New Zealand Hotel Market Sentiment Survey - Amid COVID-19 Pandemic May 2020 - TIA
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New Zealand
Hotel Market
Sentiment Survey
Amid COVID-19 Pandemic
May 2020
Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
INTRODUCTION
Horwath HTL has undertaken a series of COVID-19 impact sentiment surveys across the world and has
partnered in New Zealand with Tourism Industry Aotearoa (TIA) to undertake such a survey for the local hotel
market. The questionnaire is specially designed to examine how the pandemic is affecting hoteliers’ outlook
for the New Zealand hotel market in general and their hotel in particular. The survey was carried out
between 30 April and 5 May 2020.
BUSINESS OUTLOOK FOR THE NEXT TWO YEARS With little prospect of our borders opening to
100% international visitors any time soon, the outlook for the
9%
next two years is bleak, with 73% of respondents
80% 18% expecting that trading conditions for their hotel in 24
months’ time will have deteriorated compared to 2019.
60%
These results equal a business confidence score for the
40% two year period of -64% (percentage expecting
73%
improvement minus percentage expecting
20% deterioration). This is worse than results reported by
the latest ANZ bank business confidence survey, where
0% for the next 12 months, a net 55% of firms expect
Deteriorated Remain the same
Improved weaker activity for their own business.
These results come at a time when hotels reported an
“Business confidence amongst average occupancy of 14.9% in April and 40% of hotels
were fully closed.
hoteliers in New Zealand is much
bleaker than business confidence in This report summarises the survey results.
general”.
Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
IMPACT OF COVID-19
Hotel operating status
What is the current status of your hotel’s guest room
operation?
Fully
operational
20%
The operating status of hotels vary by region with circa
Fully closed
40% 68% of hotels in regional areas fully closed and fewer
closures in Auckland (20%) and Wellington (24%). Only
11% of Queenstown hotels are fully operational with
58% fully closed.
Partially 5% of the respondents whose hotel was still
operational
Operating as a Gov't 35% operational were planning to close.
controlled isolation
facility
5%
Expected impact on employment How many employees (full-time, part-time and casual)
have you had to let go to date and are expecting to
have to let go as a result of the COVID-19 outbreak?
Employees Hoteliers expect to reduce the number of employees by
expected to
remain an average of 56%. The number of employees let go to
employed,
44% date is still low because of the government’s 12- week
wage subsidy paid to employers at the start of the
country’s lock-down. It is expected that the wage
subsidy will not continue until such time that hotel
demand has sufficiently recovered.
Job losses in main visitor destinations are expected to
Employees be higher from 69% for Queenstown hotels to 89% for
expected to let
go, 48% hotels on the West Coast.
This extraordinary expectation of job losses is aligned
with expectations of immediate cash flow problems
and a slow recovery of the international visitor markets
on which the majority of hotels heavily rely.
Employees let go to date, 8%
Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
HOTEL PERFORMANCE EXPECTATION
What do you expect your hotel’s operating cash flow
Expected Cash Flow
for the calendar year 2020 to be?
Don't Positive,
know, 9% 9%
Around
Based on the responses received we expect that many
Zero, 17% hotels will need to make use of the government’s tax
relief and loan options while many may need more
financial assistance from lenders and /or shareholders.
All responding hotels have applied for the government
Negative, wage subsidy, while 38% had applied for debt relief
66%
and/or more shareholder funds. 80% of those that had
applied for debt relief, said that they had a positive
Expected total revenue decline
banking experience.
50%
40% 30% of hotels have applied for rent relief, which we
30% estimate will be all or most of the leased hotels in New
20% Zealand.
10%
0%
Decline (0-25%) Decline (26- Decline (51- Decline (71- Decline (91% or By approximately how much do you expect your
50%) 70%) 90%) more)
Jan-June 2020 Calendar year 2020
performance to decline in the first half of 2020 and
the full calendar year, compared to the same periods
in 2019?
Expected average room rate decline
50% 48% of respondents expect total revenue for the full
40% year to decline by more than 70%. This expectation is
30%
consistent across most of the regions in the country
and only marginally higher (51%) for hotels where more
20%
than 55% of rooms are sold to international visitors.
10%
0% Surprisingly, 55% of respondents believe that average
Decline (0- Decline (26- Decline (51- Decline (71- Decline (91%
25%) 50%) 70%) 90%) or more) room rates in 2020 will decline by more than 50%,
Jan-June 2020 Calendar year 2020 despite skilled revenue managers warning against
excessive discounting during periods of low demand.
Expected occupancy decline Fortunately, the actual reported results of major hotels
50% in April, show a “modest” 11.6% decline in ADR, while
40% reported occupancies of 14.9% were at an all-time low.
