Hotels throughout New Zealand are fielding thousands of domestic cancellations as a result of new Covid-19 restrictions.

With Auckland placed in alert level 3 lockdown and the rest of New Zealand on alert level 2, hoteliers up and down the country are inundated by leisure and corporate travellers cancelling their accommodation.

New Zealand Hotel Owners Association executive director Amy Robens says the latest impact on the struggling sector as "beyond grim" and the ongoing repercussions seemingly endless.

"Auckland is a big market for hoteliers throughout New Zealand when there is no international visitation and booking cancellations for domestic leisure and conferences, even just through to the end of August, is costing the struggling hotel sector many millions of dollars," she said.

The association supported the Government's decisive action to tackle Covid-19 community transmission, but urgent financial relief including a targeted extension to the wage subsidy must go beyond Auckland.

Hotels throughout the country feeling the full impacts of the region's level 3 lockdown."

"Hotels are particularly hard hit by enforced lockdowns given they can't reopen quickly and profitably in the same way as many other businesses. Hotels need to generate enough forward bookings to make their business viable, and given we are losing bookings many will return to single-digit occupancy," Robens said.

Hotels typically lose money unless they have 70 per cent occupancy.

"Accommodation providers feel we have been side-stepped in the Government's $400 Tourism Recovery Package. Now is the time to support the sector by allocating some of the $14b from the Covid Response and Recovery Fund."

Robens said that at its peak the hotel sector employed 20,000 people.

''Our workforce has more than halved and will likely continue to decline. With record low occupancies, low margins and virtually no profit, the situation is beyond dire."

Any extension to the current lockdown status will see the moderate level of business hotels are experiencing wash completely.

'We are at the end of the road," Amy Robens said.

Hotels in areas such as the West Coast of the South Island, in particular South Westland, Bay of Islands and Southland/Fiordland - are especially struggling and have either been mothballed or are running with low single-digit occupancies.

The association was launched in August 2019 and represents around 120 hotels in main cities and visitor destinations throughout the country. Members operate more than 11,000 hotel rooms with an investment value of $3.8b.