Covid-19

Hotels, the businesses the rescue package forgot

As the government was rushing to the tourism sector's rescue a major online booking site was working to pull more money out, Dileepa Fonseka reports

The same day New Zealand decided to pump billions into industries hard hit by Covid-19 an online giant was making it easier for international travellers to pull their money out. 

Booking.com made a big change to their booking policy on Tuesday to allow all international travellers facing quarantine in New Zealand to cancel their previously non-refundable bookings under a ‘force majeure’ clause. 

New Zealand hotels would also have to waive booking and cancellation fees under that clause. The move will further deprive New Zealand hotels of cash as travellers move to pull out of arrangements previously considered non-refundable.

Newsroom previously reported ‘force majeure’ clauses were also being used to cancel film contracts in New Zealand. 

The move wiped out 40 percent of hotelier Sunny Kaushal’s bookings in one week.

“Nearly 40-45 percent of business comes from Booking.com, it is such a big player and we cannot contest with them,” Kaushal said. 

Tourism Minister Kelvin Davis said he wasn’t aware of Booking.com’s decision and couldn’t comment on it.

‘The missing middle’

Hotel businesses like Kaushal’s are the ‘missing middle’ in Finance Minister Grant Robertson’s announcement of billions to help save jobs yesterday. 

Billions in wage subsidies for businesses have been promised for companies that have experienced a 30 percent downturn. 

However those subsidies have a $150,000 cap, which means they’re only enough to subsidise 21 full-time employees for 12 weeks, a much smaller workforce than that used at most hotels.

“Most business owners I have spoken to in this space, are realistic, they are not looking for a handout, but would like a hand up."

Stephen Mansfield, CEO of Quest Apartment Hotels NZ, the largest apartment hotel group in the country, said the package didn’t do enough for medium to large sized enterprises that paid the most tax and employed the most people. 

“Most business owners I have spoken to in this space, are realistic, they are not looking for a handout, but would like a hand up,” Mansfield said.

“They have said that what they would like to do is keep the cash they have, and delay payments of provisional tax and/or GST for the next two payment dates, until we end up at the ‘new normal’,” he said.

At question time in Parliament on Wednesday Davis said Treasury had been directed to work on a package that would cover larger businesses but this would likely roll-out on a “case-by-case basis”.

“Yesterday was the first tranche and there’s another tranche coming up,” Davis said.

Economic Development Minister Phil Twyford told reporters assistance, possibly tailor-made, would be on the table. 

“The Christchurch earthquake...had an end. We don’t know at the moment with Covid, and how fast it’s been moving, when that end is.”

He and Davis will visit Queenstown tomorrow to listen to the concerns of the region’s tourism industry.

“I think it’s fair to say they’re in a state of shock at the moment,” Twyford said.

“The Finance Minister said yesterday that for a number of the larger and more complex businesses the wage subsidy programme, because of the $150,000 cap, won’t necessarily meet all their needs,” he said.

“And so the government is doing more work about what we can do to assist those larger businesses and we’re happy to have those conversations.”

Tourism Minister Kelvin Davis says the current package is just the first tranche. Photo: Lynn Grieveson

‘There will be job losses and they will be significant’

New Zealand Hotel Owners’ Association executive director Amy Robens said hotels represented by her organisation employed 9000 people and their cash reserves were largely already used. 

It was too early to say how many jobs were at risk but she noted there had been a 75 percent drop in business nationwide.

“There will be job losses and they will be significant,” Robens said.

“If we don’t have the guests we can’t retain current staff levels,” she said. 

“The Christchurch earthquake, which was obviously mammoth and horrific, had an end. We don’t know at the moment with Covid, and how fast it’s been moving, when that end is.”

Millennium and Copthorne Hotels' NZ shares went into a trading halt Tuesday in lieu of an updated performance forecast delivered Wednesday morning. 

Managing Director BK Chiu said there had been a "wave of cancellations" over the past two days across all their hotels.

"Those cancellations are both international and domestic and are for March, April, May and June," Chiu said in a statement.

"We now face an existential crisis for all of our hotels, all of our staff and our shareholders”, he said.

Public gathering restrictions having an effect

Millenium and Copthorne Hotels forecast it would run at a loss of $24m in the first half of 2020.

"The restrictions on public gatherings announced on Monday March 16 will also substantially affect our conferencing and meetings business for the rest of the year and possibly into 2021”, Mr. Chiu said.

Chiu said there would be job losses and reduced hours for its employees. Some parts of its hotels would also have to close and the restaurants and bars attached would need to operate on reduced hours.

Robens said there was also work being done across the hotel sector to see if some staff could be retrained for jobs in places like the horticulture sector, where a drop-off in migrant labour meant it would need more workers.

She hoped the Covid-19 package announced yesterday would grow and change the same way the Kaikōura package had in the aftermath of those earthquakes.

Kaushal said he knew of one hotel that had experienced a $700,000 hit from both Booking.com cancellations and those of Chinese tourists no longer able to travel.

He said occupancy at CBD hotels in Auckland was sitting at 45-50 percent compared to a mid-March average of 93 percent in previous years.

“There is not much hope,” Kaushal said.

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