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Wednesday Letter: Supporting the survival of tourism

6 Oct 2021  By Contributor

Tourism Industry Aotearoa chief executive Chris Roberts outlines the 10 measures that will ensure the short-term survival of the industry, while it waits for New Zealand’s borders to re-open.


Chris Roberts

It has been a roller coaster ride since February 2020 for the country’s 35,000 plus tourism businesses. Border closures were necessary but a huge blow. The opening of the Tasman travel bubble in April 2021 lifted spirits but the outbreaks in Australia and the shutting down of Tasman flights meant the benefits were temporary and minimal.

Kiwis have been our saviours. There’s been a huge range of individual business outcomes – from closure or hibernation, to record revenue levels for a fortunate few. But overall, tourism businesses delivering services to a domestic market had been doing okay prior to the August outbreak. Domestic travel for leisure and business was buoyant, accommodation occupancies were steadily increasing, and a strong programme of events and conferences was underway. The July school holidays had generated good business. The biggest issue, other than the closed border, was a shortage of workers.

Domestic travel was stopped in its tracks when New Zealand moved to Covid-19 alert level 4 on 17 August. Almost every tourism business is using the wage subsidy to hang on to their staff, and the Resurgence Support payment to partially meet fixed costs. But the losses are quickly mounting. Businesses outside of Auckland were relieved to get back to level 2 on 8 September but visitor activity remains low. And for those in Auckland, there’s no business at all.

Tourism operators tell us the impact of the lockdown is very different from last year. The March 2020 lockdown came towards the end of the peak season, when operators had cash reserves to draw on. This time it’s unclear how quickly domestic tourism will bounce back. The biggest domestic market, Auckland, remains unavailable and with summer around the corner New Zealanders may delay any leisure travel until the Christmas holidays.

Operators are tiring. We’re now 18 months into the pandemic with no certainty on when we will emerge to the ‘new normal’. Operating a tourism business with closed borders and changing alert levels is incredibly hard. Revenue dries up overnight. The mental wellbeing of many operators is being impacted, severely for some. Anger and grief are common emotions. Some have made the hard decision to close.

However, tourism people are very resilient. They know we have an amazing visitor offering here in Aotearoa. Most are determined to survive, revive and then thrive again. But they can’t do that on their own.

Tourism is a complex ecosystem with multiple players. This includes government as both a steward, looking across the whole tourism system to make sure that it is working effectively, and as an actor directly through its own assets and interventions. The private sector has a few larger players but is dominated by SMEs and micro-businesses. It is locally owned, and in recent years increasingly Māori owned and operated. There are embedded inter-dependencies, with tourism businesses reliant and supportive of each other.

As tourism looks to survive the current challenges and return to its previous levels of contribution to New Zealand’s economic and social wellbeing, it will need a range of solutions that protect essential parts of the tourism ecosystem. Mass business failures will create gaps in the overall offering, making the road to recovery much more difficult and retaining the strength of the New Zealand brand highly problematic.

If businesses are supported, tourism can recover faster, supporting more jobs for New Zealanders and making a greater contribution to New Zealand’s prosperity. The difference between a patchy recovery and a strong recovery is significant.

TIA has identified 10 priority survival steps for tourism. Some are led by government, some by industry. Some are underway. All require partnership. Put together, they can get us through the biggest crisis our tourism industry has ever faced.

  1. Vaccination uptake: Achieving a high rate of vaccination is a must. TIA is actively encouraging employers and employees to get vaccinated.
  2. Compulsory vaccination: Employers want to keep their staff and their customers safe. Can they ask their customers to be vaccinated or declare their vaccination status? And can they insist that their customer-facing employees are vaccinated? Government needs to work with industry to provide guidance.
  3. Wage subsidy: The wage subsidy should continue until all of the country, including Auckland, moves to Alert Level 1. Many tourism and hospitality businesses can still show a 40% or greater decline in revenue operating under level 2 conditions.
  4. Resurgence Support Payment: Similarly, the RSP should also remain available until all of Aotearoa is at Level 1.
  5. Rent relief: After wages, rent is often the biggest cost facing tourism businesses. The government has this week introduced a new legal requirement for landlords and tenants to agree on a ‘fair’ rent when Covid restrictions prevent normal operations. This will assist some businesses but shifts the economic burden to landlords.
  6. Business loans: The Small Business Cashflow Scheme through IRD has been successful but an anomaly is that businesses can only apply now if they have not applied before or have already repaid their first loan. We seek a change allowing operators to re-borrow and to top-up loans to the maximum of $100,000.

Few tourism businesses met bank criteria for last year’s Business Finance Guarantee Scheme, as they were unable to show what future revenue will be under a ‘normal’ scenario. It would be helpful to have a re-aligned loan scheme designed for SMEs.

  1. Mental Health support: 75% of respondents to the recent Tourism Industry Aotearoa survey were concerned about their personal health and wellbeing, with 9% being very concerned. TIA is doing what we can to support our members and we are exploring a national mental wellbeing service for tourism operators.
  2. Fee and levy relief: TIA is seeking relief from the financial burden on operators of fees and levies from agencies like the Department of Conservation, Maritime NZ and Civil Aviation Authority.
  3. Travel incentives: Direct domestic travel stimulus is worth considering with borders likely to remain closed for some time. Voucher schemes have been used successfully in many countries including Australia. There is some smart technology that can be used to tailor any scheme, matching special operator deals with government support.
  4. Workforce support: If New Zealand is out of lockdown this summer, tourism businesses will need to staff up. A dozen different activities are underway to head off workforce shortages.

TIA is also looking to partner with government on longer-term strategic initiatives, including the proposed Tourism Industry Transformation Plan; TIA’s Tourism Sustainability Commitment; the TRENZ international trade event; and the government funded/industry led Go with Tourism initiative.

These initiatives all support the development of a sustainable tourism industry that delivers for Aotearoa and its people, while the 10 measures above will ensure the short-term survival of the industry.

 


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