Tourism rescue package upped from $100m to $400m

Thursday, 16 July 2020

The Government has paid out $11 billion in wage subsidies to businesses that have suffered a loss of income as a result of the coronavirus crisis. (File video, first published in August 2020)

Treasury documents show the Government’s tourism rescue package quadrupled in size as discussions progressed on how to help the sector survive Covid-19.

According to papers released under the Official Information Act, Treasury initially suggested a $100m sum, which it described as “substantial, but not exceptional” in light of other assistance, but within days it had been upped to $400m.

Tourism Industry Aotearoa chief executive Chris Roberts is very relieved the higher amount was agreed on.

“For an industry that pre-Covid was seeing $112m a day spent in New Zealand, $100m would have been less than a day’s worth of spending, and that would have certainly been inadequate. “

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There are more than 20,000 tourism businesses in New Zealand and before the global coronavirus pandemic, they employed almost 230,000 people. t

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The Hermitage at Aoraki Mt Cook was previously part of the Government-owned Tourist Hotel Corporation. Tourism New Zealand raised the prospect of a return to that kind of scenario when it suggested the Crown consider buying key tourism attractions in danger of closing.

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The Bay of Islands is identified as an area which will struggle because there are few alternatives for tourism workers who lose their jobs.

The documents show Treasury and the Ministry of Business, Innovation and Employment (MBIE) had “fundamental concerns” about Tourism Minister Kelvin Davis’ proposals to help operators survive the border closure.

Treasury documents say the effect of other disasters had been compounded by Covid-19 in some areas, such as the Bay of Plenty which is still recovering from the Whakaari/White Island volcanic eruption.

The two agencies said that the plan did not prioritise “getting money out the door” to cushion the blow, and it did not adequately consider the long term trade-offs needed, such as concentrating on value over volume.

Just four days before the Budget announcement, Treasury said it broadly supported the three parts to the tourism recovery package, but they still needed to be scoped, and it noted the advice had been developed “under extremely tight time constraints.”

An option mooted by Tourism New Zealand, but not taken up by officials, was that a fund be set up to buy strategic tourism assets on behalf of the Crown.

Roberts said it was an idea that harked back to the past.

“We have not seen any evidence of assets where the owners are leaving the key in the door and walking away, it does seem a little bit back to the future.

“The Government ended up taking over the Château Tongariro because the original developer walked away, but it’s a long time since the Government had the Tourist Hotel Corporation and owned some of the major hotels around the country.”

A short term grant scheme for both small and large tourism businesses, based on covering lost revenue or fixed costs, was considered for the rescue package.

The Government instead plumped for a strategic assets programme targeting major attractions that drew large numbers of international visitors, and contributed a significant amount to regional economies.

So far more than $15m has been distributed and 300-plus applicants are competing for a share of the remaining pool.

Officials warned that helping the more than 20,000 small businesses in the tourism sector was a delicate balancing act.

Overinvestment risked keeping jobs and capital in businesses that may not have a strong future, while underinvestment might mean key firms or assets failed, and their absence slowed recovery.

Roberts said TIA believed there was still a need for cash grants.

“We have been assured there is more to come.

“There’s a gap in support for medium-sized businesses unlikely to be classed as strategic assets to help them survive until their customers return.”