Landscape ‘won’t be like it was’ for tourism

A lot of mergers and acquisitions are ahead for the New Zealand tourism sector in the fallout from Covid-19, says Tourism Holdings chairman Rob Campbell.

The NZX-listed company, the biggest renter and seller of holiday vehicles in the world, is a major casualty of the virus crisis and will be a keen participant in the merger and buying activity, he says.

Campbell is confident Tourism Holdings will get through the crisis — but says it isn’t expecting to recreate itself as it was.

“It would be foolish for us to be saying to ourselves, or to anyone else, ‘give us some [Government] money and we’ll make things like they were before’. Because they’re not going to be like they were. No matter how much money we get.”

Border closures and community lockdowns in New Zealand and in Tourism Holdings’ overseas markets have effectively shut down the business, while threatening the jobs of 100,000 of the country’s 400,000 tourism workforce and carving at least $12 billion off the sector’s expected income during

Rob Campbell says there will be a flurry of mergers and acquisitions in tourism and Tourism Holdings will be a keen participant. the next six months.

Tourism Holdings’ share price has slumped, Campbell and his directors are taking a 30 per cent drop in fees, and chief executive Grant Webster a 50 per cent hit to his salary, for four months. Meanwhile, the company’s big fleet of motorhomes has been made available for emergency quarantine and housing, and use by emergency services.

“A business can’t afford to do that so the Government shouldn’t do it.”

In a LinkedIn post urging a “measured and moderate” response to the release from lockdown, Campbell said health officials and politicians would decide when it ended, but it would be businesses which made the decisions about what to do next and how.

“It’s OK for various cheerleaders to advocate innovation and revival but the decision whether to restart, in what form and with what energy, is not about mood but about risk,” he wrote.

Campbell thinks the Government is aware of the risks of a wasteful use of resources and the potential for

Campbell says the company appreciates the Government’s wage-subsidy support to keep staff.

“It may be there is a case for some Government money to assist the tourism industry to transition — in the trade that’s being called ‘Tourism 2.0’ so it’s being actively discussed among tourism businesses what tourism will look like, and there’s acceptance it’s not

long-term damage if businesses make rushed or rash decisions.

“But it’s under pressure from just about every quarter to give them money to sustain their current business model.

“My view about the simple economic impact of that, is that it lowers the cost of capital for those businesses and that will lead to investment which does not meet the genuine cost of capital . . . the genuine risk of operating whatever business that may be.

“When you distort that, you inevitably create decisions that destroy value rather than create value.

“It’s simple economics but people going to be like it was.

“Tourism 2.0 for us will involve a much smaller business in terms of our motorhomes in New Zealand and other countries where we operate.

“We think we will have to reorient our investment to other tourism activities once we work our way through this process. We are still doing the work, not just internally but with other tourism operators, to work out what that might look like.

“I think there will be a lot of merger and acquisition activity in tourism which we will be keen to participate in. We’ve got to get through the height of the storm which is still blowing pretty hard around us, but we will get through it.

“We have a strong balance sheet and our team is very capable. We’ll get through it and play a different role in tourism, but there won’t be anything like the number of motorhomes driving around the country like we’ve had in the past.

“That’s just a fact. We have to accept it quickly and work out what’s better than that.” Andrea Fox

lose sight of that when they think there is a honeypot with honey being distributed out of it.”

Campbell says benefit levels are “manifestly inadequate” and more Government spending should be focused there.

“I’m involved in a small charity in South Auckland and it is handing out thousands and thousands of dollars every day to people who are in financial distress through this particular circumstance.

“I’d be spending more money on the health and social services needed to wrap around these people.

“I think that’s frankly more important than whether liquor stores open tomorrow.”

[The Government must] be very careful it doesn’t allocate money to projects that are of the old economy and not the new economy.

We’ll get through it

. . . but there won’t be anything like the number of motorhomes driving around the country like we’ve had in the past. Rob Campbell