I had travelled a few times from Hamilton in the past to Sydney which cost $1300 return for two (post Freedom's exit). Thats an average of $325ow. PacificBlue's standard fare is $199 each way Sydney, and a few articles had stated that specials will be run proportionally with AKL's specials (happy hour specials I am talking). I understand Rotorua will be $209 which is not much more expensive I agree.
I agree with what you say and believe HLZ will lose the majority (if not all) of it's previous Rotorua's market, but Rotorua is not HLZ's entire catchment (in fact it is only about 10% (including Taupo maybe??)).
I agree that HLZ flight schedule is poor for the NZ market, but with an established outbound market, the current schedule suits inbound passengers (early evening departures from Australia).
From what I understand, the previous tourism initiative lost direction and funding was withdrawn - I guess this is an attempt to re-establish the Tourism initiative which is timely with PacBlue's arrival.
I guess what Hamilton has going for it is that for Hamilton and the greater regions (Coromandel, Tauranga, etc) now have access to comparable flight fares and cheaper parking rates than the equivelant in Auckland, so I would have thought that more of the Hamilton and surrounding region who would otherwise have travelled through Auckland, will now choose Hamilton. Before, parking was expensive at Hamilton and so were Air NZ's fares compared to Auckland.