27th January 2022 By Contributor
Hotel Council Aotearoa’s strategic director, James Doolan, sees four elements as essential for the industry to get going again in 2022.
As we enter 2022, a virus is spreading internationally and our government’s first response is to tighten border settings. Déjà vu? But there are key differences between Covid Alpha and Covid Omicron that should give tourism businesses a tiny bit of optimism about the year ahead. The recovery could still be on!
In comparison with March 2020 when New Zealand first closed international borders, the health system should be in much better shape this time for the following reasons:
Against that background, however, tourism businesses still face incredibly strong headwinds in 2022.
All international tourists remain completely locked out of New Zealand. In the overnight accommodation sector, international tourists provided 55% of annual revenues in the year to March 2019. Domestic tourist were never going to fill that gap. Consequently hotels, motels and other accommodation providers have been forced to severely reduce headcount and/or pivot to alternative business models such as carrying out MIQ or MSD work.
Government has been slow to recognise that for many tourism businesses, it’s a “closed border problem”, not a lockdown or “traffic light at red” problem. Past financial support has been tied to periods of lockdown only, linked to employee numbers (which have shrunk) and capped so as to implicitly favour small businesses. This has left large, capital-intensive tourism infrastructure businesses in an awful predicament.
Of course, central government and local councils continue to financially support the tourism infrastructure they actually invest in, including Air New Zealand, various airports, KiwiRail and our road network.
Privately-owned hotels, however, are left to fend for themselves. Comically, Auckland hotels are also still fighting Mayor Phil Goff’s bizarre and poorly-designed accommodation provider targeted rate. When other regional authorities worldwide have waived or reduced business rates, New Zealand’s largest city is instead appealing to the Supreme Court for the right to impose a punitive rate on hotels, described by appellate judges as invalid and unreasonable, with a consultation process that was “reverse-engineered” to achieve the mayor’s desired revenue-raising outcome.
So what are the ingredients needed to make 2022 better for the tourism industry than 2021? What will kick-start a meaningful recovery for what was once New Zealand’s largest export earner and a key way of spreading wealth throughout the regions?
First, government must commit to a clear re-opening date on which international tourists can enter New Zealand without isolation on arrival. A seven-day self-isolation requirement effectively kills any prospect of high-value tourists returning. No cash-rich, time-poor tourist will accept seven days inside a hotel at the start of their annual holiday. Tourism has a long lead time. A clear reopening date is needed to allow for air capacity rebuild, marketing, recruitment and other reopening preparations. Without clarity on timelines, another entire year will be lost.
Second, government must recognise that the tourism industry is in an existential crisis still and the financial strain is real and extreme. It’s disheartening to hear Minister of Finance Grant Robertson repeatedly talk up how well the overall economy is performing when clearly there are massive problems in tourism. If re-opening does not occur until October 2022, then government should offer targeted financial support until international tourists are allowed to enter New Zealand without isolation on arrival. Minister of Tourism Stuart Nash has offered lots of sympathy, but sympathy does not pay the bills.
Third, industry and government should work together to save winter 2022. Surely it’s possible to come up with a program that safely allows some tourists into New Zealand for the 2022 winter season? Flights from selected Australian states only? Opening up to China and other low-Covid Asian source markets? Every dollar of revenue is critical now for accommodation providers, restaurants, ski field operators and numerous other businesses that depend on the money brought into our regional economies by foreign tourists on short, sharp and free-spending holidays.
Finally, industry and government must find solutions to the massive looming labour shortfall. With borders closed since March 2020, many industries are now short of workers. Once again, tourism is in a uniquely disadvantaged position. Tourism businesses were forced to shed staff to survive. In addition, working holiday labour has departed. This was traditionally a source of skilled and experienced workers who love travel, gravitate towards tourist destinations such as Queenstown and welcome the flexibility of hospo hours. Government’s desire to have more New Zealanders working in tourism and to accelerate a step-up in entry-level wages is a complicated problem to unpick and will take time to resolve. The immediate challenge of simply not enough workers to properly re-scale our remaining tourism and hospitality businesses is now a pressing issue that needs creative and timely solutions.
It’s as simple as that: a clear reopening date, targeted financial support for tourism, a plan for winter and a willingness to tackle the short-term labour shortage. If Grant Robertson and Stuart Nash accept those four ingredients as being critical, then the tourism industry will help government bake the cake! If government and industry work collaboratively and in good faith on these issues, 2022 will be remembered as the year New Zealand tourism started to build back better.
