Hotel capacity in PNG's capital rises ahead of the 2018 APEC summit


Hotel supply has risen dramatically in Papua New Guinea’s capital city, Port Moresby, over the last decade, as construction of the PNG LNG project saw thousands of expatriates and business travellers flock to the city, straining limited supply of high-end rooms. With nearly 3000 new hotel rooms expected prior to the 2018 APEC summit, the city appears to be well-positioned to meet an anticipated surge in foreign arrivals, despite delays on several high-profile planned projects.

The challenge for hoteliers now will be to maintain profits during a time of subdued macroeconomic growth, declining government revenues and expenditure, and rising vacancy rates. Although meetings, incentives, conferences and events (MICE) tourism should help stabilise the industry in the near-term, Port Moresby is facing significant oversupply, with 750 new rooms still under development, although long-term growth trends should see the sector regain its footing, as new energy and mining projects move forward.

Supply Surge 

Hotel development in Port Moresby has surged since construction began on the PNG LNG project in 2010, with the city’s supply of available rooms rising from 600 in 2011 to more than 2000 in March 2017. In September 2016 local media reported that a total of 2590 rooms are expected to be available in time for the APEC summit in November 2018.

The total value of ongoing hotel investments stood at PGK4.7bn ($1.5bn) in March, with more than 900 rooms under development and expected to come on-line in the medium term. High-end four- and five-star hotel rooms have been particularly popular with investors, and many luxury hotels have been opened or redeveloped in Port Moresby in recent years.

The luxury Stanley Hotel opened in July 2016 in central Waigani, adding 429 rooms to the market. Its opening also doubled the amount of conference space available in Port Moresby, with facilities capable of handling a 1000-person conference and a dinner for 1200 people. MICE tourism had already received a boost when the National Convention Centre in Waigani, with a 700-seat auditorium, officially opened in April 2016. MICE tourism will likely offer support for the hotel industry in the near term, as will progress on new liquefied natural gas processing facilities.

HIilton Port Moresby 

Announced in September 2015, the PGK1.2bn ($380m) Hilton Port Moresby project will add 212 rooms to Port Moresby. Construction works will include a 16-storey mixed-use tower with retail and commercial space, as well as 128 apartment units. The development will also include four restaurants and two bars, a business centre, health club, spa and outdoor pool, and 2800 sq metres of event space, with construction originally forecast to finish in late 2017. The project is being developed by a consortium including Mineral Resource Star Mountain, Mineral Resource Ok Tedi and Petroleum Resource Kutubu, subsidiaries of the Mineral Resource Development Company (MRDC), as well as the Hilton Hotel Group.

In March 2017 Augustine Mano, managing director of MRDC, told local media the project would be ready before the APEC summit, with an opening date set for September 15, 2018. According to Mano, construction is at an advanced stage, with more than 4.3 km of cabling and pipeline installed. However, some stakeholders have noted that with exterior construction still ongoing as of April 2017, the project could struggle to meet its 2018 deadline. “The Hilton hotel is happening, but it is highly unlikely it will be ready for APEC in 2018,” Brian Hull, executive chairman of Century 21 Siule Real Estate, told OBG. “Hotel construction may only take three years, yes, but in PNG developments like this need an additional three years to fit out the building and train staff to become fully operational and be prepared for APEC.”

In The Pipeline 

The PGK1.2bn ($380m), five-star integrated resort at Paga Hill is also facing delays and is unlikely to come on-line before the APEC summit. The development, which is expected to span a 67,000-sq-metre area along an oceanfront hillside in Port Moresby, is expected to add 250-300 rooms, as well as 60-70 serviced apartments.

Billed as a tourism city, Paga Hill is planned to include a host of attractions, including a cultural centre showcasing all of PNG’s provinces, a war museum, renovated Second World War relics and a waterfront promenade. The development will also connect to the adjacent APEC Haus, which will host the summit. In December 2016 Tobias Kulang, the minister of tourism, arts and culture, signed an agreement formalising government support for the project, but its completion date is not known. Shenzhen SEZ Construction and Development Group, the China Harbour Engineering Company and the China Overseas Engineering Group are financing the venture, according to local media, with construction originally expected to finish in late 2018, although the development had not begun construction as of May 2017. In August 2016 Kumul Consolidated Holdings and Hong Kong property developer Shin King Pacific Investment also signed a memorandum of understanding to develop a 500-room, five-star hotel in Port Moresby. This yet-unnamed hotel was also expected to open prior to the APEC summit, although no further announcements have been made since.

In March 2017 the Economist Intelligence Unit reported that a hotel shortage was likely during the summit, with PNG expected to use three cruise ships to accommodate up to 5000 people during the event.


With much of the recent growth in hotel supply driven by one-off events and projects, including the now-completed PNG LNG and 2015 Pacific Games, hoteliers are already struggling with persistent oversupply, which has pushed vacancy rates upwards and put downwards pressure on revenue and profits. Steamships Trading Company, which owns Coral Resorts, reports that vacancy rates at hotels have risen from less than 10% in 2014 to 50% as of early 2017. “There’s been a recent increase in the supply of hotel rooms, with more to come as new projects complete, but demand has dropped off,” Robert Gould, project and business development manager at Steamships, told OBG. “People are looking to APEC, when an estimated 8000 rooms will be needed for the event, but there are questions about what comes after.”

Meeting Expectations 

MICE tourism should help, and in March 2017 Sushil Gordon, general manager of Airways Hotel, told media that there are an estimated 200 events scheduled for PNG before November 2018, which should keep the hotel market stable in 2017. Associated tourism developments, including restaurants, could also support growth. As Port Moresby’s hotel stock continues to rise, hoteliers and property developers have increasingly moved to launch restaurant projects offering upscale dining options. In the 12 months to April 2017 more than 20 new restaurants opened in Port Moresby, including five at Steamships Trading Company’s flagship Harbourside development.


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The Report: Papua New Guinea 2017

Construction & Real Estate chapter from The Report: Papua New Guinea 2017

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