New Zealand’s hotel construction sector is experiencing the consequences of a sustained skilled labour shortage — higher costs, longer timelines, and frustrated developers who are struggling to get projects across the line. A BDO report has found that approximately 80% of surveyed construction firms identified access to labour as a major challenge, with hotel projects particularly affected given their complexity and the concentration of construction activity in major tourism centres.
Why Hotels Are Especially Vulnerable
Hotel projects are, by their nature, complex builds. They combine high-rise or multi-storey structure with commercial kitchen installations, specialist fire protection systems, acoustic requirements between guest rooms, extensive mechanical and electrical services, and high-specification finishes throughout public areas. This complexity means they require a wider range of skilled trades than a standard residential or commercial project — and all of those trades need to be sequenced and coordinated.
When labour is tight, this coordination becomes harder. A plumber shortage means rough-in work is delayed, which delays linings, which delays fit-out, which pushes the project completion date back — and every week of delay costs money in holding, financing, and lost revenue for the operator who has booked guests in advance.
What It’s Doing to Costs
Labour shortages push costs up through multiple mechanisms. Trade rates increase when demand exceeds supply — the basic economics of a tight labour market. When crews are stretched, productivity per person tends to fall as workers take on more than they can manage well. Delays increase holding costs for developers who are paying interest on construction financing. And the difficulty of finding good subbies creates pressure to take whoever is available — sometimes at the expense of quality.
BDO’s research found that construction cost overruns on hotel projects are common, with labour-related costs cited as the primary driver. Projects that were budgeted two to three years ago are being built in a market where trade rates are materially higher than at the time of estimation.
Managing the Risk
For developers and principal contractors, managing labour risk on hotel projects requires early engagement. Locking in key trade packages before going to the market is increasingly common — waiting until detailed design is complete to start subcontractor procurement is a strategy that worked in a well-supplied market and creates problems in the current environment.
Prefabrication and modular approaches — particularly for bathrooms, which are repetitive and amenable to offsite production — can reduce on-site labour intensity and improve programme certainty. Several major hotel chains have adopted modular bathroom pods as standard on new builds for exactly this reason.