Coronavirus cashflow crunch and minimum wage hike 'a perfect storm': Hospitality NZ

Hospitality NZ is warning some of its member's profits are being wiped out by Covid-19, especially in tourism hotspots like Queenstown and Rotorua. Photo / Brett Phibbs

A downturn in international tourists and early signs Kiwis may be spending less is hammering profits in New Zealand's tourism hotspots, with Hospitality New Zealand pitching for direct Government help.

Julie White, the chief executive of Hospitality New Zealand met with Prime Minister Jacinda Ardern on Monday along with BusinessNZ to outline the hit her members - around 3000 hospitality operators and commercial accommodation providers - had taken in recent weeks.

The travel restrictions linked to Covid-19 have seen travel from mainland China severely curtailed and travel to other countries appears to be softening, as further restrictions are added.

The picture was far worse for areas focused almost exclusively on tourism, such as Rotorua and Queenstown, than in centres which had major commercial or government markets, like Wellington and Auckland, White said.

"Where they're really being hit are the regional areas such as Rotorua and Queenstown, where they don't have other market segments. With the regions such as Rotorua and Queenstown, their actual fundamental commercial driver is tourism," White said.

There were early signs that in the regional tourism towns, New Zealanders were also spending less.

"It seems to be the average cheque has reduced, the amount they're spending when they're going out. That's been reported in areas like Rotorua and Queenstown."

A looming rise in the minimum wage was likely to create extra pressure on cashflow.

"When you're working at low margins as some of our members do, having less cashflow coming in as you have increasing costs, through the minimum wage increase, is just a perfect storm."

So far, the disruptions are believed to have delivered a $180m hit to the tourism sector, with some Hospitality NZ members facing a major hit, White said.

"This is having a direct impact. Some of my members have actually communicated to me they have already had a 30 per cent impact on their" profits before tax. This was because the travel restrictions were put in place during the height of the peak summer season.

"Because of the nature of [tourism's] seasonality, the majority of their income was to be gained over the summer season. But it hasn't come."

Hospitality NZ called for the minimum wage hike to be delayed to lessen the impact from coronavirus, something the Government rejected.

Now the sector, along with BusinessNZ, is pressing the Government to offer wage subsidies like those offered to businesses hit by the Christchurch and Kaikoura earthquakes.

There, the Government effectively paid a chunk of the wages of affected business, in the hope businesses could continue to survive until conditions normalised.

"That would be beneficial in keeping our guys afloat, to get them through the recovery, making sure that we have great infrastructure available to assist with that recovery in tourism."

Ardern and Robertson have both confirmed that measures to help businesses maintain cashflow are under consideration.

Robertson indicated the response may be specific not only to sectors but to particular regions.

"It's quite clear different sectors are affected quite differently here. We have the time to plan for that well, but I've certainly heard that call and we'll take some time to consider it."

White said the sector supported the efforts to contain the virus, not only to protect New Zealanders but also by lessening the impact it would improve New Zealand's standing as a safe place for tourists to come.

However the drop in tourists could have a lasting impact.

"We don't know how long this is going to go on for, and the concern is this was the height of the summer season, so for the smaller operators, will they be able to carry the burden and the cashflow through the winter to remain open."