30%
20% It appears that ,so far, common sense has prevailed,
10% and hotels realize that at some point, further
0% discounting is not profitable when it will not create
Decline (0- Decline (26- Decline (51- Decline (71- Decline (91%
25%) 50%) 70%) 90%) or more) additional market demand.
Jan-June 2020 Calendar year 2020
Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
Hotel Market Outlook
If your rooms are fully closed or planning to close,
what is your envisaged time to re-open?
Expected time to re-open
Now that the summer high season is over, it is no
50%
surprise that many hotels expect to remain closed for
40% the next few months. Circa 27% of closed regional
30% hotels are expected to open only in Q4-2020 or next
45% year. 90% of closed hotels in Queenstown are expected
20%
30% to open before or at the start of the ski-season. This
10%
13%
suggests that there is a high expectation that the New
11% 0%
0% Zealand and Australian governments will agree on a
Q2 2020 Q3 2020 Q4 2020 Calendar Year Likely sell or
2021 permanently
“trans-Tasman bubble”, allowing Australians to visit the
close Queenstown Lakes District’s ski areas.
Period of COVID-19 impact on hotel performance For how long do you believe COVID-19 will continue to
60% influence your hotel's operating performance?
50% The first COVID-19 case in New Zealand was reported
on 28 February 2020. It looks as if the response to the
40%
outbreak in New Zealand and Australia has been more
effective in eliminating community spread than in many
30%
other countries. The message from the government has
50%
20%
been that New Zealand borders are unlikely to re-open
38%
to countries other than Australia and some Pacific
10% Islands until a vaccine has been wide available some
1%
10%
1%
time in 2021.
0%
3-6 Months 6-12 Months 1-2 Years 2-5 Years 5-10 Years
Furthermore, the impact of the pandemic on the global
economy is expected to discourage much long haul
international travel which New Zealand relies on for its
tourism. New Zealand’s reputation as a safe and
desirable country to visit is likely to remain or even be
enhanced because of its handling of the crisis.
Expected recovery of market segments Nevertheless, a significant share (39%) of hoteliers
expect the impact of COVID-19 will last more than 2
Corporate (Domestic)
years. In major visitor centres such as Queenstown, this
Leisure FIT (Domestic) percentage is much higher at 63%.
MICE (Domestic)
Which of the major demand segments do you expect
Corporate (International)
to recover fastest to their original contribution levels,
Leisure Group once the COVID-19 outbreak is over?
Leisure FIT (International)
In 2019 circa 43% of hotel rooms in major New Zealand
MICE (International) hotels were sold to international visitors, ranging from
0 2 4 6 8 10 24% in Wellington to 66% in Queenstown. The results
Scores based on ranking segments by fast and slow recovery
A score of 10 indicates the segment has often been ranked as fast to recover
reflect expectations that New Zealand’s borders remain
closed for some time and the global economic
downturn will delay a return of international visitors to
the country.Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
Expected three-years market segment recovery How do you expect each of the market segments to
100%
1% recover over the next three years?
6% 5%
90%
17% 16%
14% 14% Judging by the expected recovery of each of the key
80%
market segments, COVID-19 may well impact the
29% hotel’s operating performance for more than three
70% years. For hotels to recover, many hoteliers expect a
60%
significant shift in behaviour of New Zealand
41%
consumers, replacing overseas by domestic travel.
50%
53%
40%
Prior to COVID-19, New Zealanders took circa 3.1
million trips overseas. After deducting business travel ,
30%
46% travel for education, and all travel to Australia and the
20%
Pacific Islands, there is the potential of an average of
circa 900,000 trips per month to be substituted for
10% domestic travel while our borders remain closed to
25% 54% 42% 83% 84% 86% 85% countries other than Australia and the Pacific Islands.
0%
As a result of COVID-19, the scope of Tourism New
Zealand (TNZ) activity has been extended from
marketing the country to international markets to also
include domestic marketing to stimulate New
Unlilkely to recover 100% Same as pre-Covid19 Better than before
Zealanders to travel in their own country. While TNZ
has demonstrated excellent capabilities to market
internationally, it remains to be seen how much
domestic demand TNZ can stimulate in an economy
where unemployment is expected to rise significantly.
MEASURES TAKEN AND CONCERNS
What are some of the measures you have
or will soon be taking to reduce the
Measures taken to reduce financial impact of COVID-19
financial impact of the COVID-19
outbreak?
Applied for the government wage subsidy
Reducing part-time headcount The government’s wage subsidy only partly
Reducing full-time headcount
covers the total salaries and wages payable
to hotel employees. As a result, hotels have
Reducing employee's salaries/wages
had to reduce payroll costs, which makes
Mandatory clearing of paid leave up circa 36% of the average hotel’s total
expenses.
