. Roberts says they need to be realistic because it’s a hugely competitive market and takes six to 12 months to get properties up and running. “That means either discounting or offering specials or just to get those reviews in before they start lifting.”

Some properties in the Airbnb or holiday home space are struggling. People are pulling out of the market, particularly private owners, who just see it as a bit too much hassle with the GST scenario.

While Roberts’ company is still growing, she is quite specific about what she takes on because it’s quite difficult to get properties up and running successfully, particularly as there are 5,000-6,000 Airbnbs listed in the Queenstown region.

The company also manages long-term rentals and Roberts says the local angst about lopsidedness in the market seems to have dissipated since January when there were just 17 advertised available. In November there were 80 available to rent. Long-term rents were also sliding down slightly.

Nervous Operators

A hard winter and Auckland Council’s moves to change the rating of short-term rental properties as well as the threat of a bed tax is making operators nervous in the country’s biggest city.

Auckland-based boutique Airbnb property management company Pillo believes many people will see these moves as bringing the sector more into line with hotels and motels, so there is an element of it being an even playing field.

Pillo director Janet Johnson says after probably the hardest winter in years, the start of spring was also challenging, even though it usually picks up. But November came back to life with two major bands – Pearl Jam and Coldplay – bringing people from around the country to fill short-term CBD rentals.

November and February are usually the biggest months for Auckland’s short-term stay market, and bookings are picking up, but nightly rates are still below where Johnson would like them as cost structures are higher because demand and occupancy have been lower.

“Some of the small apartments we rent should be at $130-140 a night, but they are being offered for $100 a night. However, the industry is just flipping from the down to high season.”

Several hotels in the city have owner-occupied apartments, Airbnb and hotel management. “So, whatever hoteliers are doing, we’re part of that market, part of that equation. If their occupancy is a bit lower, they’ll be offering potential guests good rates and also different deals. If they’re doing that, that affects our market as well.”

Johnson says Auckland’s CBD short-term rentals market is extremely competitive. “There is still demand from apartment and homeowners wanting to list their properties on Airbnb and other platforms. What we have noticed is people listing their properties for sale and using Airbnb in the meantime to maximise their money.”

Within the CBD Johnson says short-term rentals range from studio to luxury apartments with a massive difference in quality and if owners are considering putting them on Airbnb now is the time because the peak season is from November to March.

She says hospitality is a hard business, but operators can see the light at the end of the tunnel, although it’s not going to happen in six months.

The B&B Scene

Bed and Breakfast Association New Zealand president Ann-Marie Johnson says most of the members’ trade comes from international markets, like Northern European, particularly the Netherlands, and North America – “tourists that travel a bit more slowly, take a real interest in learning about New Zealand and wanting to be involved in our culture.”

For their part, bed and breakfast operators tend to make it a lifestyle business and can be as busy as they want to be. “Most are not looking for high numbers of heads on pillows, they are using the business to enhance their lifestyle. They’re not necessarily looking for 100 per cent occupancy.”

An association survey earlier this year showed members’ average double room per night rate is just over $300. Room rates overall are between $100 up to more than $1,000 a night.

“In most cases, operators have only two or three rooms per property and for that guests are getting the opportunity to meet and be hosted by families in beautiful locations, often in rural areas off the beaten track,” Johnson says.

Unlike the awful bed and breakfast establishments Kiwis can encounter in the UK, for example, NZ and Australian properties have always been at the top end of the market, giving visitors a personalised experience.

Tighter Rules

Short-term rentals are not universally popular across the country, with locals in many areas protesting they lock people out of long-term rentals and push up rents.

However, a commissioned Airbnb study earlier this year showed short-term accommodation has no bearing on long-term rents, although councils have been clamping down.

Regulations, such as limiting the number of nights a property can be rented as short-term accommodation, making operators apply for resource consent, and making them pay commercial instead of residential rates, are being implemented.

In Rotorua, short-term accommodation providers are contemplating selling their houses or converting them back to long-term rentals if the council goes ahead with its plan to make those advertising for a minimum of 60 days or more pay commercial rates.

It will generate an extra $900,000 in income a year for the council.