Wednesday, April 24, 2024
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Bleak outlook for hotel sector

Business confidence among New Zealand’s hard-hit hotel sector is much bleaker than business confidence in general, according to a new survey.

The New Zealand Hotel Market Sentiment Survey was undertaken by Horwath HTL and Tourism Industry Aotearoa to examine how the COVID-19 pandemic is affecting hoteliers’ outlook for the New Zealand hotel market in general and their hotel in particular. 115 hoteliers responded to the survey which was carried out between April 30 and May 5, 2020.

Forty per cent of respondent hotels are already fully closed and with little prospect of New Zealand’s borders opening to international visitors any time soon, the outlook for the next two years is bleak.

Seventy three per cent of respondents expect that trading conditions for their hotel in 24 months’ time will have deteriorated compared to 2019.

These results equal a business confidence score for the two year period of -64 per cent (percentage expecting improvement minus percentage expecting deterioration).

“This is worse than results reported by the latest ANZ bank business confidence survey, where for the next 12 months, a net 55 per cent of firms expected weaker activity for their own business,” Horwath HTL director Wim Ruepert says.

“These results come at a time when hotels reported an average occupancy of 14.9 per cent in April.

"The survey found that 68 per cent of hotels in regional areas are fully closed. In Auckland, where some hotels are being used for quarantine purposes, 20 per cent of hotels are closed. Only 11 per cent of Queenstown hotels are fully operational with 58% per cent fully closed.”

The impact of the pandemic on hotel employees is extremely high with most hotels expecting heavy redundancies when the Government’s wage subsidy scheme ends in June.

“Overall, hoteliers expect to reduce the number of employees by an average of 56 per cent. Job losses in the main visitor destinations are expected to be higher, from 69 per cent for Queenstown hotels to 89 per cent for hotels on the West Coast,” TIA hotel sector manager Sally Attfield says.

“Hoteliers have no choice but to let their people go, as they are not expecting to continue receiving Government wage subsidies for the next two or three years until the demand for hotels has recovered.”

Sixty six per cent of hotels expect to make a cash-loss in 2020 (negative operating cash flow) and are calling for ongoing financial assistance from the Government, including a significant budget increase to provide Tourism New Zealand with the required resources to help fill their hotels.

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