Tourism 'lolly scramble' is over leaving lots of unhappy losers

Friday, 27 November 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.

Analysis: For some tourism operators, the process of divvying up $67m in cash grants to save key attractions has gone down like a cup of cold sick.

For others the money has been a lifeline, allowing them to keep their doors open and experienced staff employed.

The saying, 'act in haste, and repent at leisure' certainly applies to the process of divvying up more than $300m set aside for the Government's strategic tourism assets protection programme (Stapp).

It had the laudable aim of speedily pouring much needed cash into struggling businesses, ensuring popular economically, culturally and historically important tourism attractions did not fail as a result of the prolonged border closure imposed by Covid-19.

* $500,000 for Rainbow's End from Govt fund to save tourism businesses

* Tourism operators who missed out on funding call for review

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

While it may ultimately achieve that for lucky recipients, rancour about the scheme runs deep among those who missed out.

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.”

The selection process proved so messy and fraught, Ministry of Business Innovation and Employment (MBIE) officials recommended ditching the entire scheme and starting over, and the original target of assisting 50 businesses exploded to 130.

On Friday Tamaki Maori Village was named as the final recipient, four months after MBIE began publicly identifying those offered grants.

It took that long to work through funding agreements covering everything from staff numbers and pay rates (living wage preferred) to sustainability measures.

Tourism hot spots Queenstown and Rotorua got by far the largest number of grants, but the battle to find out exactly how winners were chosen from more than 300 applicants is far from over, and a group of 50 unhappy operators have asked the Auditor General to investigate the process, with threats of a judicial review still in the offing.

Much of the angst has centred on the fact that three high profile companies, AJ Hackett Bungy, Whale Watch Kaikoura and Tourism Holdings Ltd's Discover Waitomo, got in ahead of the formal selection process, scooping up $8.6m in grants before the maximum amount per applicant was capped at $500,000.

That capping has led to some striking differences in terms of who got what. Tiny Kaikoura Kayaks, for example, got the same amount as fellow Kaikoura operator Dolphin and Albatross Encounter which arguably faces much higher maintenance costs for larger vessels and a much bigger payroll bill.

MBIE's Stapp criteria specifically excluded retail, accommodation and transport businesses, but exemptions were made for those deemed culturally or historically important.

Kaikoura Kayaks has adapted its business model to focus on family-friendly tours during the Covid-19 pandemic. It received $500,000 from the Stapp scheme.

As a result, the Duke of Marlborough Hotel in Russell got $500,000 and the Waewae Pounamu retail shop and greenstone carving studio in Hokitika $320,000.

The latter is owned by Ngāi Tahu hapu Ngāti Waewae and chairman Francois Tumahai said that without the Stapp money the business could not have reopened

They were able to re-employ six workers, three of them full time pounamu carvers, and take on commissions from the corporate sector.

Kayak guide Zak Ainsworth switched to working at a supermarket when the pandemic struck. He had hoped to return to tourism, but has since quit the industry to become a landscaper.

Jobs saved

Former Tourism Minister Kelvin Davis told Stuff Stapp would protect up to 3000 jobs, and he strongly defended the decision to proceed with 130 grants, even after MBIE officials raised serious concerns about potential inequities in the scheme.

'It's the job of Ministers to use their judgment, weighing up all the advice against a range of different priorities, otherwise we'd just have bureaucrats running the country, not elected officials,' Davis said.

'We had to adapt the type sort of support we were providing to make sure it was targeted, that it was sustainable, and it had the biggest impact possible for the long term health of the tourism sector.'

Campervan rental company Jucy, which was recently sold after going into receivership, said the $500,000 grant it received for its Jucy Cruise trips on Milford Sound had paid for boat maintenance and wages, saving 12 jobs immediately and up to 25 as demand grew.

Ngāi Tahu Tourism laid off most of its 348 kaimahi (employees) and has gradually built back up to 148. A spokesman said the $1.9m it received in Stapp support had played a part in that, allowing it to reopen businesses, like Dart River Adventures and the National Kiwi Hatchery, that would otherwise have remained mothballed.

Double Dipping

During the selection process, questions were raised about the number of applications from large entities with inter-related companies, and some won multiple grants by submitting applications for each of their individual businesses or brands.

MBIE said it would carry out spot audits on businesses to see if they spent taxpayer money in the way it was intended.

MBIE insists applications were assessed on their own merits in accordance with the eligibility criteria, and 'ownership structure had no bearing on the consideration of the individual strategic asset they applied to protect.'

