Lifeline or lottery? Questions of fairness over $400m tourism rescue scheme

Friday, 11 September 2020

New Zealand had about 20,000 tourism businesses pre-Covid and about 126 key ones received more than $270m in grants and loans to save them from possible closure.

A lifeline, a lottery, or an absolute shambles? AMANDA CROPP reports on a plan to save tourism businesses.

A small family tourism venture in the tiny Central Otago town of Makarora is celebrating $1 million of Government grants to help see it through the Covid-19 pandemic.

Wilkin River Jets and Backcountry Helicopters, owned by pilot Harvey Hutton and his partner Patsy Nolan, each received $500,000 and Nolan says they are thrilled about the boost it will give the village (population circa 100) between Wānaka and Haast.

The money from the Government’s strategic assets protection programme is on a par with grants made to much larger attractions, such as Skyline Enterprises’ Rotorua and Queenstown gondolas and luges which employ about 200 staff, but a lot less than the widely criticised $5.1m given to AJ Hackett Bungy.

The scheme of grants and loans aims to keep key tourism operators going until the borders open but several dozen aggrieved businesses who missed out are considering legal action, potentially seeking a judicial review of the funding process overseen by the Ministry of Business, Innovation and Employment (MBIE).

**READ MORE:

Skyline’s gondola and luge attractions in Queenstown and Rotorua each received a $500,000 grant from the strategic assets protection programme, the same amount as some much smaller operators.

Howick Historical Village got a $500k Government grant as a strategic tourism asset, on top of $330k from Auckland Council. Manager Krissy Perret said the funds would let them reopen on September 19. “We were overjoyed, it has been a lifeline.”

* Queenstown tourism company collects $10.7m from govt, slashes permanent jobs

* Ngāi Tahu Tourism receives million dollar funding boost

* Tourism industry cries foul over the $311m Covid aid package

* Tourism Export Council 'immensely disappointed' by $311m industry aid package

* Tourism awaits funding news after criticism of 'Hackett cash'

* No guarantees for millions given to big tourism companies

MBIE is also getting a hail of correspondence and Official Information Act requests from other rejected operators.

R&R Kayaks co-owner Rohan Haskell is kicking himself for not applying for a Government assistance scheme, but many smaller tourism business owners, he did not think he was eligible.

Reset, a group of about 300 businesses pushing for more sustainable high value low volume tourism, is grilling MBIE over eligibility criteria that saw 116 applicants disqualified, the expertise of officials who assessed them, and whether regional spread was a factor in the decision-making.

How did we get to this?

Tourism Minister Kelvin Davis promised the bulk of the $400m tourism rescue package announced in the May Budget would be devoted to saving strategic assets.

In the end just over $67m was given out in grants and almost $203m in loans (five-year terms, interest free for the first two, then an interest rate of 3 per cent).

Heliview Flights owners Jolanda and Richard Foale are now targeting Kiwis for their specialist vineyard tours and helipicnics, but they say it’s going to be hard competing with bigger operators who received Government grants they were denied.

The scheme was originally going to assist about 50 tourism businesses, but ended up selecting 130 out of 308 applicants, and only about half of them have been publicly identified to date.

Some of the winners – Howick Historical Village, Glenbrook Vintage Railway, Northland’s Kauri Museum and Wellington Zoo for example – have raised a few eyebrows.

MBIE says all recipients and details of their grants and loans will be published once they have negotiated and signed funding agreements covering aspects such as how many jobs will be protected.

So far it has paid out $15.8m in grants to 70 businesses which receive them in quarterly installments.

Wellington Zoo is among wildlife and conservation attractions recognised as key tourism businesses.

Winners and losers

Rohan Haskell runs R&R Kayaks in the Abel Tasman National Park, and he does not begrudge competitors who got money.

However, he says the “haves versus the have-nots” atmosphere means relationships between park operators who previously got on well are now “a bit awkward and not so easy”.

