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Hope For The Holidays

Short-term and holiday accommodation operators and investors have been hammered by Covid-19 restrictions over the past year, but the opening up of Auckland on December 15 may help. Sally Lindsay writes.

By: Sally Lindsay

1 December 2021

With lockdowns preventing Aucklanders from visiting their favourite local holiday destinations, 2021 has been a year of uncertainty for holiday home owners around the country. As TIA chief executive Chris Roberts explains, Auckland, as the largest centre of population, has a huge influence on domestic travel.

“We saw this clearly with an immediate reduction in the number of visitors in Queenstown when Auckland’s borders closed. However, we expect to see an immediate and strong demand for travel when Aucklanders can leave their city, resulting from a combination of pent-up demand and normal holiday season travel.”

It’s been a rollercoaster for short-term holiday home owners this year. Bachcare is a major operator in the short-term and holiday accommodation sector and manages 2,400 baches, particularly in the regions, and general manager Matthew Clews says bookings have been up and down. But, he says, there has been a big rise in owner inquiry from Bay of Plenty, Hawke’s Bay, central North Island and the top of the South Island.

“At the end of September we were basically back to normal booking levels and anticipated being able to move from level three to level two,” he says.
“However, after the announcement of Auckland’s extended lockdown, bookings dropped off and we are now just seeing confidence come back in Auckland with more certainty for the Christmas and the summer. Despite the three-month-plus Auckland lockdown, Bachcare has seen recent increase in bookings from Aucklanders, although not back to normal levels.”

The announcement that Aucklanders will be able to leave the city from December 15 has been a hugely positive step for the industry, and is likely to bring benefits across the country. But the continuation of international border restrictions is a major issue.

Although the industry is grateful for the support from domestic travellers, they cannot replace the full contribution made by international visitors, says Roberts. International visitors spend $232 a day, compared to domestic visitors’ spend of $155 per day. Tourism New Zealand estimates there was a $12.1 billion fall in the total visitor economy last year.

New Zealanders tend to enjoy different holiday activities to international visitors. For instance, they are less likely to take a scenic flight or guided walk, and more likely to visit their bach for a weekend. Domestic leisure travel is concentrated on weekends and school holidays, making it difficult for tourism operators to offer steady fulltime employment.

As a result of the pandemic hitting bookings drastically, Roberts says many operators have downsized or put their business into hibernation. The results of TIA’s latest industry survey shows almost 5% of respondents say they won’t be operating in six months – and this was before the latest lockdown. However, 68% said they had some level of confidence they will be operating in five years, suggesting many are going into hibernation rather than closing completely.

“Given the severity of the crisis, the resilience of tourism operators has been phenomenal. Some have been forced to close but the majority are hanging on, but reserves and resolve are running out as the country continues with uncertainty about the Government’s plans for reconnecting New Zealand with the world.

AirBNB Issues

Auckland apartment buildings used for Airbnb and short-term accommodation have also been badly affected. City Sales apartment specialist Scott Dunn says whole CBD buildings used for Airbnb were left vacant and are now longreverted term rentals. “Many short-term rentals have been taken out of the market as bookings dried up, although exact figures are hard to gauge,” says Dunn.

He estimates about 20% of Airbnb property owners in the inner city have thrown in the towel because bookings have been scratchy. Those still in the short-term market need occupancy of 40-60% every week to equate to the financial benefits of a long-term tenancy as their costs are higher.

“This can be hard to achieve with the international borders closed and Auckland’s borders locked down.”

One of the most popular areas for short-term stays is Viaduct Harbour on Auckland’s waterfront. The properties are mainly leasehold and have significant outgoings, says Dunn. Many have longreverted to long-term rentals. “It’s a difficult situation because people outside Auckland have not been able to book weekend stays for three months plus and there is no clarity on when lockdowns will end, if ever. There are quite a few short-term stay operators in trouble.”

AirDNA, which collects data from Airbnb and Vrbo, is able to show the effect of Covid-19.

