A CRISIS IN THE MAKING

Covid19 Accommodation Providers Fallout

The Tourism industry is now in a crisis. Every day we are bombarded with more and more depressing news that signals exceptionally difficult times, particularly for accommodation providers. Their businesses are more capital intensive than most other businesses in the tourism industry, meaning they generally are carrying more debt and have a higher level of fixed costs that they cannot reduce in response to reduced demand.

At the time of writing this, Air NZ has started the process of making 378 pilots, and numerous other staff redundant and come out publicly that it is repositioning itself to be a domestic airline. There is also no sign that our borders will reopen to tourists in the foreseeable future.

Accommodation providers employ a huge number of hard working people and through no fault of their making, some are now facing liquidation with hundreds of innocent workers facing unemployment.

Moteliers have been identified as the most vulnerable businesses as they don’t have the financial resources the hotels have to weather this storm and for most, this is their livelihood, not just some extra money on the side like is the case for many Air BNB operators. A motel is often the only home they have and to lose their business will have dire consequences for them.

After discussion with a few respected moteliers, the area of concern has been highlighted is their Fixed Costs. This includes rates, insurance, power, advertising, marketing, etc.

While we applaud the Government’s decision to support small business by granting wage subsidies, they have paid out over 6 billion dollars and are forecasting a total cost of 12 billion dollars, it is only a temporary measure. After the lock down is lifted, many businesses will be able to continue to operate business as usual. However, the challenges faced by the tourism industry is structurally a longer term issue.

We have contacted Grant Robertson about support being provided for the tourism industry and are hopeful of receiving a positive response.

There is real urgency now as these business owners are now facing the decision to either borrow large sums of money to prop up their business or face liquidation and possibly bankruptcy.

You may be questioning – why you should contribute to this request for support when you don’t use motels. A motel supports many other businesses. For example, they pay for the services of these companies: Marketing, advertising, laundry, contractors, consumables, power, freight, phones, security, insurance, council rates, printers, etc.

These companies also rely on a range of other companies to provide, computers, stationary, linen, cleaning products, tea, toilet paper, tools, machinery, paint, food products, etc. All of these individual companies employ staff. And what do all of these employees purchase:

Flowers, coffee, eat at restaurants, housing, insurance, phones, maintenance materials, cars, and some travel and end up at motels. Your contribution may end up saving not just a motel but any one of the above businesses and help keep New Zealanders in jobs.

The monies donated will be held in a solicitors trust account and an independent panel which includes a solicitor an accountant and a finance broker, will be formed to scrutinise applications and decide on how the funds are used to support Moteliers meet their fixed costs over this difficult period.

We recognise that not every business is going to survive this Covid19 fallout. For a business to receive funds from this Give a Little page, they will need to provide financial documentation that substantiates that prior to the Pandemic, the business was a viable operation as well as a plan on how they can restructure their operation to become viable in the medium to longer term.

We would like to thank Glenn Foster of Foster and Co (accountant), Alan Robertson of Strata Funding (finance broker) and Alistair van Schalkwyk (solicitor) of Asco Legal who have agreed to offer their services for free as they fully understand the dilemma small businesses face today. We will all work diligently to assure that as many accommodation providers survive this crisis, but we need your help and we need it NOW.

Thank you in anticipation,

The team from LINK HAWKES BAY CENTRAL PLATEAU