Operators to ERC: Domestic tourism alone won’t save us

13th May 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

The Government’s Epidemic Response Committee heard from operators on Tuesday

The plight of the country’s tourism operators has been made clear in stark terms to the Government’s Epidemic Response Committee.

With almost all businesses shuttered and hundreds of their employees heading for the dole queue, both Sudima Hotels and Haka Tourism Group said domestic tourism would not save the industry alone and tailored, industry-specific support was required from the Government.

HTG’s general manager Eve Lawrence told the ERC yesterday that domestic tourism would not be the industry’s saviour, and it was too soon to start the Government’s “reimagining tourism” initiative.

Eve Lawrence

“I personally don’t believe for a moment that domestic tourism can even come close to filling the massive void that having no international visitors is going to create for New Zealand,” Lawrence said.

“The general consensus across a lot of my industry colleagues is that if we are lucky, we might see 20% of our revenue year-on-year, and efforts to reimagine tourism, in the middle of a crisis, is like calling in an architect instead of the fire service while your house is still burning down.

“We need to first put our efforts in place to save the house, and then think about reimagining and rebuilding our industry.”

The Government needed to help save jobs, businesses, “and our industry from complete decimation, and only then should we be starting to refocus on reimagining our future”.

Lawrence said an extension of the wage subsidy from 12 to 26 weeks was needed to keep the industry alive.

“We need to be able to support our kaimahi and avoid further job losses. From an HTG perspective, our balance sheet could easily make it through a recession, but we cannot make it through zero revenue – no business models for zero revenue,” she said.

“If we were still trading at a revenue loss of only 30% right now, Haka Tourism Group would be over the moon. And even with some pivoting today, we are trading at around 80% revenue loss, and early March it was more like 95%.”

Lawrence added that Kiwi attitudes towards the cost of tourism activities in New Zealand would be a challenge for the industry.

“We are fighting a mindset which is incredibly difficult to change in regards to pricing, and now you can combine that with job losses, less income, and a complete lack of confidence to travel, not only internationally but also domestically.”

Les Morgan, chief operating officer of Sudima Hotels, told the ERC that operators needed immediate help if it was to survive.

“We are hanging on by a tenuous thread,” Morgan said.

Les Morgan

“We accept that our sector is facing a long road to recovery. Our business requires volume and estimate it could take up to 4 to 5 years before a return to previous levels.”

Sudima, which operated five hotels at Auckland, Christchurch and Rotorua, had reduced its 550-strong workforce by 85% since the lockdown began. Two of its properties had been mothballed with another preparing to go the same way.

Morgan said the group’s trading revenues were down 20% of normal levels and sustained only by Ministry of Health isolation facility contracts. Revenue was still needed for operations, maintenance and compliance costs as well as debt and interest payments.

“Even with the loosening of alert levels and the subsequent stirring of the domestic tourism market, the level of demand will not be sufficient to meet our obligations,” he said.

“The corporate traveller is facing huge budget pressure, the conferencing client wary of things due to health and safety, and the leisure traveller subject to seasonality. The international visitor recovery is likely to be even more challenging and certainly more susceptible to further disruption.”

Sudima was seeking “immediate financial assistance tailored to our sector”.

Major hotels and the wider accommodation industry will not be able to effectively participate in any recovery if we have neglected assets and emaciated workforces,” Morgan said.

“The current need for hotels to be converted into hospital-like facilities is a stark reminder of how vital our sector is to the country’s infrastructure.

“New Zealand cannot hope to host major events, for example APEC, without our inventories. The Government’s priorities should be ensuring the survival of New Zealand’s key tourism assets before embarking on a fresh marketing strategy. Hotels cannot put out the welcome mat if it is behind a closed door.”