Tourism giant Wayfare got $3.5m spread across four cruise and ferry services, two ski fields, the Te Anau Glowworm Caves, and the International Antarctic Centre. On top of that it is also a shareholder in Milford Sound Tourism which got the maximum grant of $500,000.

Several much smaller companies also got multiple grants. The owners of Abel Tasman Sea Shuttles and Kaiteriteri Kayaks, for example, were awarded $1m across their two operations.

The Alborn family submitted a single application for three of their Abel Tasman businesses and received two grants totalling $866,000 for Marahau Water Taxis and Marahau Sea Kayaks.

Director Brendan Alborn said they were disappointed to miss out on a third grant for the company that staffs their Marahau camp ground, store, cafe and booking centre.

He is aware of competitors who have laid off all their staff, but he suggests those who did not put their names in the ring for Stapp support only have themselves to blame.

Brendan Alborn has plenty to smile about. He is still hoping to employ 54 full time equivalent staff this summer instead of the usual 70 in peak season, and says cash from the Government has been a big help. 'It means I sleep much better at night.” But smaller Abel Tasman operators who did not receive any money are worried about how they will compete.

'I know there are businesses that didn't apply for it, and that's a bit like complaining when you neighbour wins lotto when you didn't buy a ticket.'

He had more sympathy for those who applied and did not get it. 'I'd be really sore as well.'

His take on Stapp is that the Government moved the goal posts part way through the game.

Cromwell's Highlands Motorsport Park was among the 26 Central Otago businesses to receive Government assistance during the Covid-19 border closure.

'They started out with one intent; let's pick a handful of big businesses and make sure they survive.

'Then they went 'what the crap, that doesn't look like the best outcome, let's support as many small and medium-sized businesses as we can'.'

Tourism operators who missed out are anxious to avoid being seen as sore losers, but their desperation is palpable when they talk about trying to hold their own against much larger competitors with Stapp money to aggressively market and price cut .

The head of a small aviation business said being put in that position is completely unfair and he is now looking at cutting staff.

'They should have spread the love around.'

The Civil Aviation Authority recently asked whether he was in a financial position to properly maintain his aircraft and retain key personnel needed to keep his operating licence, and he knows of others in the sector coming under the same scrutiny.

Secrecy and commercial sensitivity

Ngai Tahu Tourism, which lost $6.5m last financial year, began gradually restarting its various attractions. They include the National Kiwi Hatchery.

Former Tourism Minister Kelvin Davis emphasised that the Stapp process had been transparent, but it can be a mission getting information on how taxpayers money is being invested.

Under the terms of their funding contracts, operators must get prior written approval from MBIE before making any public statement made about their grants and conditions attached to them, and in the case of Wayfare, Stuff waited 18 days for a response.

MBIE said the clause was standard in its funding agreements, and intended to ensure any comments were factual and contained no surprises for the Government.

Stuff applied under the Official Information Act for copies of Stapp forms submitted by a number of successful applicants, including Wilkin River Jets and Back Country Helicopters, two small Makarora-based businesses owned by the Nolan and Hutton families, which were granted a total of $1m.

In the OIA response, details such as how they intended spending the money were blacked out, but much more information was released about AJ Hackett Bungy's successful plea for a $5.1m grant to save 66 jobs.

Companies getting tourism grants have to show they will pay employees at least the living wage by the end of their contract period, or support them to improve their qualifications.

MBIE said each OIA application was considered separately, and while some applicants asked for information to be withheld when they were consulted, it made the final decision on what to release.

The agency said most information was withheld due to commercial sensitivity, and the possibility it could jeopardise an operator's competitive position.

Money with strings attached

Grants are paid in six monthly instalments once recipients have complied with reporting requirements.

MBIE will do spot checks on whether conditions are adhered to and said funding could be terminated if there was a 'material change in circumstances' or a business was subject to insolvency or administration.

'If a business exceeds their revenue expectations, it will not affect the remaining Stapp grant payments. Ultimately we want these business to succeed, and if revenue is higher than forecast then that is a positive outcome for New Zealand and the community or the region that the business operates in.'

Tourism Industry Aotearoa has repeatedly lobbied for further targeted assistance and chief executive Chris Roberts is pushing to have unused grants redistributed (three companies decided they did not need them), along with almost $203m in low interest loans offered to Stapp recipients.

'If the industry recovers as well as we hope it does, then the majority of those loans won't be taken up, but having been allocated to tourism we wouldn't want to lose them in terms of support for our industry.'