Glenbrook Vintage Railway general manager Tim Kirwan says about a third of its revenue came from coach tours carrying overseas visitors pre-Covid-19, and he is grateful for a strategic assets grant. A crisis appeal has also raised $110,000 in donations to help get the charitable trust back on track.

He is deeply unhappy about the lack of transparency and fairness which has prompted him to join other operators getting legal advice on their options.

The criteria provided by MBIE led him to believe he was ineligible, so he did not apply. “In hindsight, every tourism operator should have applied.”

Cromwell-based Heliview Flights owners Jolanda and Richard Foale were part of a group of 24 aviation tourism businesses that in May put forward a proposal for grants to cover air operating certificates and aircraft maintenance.

Accommodation businesses were excluded from the strategic assets fund, but an exception was made for the Duke of Marlborough hotel in Russell because of its heritage status as the country’s oldest licensed hotel.

“It meant something for everyone,” says Jolanda Foale.

But they were told to seek strategic assets protection programme funding instead, so gave it a punt, asking for $170,000.

They were bitterly disappointed to discover that of 12 helicopter applicants, they were among only three turned down.

Tourism Minister Kelvin Davis says the number of tourism business awarded grants changed, but the process for deciding who got the money did not. “There’s always going to be people who’re unhappy.”

“Some people have been given a hand up and others have been chopped off at the knees,” Foale says.

Tourism Industry Aotearoa chief executive Chris Roberts says industry rumblings about the programme are widespread.

“It appears that the criteria has been quite elastic.

“At face value not all the successful applicants would normally be considered a strategic tourism asset that New Zealand cannot survive without, which was the initial stated purpose of the fund.

“Our fear from the beginning was that by trying to identify the businesses that needed to be saved, you were inadvertently condemning others, you were allowing others to fail.”

Wilkin River Jets has a $500,000 grant to see it through the Covid-19 pandemic. The Blue Pools near Makarora were on their river jet safari trips.

Running the lolly scramble

MBIE defined a strategic tourism asset as one that was nationally or internationally recognised, a key operator attracting large numbers of visitors that would drop substantially if it closed, and generating significant spill over benefits to other businesses in the region.

Accommodation, transport, retail and hospitality were excluded, but exceptions were made for those with iconic cultural, heritage or environmental status.

MBIE looked at whether businesses could be “paused” then turned back on when demand picked up, and whether highly skilled staff would be difficult to replace if lost.

The Wayfare group was successful with seven separate applications for its various tourism operations such as the TSS Earnslaw, Queenstown.

Under the “high trust model”, applicants had to sign a declaration that they had exhausted all other avenues of support from Government and private sources such as banks or investors, and Deloitte did financial assessments on all 145 applicants deemed eligible.

They were sent to seven other government agencies for comment, and on July 7 recommendations went to the Tourism Ministers’ Recovery Group (the ministers of tourism, , Māori development, conservation, and the under secretary of regional economic development).

They decided who got the money and had discretion to attend to urgent requests, which explains how assistance for three big operators was approved well before formal applications had even closed.

Kaikoura Whale Watch got $1.5m, Discover Waitomo $4m (split between a loan and a grant), and for AJ Hackett $10.2m (a grant matched by a loan of the same amount).

Kelly Tarlton’s successfully applied for assistance despite being overseas-owned, but the amount it will receive has not yet been publicly released.

Tightening the purse strings

But late in the piece on July 24, ministers decided to cap all grants at $500,000 regardless of what was asked for.

Inflite Charters sought Government support for its aviation group, but confirmed the grant offer specifically excludes its four skydive operations. Skydive Queenstown which is owned by ASX-listed Experience Co received $500,000.

Davis stoutly defends that move, and denies it was in any way related to the backlash against the Hackett help.

He says the economic environment had changed with the much anticipated trans-Tasman bubble bursting in spectacular fashion following the outbreak in Victoria, Australia.

The wage subsidy was extended and domestic tourism, particularly over the school holidays, was stronger than anticipated.

