The hospitality industry has backed Queenstown councillors' decision to restrict visitor homestays, saying it will help workers to find accommodation.
The move by Queenstown Lakes District Council has angered accommodation website Airbnb's local arm, which says the policy will hurt tourism.
But Hospitality NZ believes it will improve rental affordability and shortages for workers in the region.
General manager Rachael Shadbolt says the greatest concern among its members in the Queenstown area is the shortage of staff to meet growing visitor demand.
"Businesses find that staff are willing to move to the region, but finding accommodation is becoming near impossible," she said on Thursday.
"If these restrictions go some way to freeing up houses for the long-term rental market, it will take serious pressures off businesses in the region."
The council's draft regulations cap the annual rental of visitor accommodation to 28 days in outer residential areas and 90 days in central areas, before resource consent is needed.
The changes will go to public consultation for three months from November 23.
However, Airbnb argues that people should have the right to share their home if they want.
"Nanny-state policies, like caps or bans, would rob people of their property rights, hurt the tourism economy and cost local jobs," it said in a statement.
Queenstown Mayor Jim Boult said it wasn't a case of taking Airbnb out of the district completely, but just out of low density areas.
"We're under real pressure for accommodation here," he told TVNZ.
"While we love Airbnb - they provide the equivalent of six hotels in the district - it is making it very difficult for ordinary people to find houses."