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.
