An over-supply of childcare services is causing price wars and could lead to business closures, a Tauranga childcare manager warns.
Ministry of Education statistics show 118 childcare services operating in Tauranga - and more are set to open soon.
The Tauranga City Council has issued 22 resource consents for childcare centres since January 1, 2010, some of which have not yet opened.
In the past 12 months, the council has issued four building consents to convert houses or business premises into childcare centres, and one consent for a new build.
Tauranga Region Kindergartens principal Peter Monteith, who oversees 16 kindergartens in the Tauranga area, said he thought the number of new childcare centres opening in Tauranga was high, considering the state of the economy.
"We've got this huge increase in early childhood education services at a time when economic growth is marginal, so maybe it's a flight to what is seen as a safe industry." However, the sector might not be as safe an investment as people think if it becomes oversupplied, Mr Monteith said.
"I think we're oversupplied. There's a block in Papamoa bounded by Domain Road, Parton Road and State Highway 2 where there's 11 services out there, plus home-based ones. Go to Bethlehem town centre and there's about four or five within 50 yards of each other."
Whereas an undersupply of childcare services leads to waiting lists, an oversupply leads to price wars, Mr Monteith said.
Some centres were offering the first six hours of childcare a day free in an effort to attract children and their parents, while others were offering free fees for the first six weeks.
Centres spoken to by the Bay of Plenty Times offered referral rewards, half-price fees for a month, or free hours (in addition to the Government's 20 free hours programme).
"The impression we get by all the deals we've seen is we've got an oversupply," Mr Monteith said. "We've reached the price wars. Whether people will start to fall out because they can't afford to keep going we're yet to see.
"It wouldn't surprise me to see some services shut."
Michelle Hodge is the owner of Tot Spot, a newly opened childcare centre in Greerton.
While she believed the market was not yet saturated in Greerton, she agreed that an oversupply of centres in Tauranga will soon lead to price wars.
"When people come here they shop around and their main issue is money. I think the money issue will overtake the quality issue, whereas at the moment people are still looking for a quality childcare service."
The Tot Spot is licensed to take on 72 children and has reached 60 per cent of capacity after just four months' operating.
"In Greerton there was definitely a lack of childcare and the kids that we've taken from other centres were ones that had to go out of Greerton to get childcare."
However, "there's another business I know of that had a two-year waiting list but their waiting list is basically non-existent now because others have opened up".
Kidicorp chief of operations New Zealand Fiona Hughes said competition had become particularly intense in the Papamoa area, and the Kidicorp centres in Papamoa were offering deals to attract new clients.
Kidicorp owns nine childcare brands, including First Steps, ABC, Edukids and Montessori.
New Zealand Childcare Association chief executive Nancy Bell said nationwide early childhood education enrolments have grown at about five per cent a year over the past three to four years, but a fast-growing city like Tauranga may see higher levels.
Ms Bell said there were a number of factors driving the growth of the sector.
"There was a bit of a surge in the birth rate a few years ago.
"Alongside that, some of the Government policies around 20 hours of free early childhood education and making it more affordable has seen more children extend their hours."
Children spend an average of 21 hours a week in ECE centres, up from 15 hours four years ago.
The increased participation of women in the workforce has also fostered growth in the sector, Ms Bell said.