Flawed tourism rescue plan was almost dumped

Tuesday, 15 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 controversial plan to save key tourism attractions struggled to properly assess applicants and was almost dumped.

Ministerial briefing documents just released reveal that the strategic assets protection programme (STAPP) – the mainstay of the Government’s $400 million tourism rescue package – was fraught with problems.

The Tourism Ministers Recovery Group eventually chose 130 businesses to support out of 308 applicants, but at a watershed meeting on July 22, the option of closing the scheme down completely was on the table.

However, ministers decided to cap grants at $500,000, which Ministry of Business Innovation and Employment (MBIE) officials opposed because they said it would carry high administrative costs and lead to “perverse outcomes.”

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Wayfare Group was successful with seven separate applications for its various tourism operations such as the TSS Earnslaw, Queenstow, and received $3.5m in total from the STAPP fund.

The aim was to get money out to ailing businesses by the end of July, but that target was not met.

On July 9 ministers were so concerned about the “truncated” assessment process they agreed not to allocate any further funding while the STAPP was hastily rejigged.

Jolanda and Richard Foale own Heliview Flights, a Cromwell-based tourism company that was one of a few helicopter operators to miss out on STAPP funding. They say it will be harder to compete with larger scenic flight operators who received grants of up to $500,000.

By that stage they had already agreed to make $15.8m in urgent grants to AJ Hacket Bungy, THL Ltd’s Discover Waitomo, and Kaikōura Whale Watch.

According to a briefing paper dated July 15, “from the information provided, [the ministers] were not able to confidently identify ‘strategic tourism assets’ from other tourism assets,” and they lacked sufficient information on individual businesses to decide whether they deserved STAPP support.

Ministers also raised concerns that many of the more well-known tourism assets were owned and operated by larger firms who had made considerable profits over recent years and should therefore have “commercial options” for finance.

They noted that applicants had declared that they had exhausted alterative sources of funding but that officials were unable to independently determine if that was the case in the time available, and they asked MBIE to look at other options for STAPP funding.

Officials recommended pausing the programme to see how the upturn in domestic tourism and the end of the wage subsidy panned out, and it gave them time to come up with “more informed and better targeted support mechanisms”.

Options included funding about 10 assets to allow proper due diligence to be done to ensure the Crown was genuinely a funder of “last resort,” and the use of semi-commercial loans rather than grants.

The way 130 successful tourism operators were eventually chosen has come under fire, and a group of businesses who missed out were considering seeking a judicial review of the selection process.

In the early stages, MBIE officials recommended assisting just 30 well known tourism operations, such as Dive Tutukaka or Hobbiton, but later upped this to 53. (Hobbiton did not apply and Dive Tutukaka received the maximum grant of $500,000.)

MBIE said that if large numbers of businesses were helped – say up to 1000 – it would cost a lot more and designing “bespoke support packages” would be more difficult.

It warned of a backlash if even up to 100 businesses were chosen because it could spark debate about which assets were truly strategic, and it gave the example of a West Coast sightseeing company that could object to being left out if its competitors were got funding.

A moderation exercise to ensure all applicants were treated fairly and consistently led to all jet boat helicopter tour operators being ruled as eligible.

To be eligible tourism operators had to be well known, attract large numbers of visitors that would drop substantially if it closed, and generate economic benefits across the region.

Applicants were ruled out for three main reasons – they were transport, accommodation or hospitality services, they were too small, or they had sought money for capital work or marketing.