Covid-19 Delta outbreak: Hotel Council Aotearoa counts $1.5 billion cost

Hotels have lost up to $1.5 billion in revenue during the past 18 months and are calling for a Government rescue package.

Auckland hotels have lost about $500m and are now being hit hard again by the prolonged level 4 lockdown following August’s border failure in the city which was exacerbated by delays to the country’s mass vaccination and rapid testing programmes.

Hotel Council Aotearoa is pleading with the Government to introduce targeted measures to support the sector, crucial to rebuilding international tourism when borders reopen to international visitors.And one hotel expert says the international recovery could be four years or more away and could be even more painful in Auckland as it coincides with thousands of new rooms coming on stream.

The council’s strategic director James Doolan said the sector wanted wage subsidies to help retain staff and make up for lost revenue no matter what alert level the country was at.

The wage subsidy during the current lockdown can be claimed by businesses suffering a 40 per cent loss of income.This has been extended beyond Auckland to be paid at alert level 2 for those businesses suffering from the city’s extended hard lockdown.

Doolan said hotels throughout the country had on average suffered more than a 40 per cent loss of business since border restrictions were imposed last March, in spite of a surge in domestic travel at alert levels 1 and 2.

It has called on the Government to help in three areas:

• A targeted wage subsidy programme for the accommodation sector, helping hotels and other accommodation businesses retain valuable staff until borders reopen and reasonable inflows of travellers return. Just on 55 per cent ofpre-Covid spend at overnight accommodation was by international visitors.

•Accelerated depreciation for tourism industry assets (modelled on similar policy previously offered in Australia), so that tourism businesses are encouraged to invest to support the future recovery of tourism.

• Support for marketing channels would mean the Government to fund key regional tourism organisations (RTOs) for the next three years, particularly the country’s largest RTO (Auckland Unlimited) and our key destination (Queenstown).Auckland Council is currently insisting that accommodation providers fund Auckland Unlimited from July next year through its reintroduction of the Accommodation Providers’ Targetted Rate(APTR).

Doolan said accommodation providers some much-needed breathing space.

”It’s cruel for the APTR to be looming in front of accommodation providers while they are accumulating massive losses.With a massive oversupply in hotel rooms, there is no prospect of the APTR being passed on to hotel guests, which (its) supporters insisted would happen.”

The council represents hotel owners, general managers, operators, brands, hotel consultants and supporters of New Zealand’s hotel sector.

Tourism minister Stuart Nash said in addition to an extension of the wage subsidy scheme, a second round of the resurgent payment to cover non-wage costs had been launched.

Latest figures from the Ministry of Social Development and IRD show about 130,000 jobs in the accommodation and food services industry category were supported by $165 million in wage subsidy payments; and more than 15,000 accommodation and food services businesses received resurgence support payments worth more than $66 million.

He said depreciation changes for owners of commercial buildings, including hotels and motels, were made last year with an estimated cost to the Government of $2.1 billion over three years.

Covid recovery funding for Regional Tourism Organisations for two years in a row. For the coming financial year, $26.6 million is being distributed to 31 RTOs, including $1.5 million to the Auckland RTO, $1.5 million to the Destination Queenstown RTO and $1 million to Lake Wanaka Tourism RTO.

”I particularly want to thank those businesses in Auckland, who are doing it tough for the rest of the country. We know that it is hard going but we will manage this outbreak together and come out the other side and rebound again” said Nash, who is also minister for economic and regional development, small business and forestry.

Doolan said the hit to revenue was calculated by comparing month on month data from the past 18 months to 2019 figures.

”Lockdowns are disastrous, but hotels have been struggling ever since borders closed.The 40 per cent revenue drop threshold has been reached in the majority of months since Covid began, not just when there’s level 3 or 4.”

After airlines and airports, hotels are the most capital intensive parts of the tourism sector and unlike other businesses couldn’t park their assets.

”It’s not like when we lose business just for a lockdown.Thatnever gets recovered – it’s gone, it’s like throwing fruit away.”

The revenue figures for Auckland hotels were inflated by 17 or them being in the managed isolation and quarantine scheme (MIQ) making up just over half of the country’s total.

Doolan said when they were first contracted by the Government it was hoped it could be for six months or so.

”Are the hotels that ended up doing that work happy they’re doing that work? of course they are. Are they making off like bandits? I don’t think so.”

Horwath HTL, hotel, tourism and leisure consultants, forecast a room glut in Auckland before the pandemic and its managing director Stephen Hamilton said the outlook was getting worse for hotels in the city.

It could be 2025 before pre-pandemic overseas visitor numbers were reached and by then the number of hotel rooms in the city is due to grow by 2500, on top of close to 11,400 existing beds.

“‘It’s going to be a long haul for Auckland because of the room supply increase. Arguably we may never get back to the level of international arrivals this investment was predicated on and that is very scary’

He said there were grounds for the Government to treat Auckland accommodation as a special case, especially because the city hasn’t been able to benefit from the surge in domestic tourism during the pandemic. Most spend by Aucklanders – the biggest in the country – was outside the city.

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