No guarantees for millions given to big tourism companies

Thursday, 9 July 2020

A $1.5 million Government funding boost helped Whale Watch Kaikōura set a July 4 date to resume its tourism operation.

The Government has admitted there is no security for taxpayer money spent on saving major tourism operators.

Most of the $400m tourism rescue package is being devoted to a strategic assets protection programme which has so far given out $15.7 million in grants and loans to A J Hackett Bungy, Tourism Holdings Ltd Waitomo cave tours, and Kaikoura Whale Watch.

More than 300 operators have sought assistance under the scheme, and small tourism companies ineligible for the money are upset at the focus on saving big businesses.

The Ministry of Business Innovation and Employment (MBIE) said successful applicants would have to meet strict conditions, but it has confirmed it would not make a claim against assets if a business failed.

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AJ Hackett Bungy will receive a $5.1m grant in the first year, with a possible loan of up to $5.1m available in the second year if borders remain closed to international tourists.

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Tourism attractions chosen as “strategic assets” are supposed to receive Government funding before the end of July.

* Government backs Waitomo caving with $4m, dishes out $20m to regional tourism groups

Tourism Minister Kelvin Davis has indicated at least 50 “strategic” tourism ventures could receive funding which aims to ensure key attractions survive the dramatic drop in visitors resulting from Covid-19 border closures.

Tourism Minister Kelvin Davis, seen here visiting Kaikoura Whale Watch with Prime Minister Jacinda Ardern, has repeatedly said the Government cannot afford to save every business.

In a written statement MBIE assets programme director Danielle McKenzie said recipients would have to report quarterly on conditions in their funding agreement, such as retaining a minimum number of employees.

“We do not anticipate refunds of the [strategic assets] funding, and we will not be seeking repayment if the business is no longer viable.

“To minimise risk, we have split grant payments into three monthly payments. We will not make a claim against the assets if the business fails.”

Questions have been raised about the fairness of publicly listed company Tourism Holdings Ltd company receiving $4m for its Discover Waitomo attraction, while other Waitomo operators end up laying off workers.

McKenzie said applicants signed a declaration stating they had explored and exhausted other sources for funding and to date Deloitte had been paid $87,000 for an independent financial analysis of applications.

Davis said he was comfortable with the checks and balances built into the process to minimise risk.

But that does not satisfy a new ginger group set up to represent the small operators who make up the vast majority of New Zealand tourism businesses.

Responsible Environmentally Sustainable Entrepreneurial Tourism (Reset) has gained 180 members since it was formed a month ago.

Reset spokeswoman Jacqui Wilkinson said members employed more than 500 people and generated annual revenue in excess of $80m.

She said the assets programme appeared to help high volume mass tourism which was at odds with the more sustainable approach outlined in the Government's tourism strategy.

To be eligible for the money, an operator had to be internationally recognised, and provide significant economic benefits to the community.

Wilkinson said Waitomo was an example of the unfairness of the scheme because publicly listed company Tourism Holdings had received $4m for its caving tours while smaller businesses in the same area were ineligible, even though collectively they also contributed substantially to the community.

“If a coach load of tourists turns up at a large attraction and literally just visits that large attraction and leaves, I’m not sure how the broader community is seeing much of that money at all.”

The wage subsidy finishes on September 1, and according to MBIE, of the $10.7b spent by May 22, an estimated $1.75b had gone to tourism-related firms.

Wilkinson said not everyone wanted to visit Hobbiton the Waitomo Caves, and the loss of many small boutique operators would be a major blow for the tourism industry.

”Most of us don't know how we’re going to pay our landlords, most of us haven’t had any income for months now.”

A further extension of the wage subsidy should be reconsidered.

”You can't just say ‘the job’s done, we’ve saved the big guys, we’ll see you later and if all you small guys fall over, tough,’ because that seems to be the message that's coming through.

”Imagine if this was happening in the farming community and small farmers, who play a very import role in the primary sector, being told ‘shut up, you're not one of the big guys, we will only prop up those who produce the most amount of milk, ’” Wilkinson said.