AJ Hackett Bungy NZ was one of three large attractions that received emergency grants ahead of other tourism operators. According to its application, it drew more than a million visitors annually to its regional sites.

“While the operating environment changed, the way we determined successful strategic assets didn’t,” Davis says.

The number of applicants was higher than expected, which led to them more than doubling the number chosen, he says.

NZ Ski is one of two grant recipients that decided to turn down the offer of Government assistance.

“It took much longer than we would have liked because we agonised over it … There came a point where we didn’t have any more money, so some that were below a particular score sadly missed out.”

He dismisses any criticism about supporting “minnows” like Wilkin River Jets which according to its website has two jet boats, two helicopters and six staff.

23112017. News. Photo: Mytchall Bransgrove/Timaru Herald. Aoraki Mt Cook mount trip feature scenic tourist tourism scenery landscape NZ national park walks hike ice snow glacier river search and rescue. Hermitage hotel

“We also copped criticism that we were only looking after the big end of town and now we’re getting criticism that we looked after a broader range.”

In the end a total of 18 eligible applicants were left empty-handed.

Angst over who was ruled in and out

Other aspects of the funding scheme, possibly caused by the haste with which it was stitched together, have also caused concern, and the late stage decision to limit maximum grants to $500,000 had a major impact.

Aviation industry advocate Irene King, who assisted applicants, says the criteria never defined what an individual business was, leaving it open to interpretation.

The Wayfare group received $3.5m in grants after lodging seven separate applications for its ski and cruise brands.

Totally Tourism on the other hand, got a $500,000 grant after submitting a single application covering four separate divisions operating 23 aircraft, and two Milford Sound cruise vessels.

Overseas-owned companies could apply and at least two were successful.

Sealife Kelly Tarlton aquarium in Auckland is owned by Merlin Entertainments, a global business with more than 130 attractions in 25 countries.

Aquarium general manager Daniel Henderson would not reveal how much they got from the programme and says they were up front about their limited funding from Merlin, which was severely affected by the pandemic.

Fallout from the Hackett cash

There is no doubt that the $10.2m Hackett decision greatly inflamed criticisms of the programme because the company’s wealthy owners include richlister Sir John Davies, and Henry van Asch, whose property portfolio includes one in Darfield with a valuation of almost $7m.

Reset group member and Haka Tourism Group general manager Eve Lawrence says operators forced to mortgage their homes to stay afloat are still angry about it.

”Almost nobody would have begrudged them a loan, but it was the grant portion of the money that got people really riled up.”

AJ Hackett Bungy NZ refused repeated requests for an interview, but documents obtained under the Official Information Act show it sought emergency assistance from the Government in late May, and just days later it got the thumbs up after signing a declaration it had explored and exhausted private or commercial finance sources.

On July 23, a month after Hackett’s funding was publicly announced, Davis’ office sought reconfirmation of that declaration from Hackett’s chief executive and board chairman.

Davis says it was given. “My understanding was that officials had received assurances that they had expended all options of finding money and if they didn’t get support the business would go down and 83 jobs would be lost.”

Trojan Holdings, which has a 40 per cent shareholding in AJ Hackett, also owns NZ Ski which is one of two successful applicants to decline grant offers (MBIE would not identify the second one).

NZ Ski chief executive Paul Anderson says the decision to turn down a $500,000 grant and a $6.6m loan was not influenced by fears of negative public reaction post-Hackett.

“My understanding is that it should be a fund of last resort, and at the moment we’re doing better than expected, and we’re able to access some funds from our parent company.”

According to MBIE, the loan facility is still being established and no agreements have yet been signed, but Roberts says there is not a lot of enthusiasm for loans that have to be repaid when businesses have greatly reduced incomes.

If they are not taken up, he would like the money spent on tourism rather than directed back into general coffers.

“It is quite clear that a significant proportion of the recovery package may never be actually accessed, and if it is, will have to be paid back.

“It would be over-stating it to say that the tourism industry has received $400m, it has received considerably less than that.”