Tourism job losses predicted to peak at 92,000 this year

Friday, 26 June 2020

Job losses in tourism and hospitality escalated after the borders closed, but some hotels are re-employing staff to cope with the increase in domestic travel, particularly over the school holidays.

A newly released Government paper paints a bleak outlook for tourism with job losses predicted to peak at 92,000 this year.

Economic losses from Covid-19 in the tourism sector over the next four years were estimated at $18b to $21b of GDP.

The information was in a massive new tranche of Covid-19 Cabinet papers and other documents proactively released by the Government on Friday.

A paper on the Government's $400m tourism recovery package from Tourism Minister Kelvin Davis warned the sector's recovery would much slower that other areas of the economy because international travel was zero, and a trans-Tasman bubble would take months.

AJ Hackett Bungy has received up to $10.2 million to ensure its survival post-Covid-19. In May the company announced 150 jobs out of 224 could go as it made cut backs.

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A domino effect was already evident with insolvent tourism operators unable to pay their suppliers and smaller businesses supporting major operators were also compromised.

Chief executive of Tourism Industry Aotearoa Chris Roberts says it is not yet clear when job losses in the sector will peak because there is so much uncertainty around factors such as the opening up of borders with Australia.

The forecast of 92,000 job losses is not far off Tourism Industry Aotearoa's estimate of 100,000, and chief executive Chris Roberts said that despite some positive signs, the future remained uncertain.

Some businesses were re-employing staff because of increased demand from a domestic market buoyed by a post-lockdown desire to travel and the school holidays.

The government has taken a leap of faith on Wednesday approving more than $10 million in funding for AJ Hackett bungy after declaring it a strategic tourism assets.

'But at the same time there are other significant lay-offs still going ahead, so it's very much a mixed picture.

'Our worst fears of 200,000 jobs losses have been alleviated, but it doesn't mean it's not still a possibility if things take another downward turn.'

Roberts said more unemployment was looming when the extension to the wage subsidy began ending in mid-August, and that would make it difficult for some businesses to hang onto staff until summer.

The newly released document outlining the Government's tourism recovery plan also justified the need for a strategic assets programme set up to prevent key attractions from failing.

The fund, which has received more than 300 applications, has so far given $15.7m in grants and loans to three major tourism operators - Kaikōura Whale Watch, THL's Waitomo Caves tours, and AJ Hackett Bungy.

The Hackett decision has been criticised as corporate welfare because of the owners' substantial business and personal assets.

Davis said it was 'neither feasible nor desirable to keep all firms afloat' until borders reopened and travellers' fears about Covid-19 abated, but important parts of the tourism network needed protection.

'There is an unjustifiable risk that some key attractions, services or facilities may be lost, and that this will slow down either the national or regional recoveries, with a disproportionate and even catastrophic impact on some communities.'

Funding criteria on the Ministry of Business, Innovation and Employment website ask whether applicants are facing severe financial stress, and if they had exhausted all other sources of cash and working capital.

In a recent Radio New Zealand Interview Davis repeatedly said that Ministers choosing recipients for the money would base their decisions on advice from officials.

Roberts said the fact that so many applicants would be unsuccessful would cause tension across the industry, and there had already been questions raised over the choice of recipients to date.

'I don't think there is any doubt that the first three businesses are all iconic businesses we want to retain, even though people may have different views on their ownership.'

Part of the problem was the need to get the funding allocated quickly.

'The usual process for this Government funding involves about six months of jumping through hoops and the downside of that is the time it takes and there are frustrations for the applicant.

'This is certainly going to be much speedier, but that does mean that some of the controls are not going to be there, we recognise that and getting decisions made quickly is really important,” Roberts said.