Covid 19 coronavirus: landlords forfeit $2m+ rent on Quest chain as occupancies plummet

Quest Highbrook, owned by Goodman Property Trust. Photo / supplied

Landlords who own properties in a national hotel chain agreed to halve rent as operators struggled with falling revenue from low occupancies.

Stephen Mansfield, chief executive of Quest Apartment Hotels, said about 80 per cent of the property owners had agreed to halve the rent in May and June, resulting in a deduction of more than $2 million.

Franchisee operators greatly appreciated the landlords' actions, he said.

Quest, with 1573 rooms and suites from Whangarei to Invercargill, suffered occupancy rate drops from 80 per cent-plus pre-lockdown to just 43 per cent in the almost five weeks of level 4, Mansfield said.

"So we went to the landlords and the majority of them were reasonable. Only about 20 per cent of them were challenging and those were mainly offshore," he said today.

Quest franchisee businesses pay on average $60,000/month rent to the investor landlords, he said, naming two NZX business which forfeited rent.

Goodman Property Trust which owns Quest Highbrook and PFI which owns Quest Carlaw Park had behaved responsibly, he said, and understood the position Quest operators were in financially. Both businesses forfeited rent when room occupancies plummeted, he said.

Neither Goodman's John Dakin nor PFI's Simon Woodhams would discuss arrangements today. Both said the agreements reached were confidential.

"During lockdown, we reached out to the landlords for a rent reduction and were surprised at how accommodative most were once they have a proactive and thorough proposal to consider. Only a few said no or refused to engage," Mansfield said.

Of 1573 rooms and suites operated by Quest, rent reduction agreements had been reached on 1206 rooms and suites, he said.

"During lockdown, we've still been operating because we have guests from the Ministry of Business Innovation and Environment, Ministry of Health, district health boards, Ministry of Housing and Urban Development, Ministry of Social Development, NZ Police, Department of Corrections and Inland Revenue as well as other essential workers such as doctors, nurses and locums," Mansfield said.

Quest also struck a deal with Air New Zealand to accommodate business travellers, he said, and had plans to open five new hotels in the next year.

Most of Quest's guest market was domestic so although he does not think business for the operators will be easy in the near-term, he says catering for Kiwis was a plus.

Amy Robens is executive director of the New Zealand Hotel Owners Association, said on April 8 that hotels more dependent on the Chinese market were first hit hard in February when our borders were closed to foreigners arriving from China.

Tourism, our largest and fastest-growing industry and biggest export earner, had been hit with aeroplanes sitting lonely on tarmacs and around half New Zealand's 250 hotels shut.

Those remaining open had only skeleton staff to help stranded tourists, guests in self-isolation, aircrew and essential service workers; the police the medical staff, Robens said.

• Covid19.govt.nz: The Government's official Covid-19 advisory website