Hotel sector profitability devastated

AUCKLAND: A new hotel sector group says the sector is bleeding money as Covid19 continues to push occupancy below breakeven levels for many of its members.

Hotel Council Aotearoa (HCA) says profitability had been devastated by the pandemic and it would be years before recovery in the sector, which is crucial to rebuilding the country’s tourism economy.

Border closures would continue for much longer than expected, and hotels which had signed up for the Government’s managed isolation programme had been able to keep revenue coming in but were suffering in other ways, said the council’s strategic director, James Doolan.

"With borders closed, revenue has plummeted. If a hotel guest room is left unoccupied, or sold at a material discount, lost revenue can’t be caught up at a later date," he said.

At this time of the year hotels would normally have been running at 90% occupancy but this had fallen to 50%, with rates that were 10% to 15% down.

"Half of your revenue has disappeared and that’s before you’ve paid your property and interest costs."

There were more than 300 hotels with 30 rooms or more in the country and, Mr Doolan said, it was hard to speculate how many would not make it through.

"The key thing for a hotel is that there is no such thing as pentup demand for a room night that has already gone. It’s like throwing away crops of cherries every single day," he said.

It has been impossible for New Zealand hotels to maintain staffing at preCovid levels and costs such as maintenance, utilities, rates, insurance and interest continued to mount up.

"I think there’s a misunderstanding about how bad it is operationally — the hotel industry isn’t 20 or 30% down like your corner coffee shop, it’s a lot worse."

Launched late last year, HCA is a representative body for hotels, hoteliers and supporters of the hotel sector. It speaks for 140 New Zealand hotels comprising more than 15,800 guest rooms, or about 5.7 million room nights per annum.

Mr Doolan said the group would lobby politicians on behalf of its members, which includes hotel owners, general managers, hotel chains , developers, consultants, hospitality advisers and expat New Zealand hoteliers.

"The time is right for Government to start formulating policy in strategic and considered way for the benefit of hotels and our tourism sector," he said.

New Zealand has 32 managed isolation hotels — in Auckland (18), Hamilton (3), Rotorua (3), Wellington (2) and Christchurch (6).

Mr Doolan said many had answered a government request early in the pandemic to provide facilities for returnees.

"We’ve got members who thought doing the isolation work was too great a risk, others thought it was better than being empty. Some hotels in the iso [isolation] programme have taken risks with their brand and their existing customer base who they can’t service any more."

Physical infrastructure was being used in a different way to what it was designed for, with far more pressure on rooms and other facilities that were being used 24 hours a day. — The New Zealand Herald

❛ Half of your revenue has disappeared and that’s before you’ve paid your property and

interest costs