Pain for Auckland hotels when thousands of MIQ rooms flood the market, and for hotel workers facing pay cuts
Thursday, 3 March 2022
After almost two years of operating behind security fences looking more like prisons, managed isolation and quarantine hotels are readying for return to real hospitality when MIQ ends.
The change is being met with a mix of relief and dread by hotel operators and the legions of workers and contactors that have been involved in transporting, feeding, accommodating and providing security for 228,570 overseas travellers.
At peak, more than 6000 rooms were set aside for MIQ, pouring welcome cash into 33 contracted hotels in Auckland, Hamilton, Rotorua, Wellington and Christchurch, but their services will be largely redundant under new isolation rules, and some contracts with the Ministry of Business Innovation and Employment (MBIE) due to end in June, are expected to finish sooner.
Close to two thirds of MIQ accommodation is in Auckland and when those 4136 rooms end up back on the market, along with 617 new rooms opening this year and a further 2000 under construction, the resulting glut in accommodation promises more financial pain for hoteliers.
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Fresh Info director Shane Vuletich says their hotel data shows that last year, Auckland’s non-MIQ hotels had an average occupancy rate of about 38 per cent over 12 months,
“That’s an absolute misery for a hotel. Break even is probably 70 per cent, may be 60 per cent if they have really slashed costs, so they’re haemorrhaging money.
“There still was not enough demand for the remaining hotels, so it would have been an absolute bloodbath if all those [MIQ] guys were competing for that small amount of custom.”
Until borders fully open, absorbing those extra MIQ rooms, plus new ones, will be tough.
“It’s going to smash occupancy, spreading the same number of people across more and more rooms.”
Auckland Unlimited director of industry and investment Pam Ford agrees there are concerns about a big increase in accommodation when the super city is battling the perception that it is a Covid-19 hotspot, and a lot of work is going into getting both leisure and business travellers back when the current surge dies down.
Tourism and hotel consultant Stephen Hamilton says the hotel glut could well mean a wider range of prices and more affordable room rates in Auckland.
“If Kiwis are looking for bargains, there will be deals to be had, but they won’t be in the new flash five-star hotels.”
Dropping managed isolation will have a more positive impact in Christchurch, where at one stage half the city’s 3190 hotel rooms were MIQ, including two of the largest hotels, the Distinction in Cathedral Square and the Crowne Plaza opposite the new Te Pae convention centre.
ChristchurchNZ general manager destination Loren Heaphy says that while it was great for the hotels themselves, it adversely affected bids for major events, because they could not guarantee sufficient accommodation of a certain standard, and it limited choices for business events.
Back to business as usual
When Wellington’s Bay Plaza hotel reopened in February after 18 months hosting MIQ guests, managing director Shane Evans was more than happy to ditch the military regimen designed to keep everyone safe.
“Essentially you’re not really running a hotel, all you’re doing is cleaning and catering.
“It was a very structured environment in MIQ, meals and exercise at a certain time, everything is quite rigidly planned and executed, now people can come and go as they please.”
Even guest complaints were dealt with by the military. “In hospitality we resolve things, in the military you just tell people what to do.”
Getting tradespeople in was tricky and they tackled only very basic maintenance “so the rooms do take a bit of a hammering … you really are just patching things up the whole time.”
The Bay Plaza’s big revamp included new beds, linen, curtains, soft furnishings and carpet, and Evans is grateful not to have rooms trashed like those at other hotels which experienced problems with intimidating behaviour by guests with gang links.
Like other MIQ hotels, the Bay Plaza gets to keep the sophisticated security system and network of CCTV cameras installed at taxpayer expense.
Some accommodation providers, like Jet Park Rotorua, are offering packages for Kiwis who want to self- isolate because they don’t have space to do so safely at home.
“That’s not something we’d be jumping at,” says Evans, “there’s a whole level of responsibility that would be quite hard to manage.
Mixed blessings for MIQ workforce
MIQ hotel workers became accustomed to rarely laying eyes on their guests, regular PCR tests, and doing their duties swathed in protective gear.
The stigma of being an MIQ employee has seen them made unwelcome at gyms and family gatherings, turned away from hairdressers and dentists, even photographed leaving work and the images posted online.
Unite Union hotels’ organiser Shanna Reeder says workers won’t miss those social repercussions, but they are worried about having to enforce mask wearing and social distancing minus the support they now have from onsite security guards, police and the Defence Force personnel.
“If a guest gets too close they’ll have to ask them to step back, they’re not used to having to do that without the backup of those more authority type figures.
“They’re pretty nervous about that, they won’t have their N95s, they’ll have surgical masks.”
The return to normal hospitality service also brings with it the unwelcome prospect of a pay cut if they lose the living wage top-up given in recognition of their added risk of exposure to Covid-19.
Reeder says that extra payment is worth about $80 a week, a huge amount for families.
She believes that given the industry’s current labour shortage, the living wage of $22.75 should be standard, and the union has written to major hotel employers asking them not to cut worker pay when MIQ ends.
“We've received one written response which was that the MBIE contracts had kept them afloat and without them, they aren't confident they will have the cash flow to even remain open, let alone keep the MIQ pay rate.”
Rydges Auckland will quit MIQ at the end of April and will continue to pay workers the higher rate.
Accor, which has nine MIQ hotels, declined to discuss employee remuneration, but Reeder says it was the first MIQ employer to pay the living wage and that put pressure on the others to eventually fall into line.
Hamilton says that pre-pandemic hotel operators argued they could not afford to pay the living wage unless room rates increased, but it had to be a high priority in order to maintain service levels.
“If the industry wants to retain staff, which they say they are desperate to, they just need to pay more.”
MIQ workers also include 687 private sector security guards, and New Zealand Security Association chief executive Gary Morrison hopes the MIQ living wage permanently lifts pay across the industry.
He says Omicron has driven demand for security and the industry is short of between 1500 and 2000 workers, so those moving on from MIQ should not have any difficulty finding new jobs.
The big MIQ bill
Managed isolation succeeded in keeping Covid-19 transmission to a minimum until vaccines were available, but a September Cabinet paper outlining plans for the last new MIQ facility, The Elms hotel in Christchurch, outlines the eye watering cost.
The budget to set up and run the facility until mid 2023 was $35.6m, including establishment costs of $410,000 for security cameras, ventilation checks, staff equipment and legal fees.
Hotel services, transport, wages, and Covid-19 testing cost $1.7m a month, and the 24/7 operation required 43 police, security, MBIE and health staff to care for and keep tabs on guests in 85 rooms.
MBIE also spent about $350,000 on improving hotel air conditioning following suspected cases of airborne transmission between MIQ guests, but operators will foot the bill for post-MIQ refurbishment of rooms, building it into the rates they charge the Government.
MBIE’s annual report notes that rights of renewal for MIQ contracts are based on a mutual agreement with the hotels, and it lists noncancelable operating lease commitments as being worth $136.2m.
Future MIQ
Managed isolation will remain for unvaccinated travellers, refugees and some community cases, and as of Tuesday there were just five people occupying free community isolation rooms, with eligibility determined by district health boards.
The Cabinet paper on The Elms says officials had been directed to prioritise an investment case for purpose-built facilities or the purchase and refurbishment of existing buildings for future MIQ.
By the time of publication, MBIE had not responded to an Official Information Act request for progress on this report or the total cost of MIQ.
Ford says Omicron is probably not the last Covid-19 variant we will see, and planning for further outbreaks makes sense.
“I’d hope, from an Auckland perspective that we do have contingency for some form of MIQ in future that would allow us to continue living with Covid, but also ensure there’s a safety net for people.”