Coronavirus: Rescue package fails to deliver for tourism and hospo businesses

Wednesday, 15 April 2020

The Government's latest rescue package does not go far enough for businesses starved of tourists and fearing the end of wage subsidies. 

Tourism Industry Aotearoa chief executive Chris Roberts said measures announced on Tuesday to help small to medium sized businesses did not help his members still facing high overheads. 

They needed a capital injection, such as from an interest free loan, to pay rent on their business premises. 

Roberts said many operators had lease clauses that entitled them to a a discount - commonly 50 per cent -  while their premises were inaccessible during the level 4 lockdown, but that would no longer apply when restrictions were relaxed. 

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​'Then you are really at the mercy of the landlord at that point.'

Hospitality New Zealand chief executive Julie White said the latest package fell well short of what was needed to save hospitality businesses and jobs, and targeted relief for rent and rates was needed now.

'Many of our members will not have the cash-flow to re-open after level 4 without further immediate support, and the measures that the Government has announced will in no way help businesses that cannot reopen.

Even with the wage subsidy, White said 32 per cent of hospitality operators had laid staff off, and more than 60 per cent were likely to make more workers redundant.

Roberts said the tax loss carry back scheme unveiled on Tuesday was something the tourism industry had specifically asked for and it would be very helpful. 

'It's a very sensible move to allow them to offset losses they are now incurring against the profits they made last year, and that will keep cash within the business.'

But it was not enough to ensure the survival of businesses who faced laying off staff when the 12 weeks of wage subsidies end. 

Roughly 1 per cent of the wage bill was made up of Accident Compensation (ACC) levies and Roberts said the Government should consider suspending employer contributions until the end of the year. 

'We understand the employer levy is in a healthy position and we anticipate there will be much lower claims with so many people now working from home.'

Department of Conservation (DOC) concession fees for commercial activities carried out on the Crown estate were also an issue. 

DOC has written to concessionaires giving them a month's grace to pay their outstanding annual fees.

Roberts said that for some concessionaires the fee, which traditionally included 7 per cent of revenue, could be a six figure sum and he feared there could be a high default rate because some simply could not afford to pay.

'DOC suspending it for a month is not going to do a lot. 

'That's going to impose a burden on a business at a time when they have no money, and the other issue facing DOC is that concessionaires are not going to be doing a lot of work in the next 12 months, so DOC's income in a year's time is going to be substantially lower.'

Roberts said there had even been discussions about the Government potentially taking an equity share in key tourism businesses to ensure they did not fail. 

'While our industry is mostly small to medium businesses, we do have some large business that are an essential component of the industry and many of them have been built up over many decades and it would be tragic to see any of them fall over. '

Roberts declined to say what tourism operators might be in this situation and requiring Government investment to secure their future.