Wellington, March 30 NZPA - The hotel industry's annual survey highlights the pressure going on revenues as demand falls.

The New Zealand Hotel Council's annual operating survey found that hotel occupancy fell nationally from 70.7 percent in 2007 to 69.2 percent in 2008.

At the same time, operating costs for hotels rose to 74.5 percent of total revenue in 2008, up from 71 percent in 2007. The average national room rate increased by just $1.11 to $138.65.

Council chairwoman Jennie Langley said the short term outlook for many hotels was tough, but she noted the need to retain skilled staff and invest in refurbishment and development.

"Hotels are coming under increasing pressure to offer discounts but it is very difficult to make up the revenue elsewhere and have funds to invest in the business when the market recovers," Ms Langley said today.

"We strongly recommend hotels find ways to add value to their guests to help maintain demand."

A shortage of skilled labour continued to be a challenge for hotels around the country, with a consequent high use of non-New Zealand residents.

Australia and the domestic market would be critical in buffering the industry from lower long-haul international demand, Ms Langley said.

Recent announcements by the Government and Air New Zealand of an additional $5 million for marketing in Australia would provide a boost.

Tourism Industry Association chief executive Tim Cossar said hotels were major investors and vital to the economic development of New Zealand.

"Increased revenue and new investment will be critical, particularly as we approach the Rugby World Cup 2011."

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