In Auckland at the end of October there were 4,019 active Airbnb rentals, a 48% drop from 5,177 at the same time last year. Wellington had 2,192 active rentals at the end of October, a 27% drop from 2,397; Christchurch had 1,846 active rentals, a 37% decline from 2,248 last year. In the provinces Tauranga had 1,176 active rentals, 16% decline from 1,239 last year; Rotorua 1,014 active rentals, an 18% drop from 1,117; and Queenstown 1,537 active rentals, a 17% fall.

Bookings have also dived. In Queenstown, for example, there were 13,516 bookings for the 30,692 rooms available in October last year; in October this year 11,630 rooms booked from 29,975 available. In Auckland, 29,619 rooms booked from 59,512 available; 15,048 booked in October this year from 39,967. airDNA market associate Madeleine Parkin says it remains to be seen how tourism recovers this summer, but Wellington and Christchurch are looking good for Christmas and New Year, with occupancy rates of 50-60%, although the listing numbers are, of course, still down. In Auckland, on the other hand, occupancy is down at 30% for the holiday period.

Popular Spots

Clews says investors can’t go wrong with a holiday home that can be rented in an area with a lake or beach nearby. “It’s almost in our blood as Kiwis like to holiday close to the water. While there is still demand for ski holidays, the season can be quite limited with the majority of an investor’s earning potential reduced to a couple of months of the year.”

As for bang for your buck as an investor in the early stages of buying, Clews recommends a dual-season location, such as the Queenstown/ Southern Lakes region, Lake Taupo or the Wairarapa.

Typically, Bachcare’s most popular destination from Auckland, which is a three-hour drive, is Lake Taupo. “The majority of Aucklanders prefer destinations between two to three hours away, hence why the Coromandel, Bay of Plenty and Mangawhai are popular regions for Bachcare.”

Bookings for the most popular spots are so far running at 33% for the Coromandel, 11% for Lake Taupo and tracking at 8% for the Tasman/ Nelson area.

“Generally, these regions are on track to be just as popular this summer as they were during 2020.”
Queenstown performed well last summer considering there was little international tourism. “This summer it is having a slow start due to the uncertainty around domestic travel from Auckland. Once Auckland gets the green light for flights back into the region, we are confident bookings will pick up quickly.”

Motels Hit Hard

While the number of Aucklanders booking summer holiday accommodation outside the city is increasing in anticipation of borders reopening before Christmas, the number of cancellations for motels is outstripping bookings ... motel guest nights are down 51% from a year ago.

This sad state of affairs is typical of the damage caused by lack of clarity until recently around when Auckland’s borders will reopen and the city drops alert levels, says Julie White, Hospitality New Zealand chief executive.

“Every time moteliers experience a lockdown the lag has been longer for owner/s or operators to make up the income deficit. People’s confidence about planning holidays wanes when they are not sure whether borders across different areas of New Zealand will change if there are Covid outbreaks. They are aware they can get stuck away from their homes for weeks or months on end and it leads to a wave of cancellations, or they take shorter trips within a three-hour drive,” says White.
“A couple of years ago longer holidays would be taken overseas or anywhere around the country. People are now scared to go too far from home. The damage of lockdowns is a worrying trend for moteliers.”

With the December 15 opening date, Auckland is likely to see more visitors than may have been expected. This is a positive move.

“Moteliers need the high season from November to March to tide them over financially during the rest of the year. Many are already on the knife-edge as they still have rent – often their biggest expense – staff wages and perishables to pay,” says White.
“Many moteliers are tied to their assets and have been running their businesses as a lifetime career. There is only so long they can hold on. The lockdowns have been devastating and some are going to have to sell. Whole families are going to be distraught. ”

Hundreds of motels are leased to Work and Income for emergency and transitional accommodation, but White says this still leaves a substantial number relying on tourism and business trade.

Before Covid, November and February months were strong for bookings. Moteliers expected 90% plus occupancy for most of the summer. Shoulder season and winter trade would come from business travellers during the week and over weekends people and families on short breaks.

Revenue per room was on average $200. It has now dropped to $100 and below. Some are down to $68, says White. “It is a huge drop considering some moteliers pay $20,000-$60,000 a month in rent to landlords. Some landlords have provided rent relief but it has been patchy.”

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