New Zealand's hotel sector has become an attractive proposition for foreign investors seeking stable returns and growth potential.
Despite global economic headwinds, the country's hospitality assets continue to draw significant international capital, particularly from Asian and North American investors.
This article explores the factors driving foreign investment, highlights key investment opportunities, and presents case studies of recent deals in New Zealand.
Factors driving foreign investment
- Rebounding tourism: New Zealand’s tourism industry is experiencing a robust recovery. In the year ending December 2024, the country welcomed 3.3 million international visitors, a 12% increase from the previous year1. This surge is attributed to pent-up demand, the restoration of airline routes, and New Zealand's strong global reputation as a premium, safe destination.
- Overseas Investment Act considerations: Hotel investing is already relatively straightforward under the Overseas Investment Act and the Government's recent commitment to reform the Overseas Investment Act 2005 will likely also add to the ease of investing. See the discussion further below.
- Relaxed immigration settings: The Government is modernising visa settings to incentivise migrants to invest in New Zealand. Since 1 April, the complex weighting system for the AIP has been replaced with two simplified investment categories: Growth and Balanced2. These changes aim to make New Zealand more attractive and accessible to high-value foreign investors.
- Favourable economic conditions: Overseas investors can benefit from lower interest rates in their home countries and a weaker New Zealand dollar, enhancing their purchasing power and making New Zealand investments more attractive.
Investment opportunities
- Hotel acquisitions: There is a growing interest in acquiring existing hotels, with some major transactions occurring in recent years. Precinct Properties, a listed entity in the NZX50, recently sold the InterContinental Hotel located in the Commercial Bay Precinct to a listed entity in Singapore, a wholly owned subsidiary of Hotel Properties Limited. With a transaction value of NZ$180 million, this is the largest single hotel asset sale to date in New Zealand. This follows the landmark NZ$170 million transaction of Auckland’s Stamford Plaza in 20223 and the $31 million Mount Cook Hotel Collection sale in 20234.
We have advised a range of hoteliers and hotel investors in both New Zealand and Fiji on acquisitions, developments, management arrangements, IT, and business transactions. - Premium hotel brands and iconic boutiques: New Zealand has seen a recent influx of premium hotel brands:
- QT Hotels opened a new luxury offering in Queenstown in 2017, adding to the city's growing list of high-end accommodations.
- In 2020, Accord's Pullman brand launched a new hotel in Rotorua and announced a future development in Hamilton.
- Marriott International introduced the JW Marriott brand to New Zealand when it acquired the Stamford Plaza in Auckland in 2022.
- In 2024, the Intercontinental opened at Precinct Properties' newly refurbished One Queen Street tower in downtown Auckland.
- In the boutique market, 25 room Huka Lodge re-opened last month after a NZ$25 million refurbishment following its acquisition by Colorado private equity firm KSL Capital Partners in 2020.
- Design Group has announced that it has received resource consent to develop Waimarino Luxury Lodge in Queenstown.
- New hotel developments: New build and construction projects are also likely to be a preferred option for future market entry. The current New Zealand Government is focused on enabling urban development in a timely and efficient manner. New hotel developments may be able to utilise the new Fast-Track Approvals Act 2024 (FTAA), which was recently enacted with the aim of enabling a more streamlined consenting process for major infrastructure and development projects. Any project would need to demonstrate that the development will have significant regional or national benefits, which lends itself towards large-scale projects. The FTAA project removes the requirement for a public hearing, tilts the decision-making framework in the developer's favour, and restricts appeal rights.
More broadly, the Government is in the process of developing replacement resource management legislation. That new framework will have a stronger focus on private property rights and is intended to narrow the scope of environmental effects that can be considered, including potential for reduced consideration of landscape and visual amenity effects. This has the potential to streamline the consenting of new hotel developments in the future.
Overseas investment (FDI) considerations
The Overseas Investment Act 2005 governs New Zealand's FDI regime, administered by the Overseas Investment Office (OIO). Hotel investing under this regime is relatively straightforward, with two main categories of consent that may be required.
The first category involves sensitive land, including rural land, land adjacent to sea or lake foreshores, or land with other sensitive factors, irrespective of transaction value. Land may also be considered sensitive if classified as residential. Hotels in urban areas are unlikely to involve sensitive land unless it is residential, which should be a key component to confirm in due diligence.
The second category is the significant business asset threshold, triggered when the transaction value or asset value exceeds NZ$100 million. This threshold may be higher (currently NZ$200 million) for investors from countries with obligations to New Zealand under international agreements (e.g. Singapore) and significantly higher for Australian “non-government” entities (NZ$650 million for the year ending 31 December 2025, adjusted annually for inflation).
If consent is required for significant business assets, the investor must pass the “investor test”. This negative ‘bright line’ test is met if none of a list of “character” and “capability” factors are present, or if the OIO is satisfied that the person is not unsuitable to own or control sensitive New Zealand assets despite any factors being present.
For sensitive land investment, the investor must pass the investor test and usually demonstrate a net benefit to New Zealand (the "benefit test"). The benefit test compares the likely benefits of the proposed overseas investment against the current state of affairs and assesses them across seven broad categories. It is not necessary to satisfy every category but to establish a strong case for benefits in at least one category. Economic factors, such as job creation, are key considerations, especially in hotel development and investing.
There may also be a “national interest” assessment, particularly if the investment results in one or more “non-New Zealand government investors” from a single country acquiring more than a 25% ownership or control interest in the target business or assets. This commonly applies to sovereign wealth funds and government employee pension funds. The national interest assessment is ultimately made by the New Zealand Minister of Finance. However, given the importance of tourism to the New Zealand economy, it is unlikely that a hotel investment by a sovereign wealth fund or pension fund, particularly one free from political interference, would raise national interest concerns.
Looking Ahead
Foreign investment in New Zealand's hotel sector is set to grow, driven by favourable economic conditions, strategic opportunities, and successful recent deals. Investors can leverage the country's stable investment climate, recovering tourism industry, and diverse investment opportunities to achieve long-term success. As New Zealand continues to attract international tourists, the hotel sector presents a promising avenue for foreign investors.