Squeeze on as hotels tough it out

Hotels' profits are being squeezed by the pressure to offer cut-price room rates and the increasing costs being charged by suppliers, the boss of one of New Zealand's largest hotel groups says.

B.K. Chiu, managing director of listed Millennium and Copthorne Hotels, which owns and runs 17 hotels in New Zealand, said that as well as the economic downturn and swine flu, operators were grappling with a price war.

"Prices have come down, so have occupancy levels but costs have gone up. It's a cost price squeeze."

Last week the group reported a half-year result for the six months to June showing it had more than halved its profits to $5.38 million down from $13.29 million.

Chiu said the tourism downturn and slow sales in the property investment arm had dragged profit levels down.

The company had believed the drop in tourist numbers was plateauing until swine flu hit its business hard in May and June as school groups from Japan cancelled bookings.

"That broke the camel's back. Everything dried up because those who would have gone overseas are worried about quarantine."

The only bright spark was Queenstown because of the strong ski season.

Fortunately Chiu said the hotel and property development group had foreseen the tough times two years ago and put a "sinking lid" on staff levels.

That meant any staff leaving were not replaced and those who remained were being asked to multi-task to enable them to work a full week.

"A person can be serving breakfast and then doing the rooms. They get their hours up to a week and we don't have to cut staff back."