Request relief of rent payments
Provide additional equity funding While the wage subsidy is in place, hotels
Apply for debt relief
have only reduced headcount by circa 8%.
Survey respondents expect this to grow to
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
56% once the subsidy has ended.Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
Most critical support requirements
What are the most critical support measures you need
to prevent having to permanently close or sell your
hotel?
Many respondents regard an extension of the wage
subsidy as being critical to avoid having to ‘let go’ more
employees. However, to secure business continuity in
an environment where 66% of respondents expect to
have a negative cash flow this year, broader financial
assistance is critical in addition to measures such as
rent and tax relief.
Hoteliers also look to the government sector to start
travelling again and use hotels for overnight stays,
meetings and conferences. Additional support to the
business events market and a ‘whole of industry’
collaboration is mentioned as critical to resurrect the
sector.
Some hoteliers expect to only get back to more sustainable business levels once unrestricted domestic travel resumes
and a trans-Tasman bubble has been established, but for many this is not expected until borders are re-opened to most
of New Zealand’s key source markets.
With most destinations around the world vying for the same tourists and TNZ’s extended role, hoteliers advocate for a
significant budget increase to provide TNZ with the required resources to help fill their hotels.
SHARE OF RESPONDENTS
By location By Classification
Otago/Southland
17%
Northland/ 3-3.5 Star, 17%
5 Star, 21%
Auckland
31%
Canterbury
8%
West Coast
5%
Tasman/Nelson/
4 Star, 26%
Marlborough Waikato/Bay of 4.5 Star, 36%
5% Plenty
9%
Gisborne/Hawkes
Wellington Taranaki/Manawatu- Bay
18% Wanganui 4%
3%Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
Horwath HTL New Zealand Authors
Horwath HTL is the world’s largest hospitality consulting
brand with 45 offices across the world providing expert
Wim Ruepert
local knowledge. Since 1915 we have been providing
Director
impartial, specialist advice to our clients and are recognized
Horwath HTL New Zealand
as the founders of the Uniform System of Accounts which
wruepert@horwathhtl.com
subsequently has become the industry standard for
hospitality accounting.
Wim joined Horwath HTL in 2016 with over 28 years’
experience in financial leadership and general
Our regional experience and analysis capabilities underpin
management positions in international hotels and
the planning process for new hotel and tourism related
resorts.
developments. By thoroughly understanding local market
characteristics, trends and opportunities, Horwath HTL
He specialises in hotel asset management, market
provides product positioning, sizing and facilities
demand, supply and feasibility analysis and has
configuration recommendations designed to optimize
worked with a wide variety of owners and investors,
project performances. Financial feasibility is then tested by
from high net worth individuals, to institutional
estimating cash flow and investment returns. Through
owners and private equity funds.
financial and development sensitivity analyses, we are able
to determine the project and financial structure which best
His extensive international experience includes hotel
meets the objectives of the developer or land owner.
management roles in Australasia, Europe, USA,
China, Japan and the Caribbean.
Horwath HTL studies are relied upon by developers,
operators, lenders and third parties requiring an impartial
assessment of project viability, while our market and
product descriptions form the basis for architectural briefs.
Stephen Hamilton
Horwath HTL know what it takes to ensure performance in Director
all areas of your business. We will assess, explore and make Horwath HTL New Zealand
detailed recommendations on how to improve business shamilton@horwathhtl.com
performance, whilst evaluating your internal processes
against the best the industry can offer. Stephen jointly established the specialist tourism
and leisure consulting practice, Horwath HTL in
Understanding what strategies and management 2002. With thirty years consulting experience in the
practices result in increased cash flow and asset value, New Zealand tourism industry, Stephen’s in-depth
we take an assertive position in an asset management knowledge is valued by all his clients.
role as owner representative to maximise returns and
asset value over time. Providing a well-balanced and sound approach to
their specific needs, Stephen assists clients to
This service is especially tailored to the particular needs of progress their business with quality information for
owners, be they institutions, companies or private decisions and strategies.
investors, whose hotels are managed by an external
operator. It can also be adapted to support owner - Stephen assists lenders, investors, funding sponsors,
operators, especially those facing strict bank control or and / or purchasers and developers in both the
struggling to meet debt repayment obligations. public and private sectors, with the ability to quickly
ascertain what financial and market analysis or
research will be of most benefit.
Level 5, West Plaza Building, 3 Albert Street,
PO Box 628, Auckland 1140, New Zealand Stephen’s service lines include market demand
Tel: +64 (9) 309 8898 analysis, financial feasibility analysis, market
research, economic impact analysis and strategy
www.horwathhtl.co.nz development.Horwath HTL New Zealand Hotel Market Sentiment Survey May 2020
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