WHAT NEXT FOR OUR HOTEL SECTOR?

“Overnight our hotel sector nosedived from dealing with a critical shortage of hotel rooms to accommodate our booming tourism sector, to the heartache of closed doors and empty beds.

This drastic U-turn, so extreme and sudden to battle Covid-19, left hoteliers in freefall managing operations 24/7 to look after their guests, their staff and then look strategically at their operations.

While hotels more dependent on the Chinese market were first hit hard in February when our borders were closed to foreigners arriving from China, no one could foresee what would happen next as Covid-19 spread rampant across the globe leading to New Zealand shutting all borders and then moving to Alert Level 4.

There’s no rule book for this. A completely blank canvass where anything before, is virtually no more.

While every corner of our economy is impacted, tourism – our largest and fastest growing industry, our largest export earner – has been at the forefront. Just as air planes sit lonely on the tarmac, so do many of our hotels. Empty, their grandeur depleted.

The places where tourists flocked. No longer the hustling bustling environments where travellers enjoyed renowned Kiwi hospitality.

Around half of New Zealand’s 250 hotels (50 rooms or more) are now closed. Those remaining open do so with skeleton staff to help stranded tourists, guests in self-isolation, air crew and essential service workers; the police the medical staff. Those working hard on the front line to keep us all safe.

As hotel doors closed, perishable and short dated food was given away to staff, to night shelters and charities. Those hotels still open accommodated staff for free. Staff whose flats had disbanded, or had become over crowded, and they had nowhere to go.

The people came first. The guests, the staff – then a long hard look at the balance sheet.

Turn back a page, when hoteliers struggled to keep up with demand. When projected growth in new hotel rooms over the next 10 years estimated that there would  be a significant shortfall in hotel rooms of up to 4,526 across New Zealand’s five focus regions by 2025. 

Hoteliers then investing hundreds of millions into building new hotels so the tourists could keep coming and other businesses could enjoy the ripple on effect.

Today, we face a reverse landscape. Hotel occupancy plunged by 40 per cent in March this year compared to the same time in 2019 and RevPAR is down by 45 per cent mostly driven by the freefall in the second half of the month. It’s bittersweet when overseas visitor arrivals into New Zealand increased by 2.9 per cent in January, reaching 410,432 and beating market expectations.

So where to now for our multi-billion-dollar tourism industry? An industry contributing $40.9 billion to our economy each year, and $112 million each day.

The Covid-19 curve looks to be flatting but our borders won’t be open any time soon. Hoteliers may be resilient but they are also realistic. The remainder of the year, for those properties still open, will see very low occupancy, single digits in many cases with more hotels closing as stranded tourists return home, and as accommodation for essential services declines.

The next 18 months will be especially tough with just some hoped-for-but-not-certain domestic tourism including corporate travel returning, yet remembering people and businesses will have limited discretional spend. When the borders do open, they will open to countries deemed safe. Let’s look closely at our Australian neighbours who make up 40 per cent of total arrivals.

We must protect our hotel assets worth around $10 billion. 

Any targeted rate on the commercial accommodation sector that Councils around the country have in the pipeline to pay for “growth infrastructure”, must go. The Auckland Provider Targeted Rate (APTR), must go.  A rate that’s increasing the rates bill by up to 200 percent in some cases. It wasn’t sustainable before, and it certainly isn’t now – not in this new norm.

With a full recovery expected to take up to five years, everything to relieve the burden on the hotel sector must be done, including the government reviewing taxation obligations, depreciation and extending the wage subsidy scheme for those in the tourism sector, as things will be far from normal in three months’ time when the subsidy period currently ends.

While hotel owners unreservedly support the Government efforts to eliminate or minimise 

COVID-19 and ensure we live up to our 100 percent Pure brand, it is essential that support is given in various forms to recognise the economic and social disruption that its policies have caused.  

We need to look closely at what other governments around the world are doing and stay connected with our counterparts across around the world. 

Most of all, we need to stay positive in the knowledge that tourism, one of the hardest hit industries, will come back but it will take time and getting a real gauge on how long that will be, requires some crystal ball gazing.”

By Amy Robens, executive director of New Zealand Hotel Owners Association