Coronavirus: Tourism Industry Aotearoa says hundreds of sector jobs have gone

The tourism sector is taking a big hit because of travel restrictions and travellers' jitters. Photo / Mike Scott

Hundreds of part-time and casual tourism workers have been laid off and businesses are looking to cut permanent staff as the coronavirus hits, an industry group says.

But analysts at Forsyth Barr say a $3 billion share market hit on tourism stocks is an over-reaction to the impact of Covid-19, although they say the outlook is uncertain.

Tourism Industry Aotearoa chief executive Chris Roberts said the industry had got through most of February without major damage but bookings by overseas visitors were evaporating for March and beyond.

The industry body was compiling data on the impact of the coronavirus and did not have details of job losses yet but ''hundreds'' of part-time and casual staff had been laid off and full-time workers could follow.

Finance Minister Grant Robertson said the situation for the tourism sector, and others, was unfolding.

"The sense I've got from industry is there is an understanding that this situation – an export shock with domestic flow-on impacts – is different to others the economy has experienced in recent years.

The collapse of the Chinese tourism market could cost up to $500 million in the three months to March, Government visitor marketing agency Tourism NZ says.

Chris Roberts, chief executive of Tourism Industry Aotearoa. Photo / Jason Oxenham

Travel restrictions sent the number of Chinese tourists plummeting from the start of February and this has since spread to other markets, South Korea and Italy.

''Businesses have to accept there will be much higher levels of cancellations than any normal situation but there are opportunities to replace those lost bookings with new bookings,'' said Roberts.

This happened with rental car companies who were able to transfer bookings from China to other overseas tourists and New Zealanders staying at home.

A survey of its hotel members found occupancy had held up ''surprisingly well'' during February. It was at 87 per cent throughout the country - down from 90 per cent in the same month last year.

''Some hotels were able to re-sell some of the Chinese bookings - but we're getting very different news now we're in March,'' he said.

''The impact is starting to spread to other markets and the forward bookings are looking extremely light. People are just not making travel decisions.''

Tourism vies with dairy to be the biggest earner of foreign exchange and last year international visitors spent close to $17b.

Rating tourism businesses

Forsyth Barr says the Covid-19 outbreak will continue to depress tourist arrivals for the rest of the year but says the share market hit listed tourism-related companies SkyCity, Tourism Holdings, Air New Zealand and Auckland International Airport has been an over-reaction. About $3.1 billion has been wiped off the market capitalisation of the four companies, which Forsyth Barr analysts have upgraded as a result of what they say is the over-reaction to the risk.

Air New Zealand gets an outperform rating. Its structural and balance sheet strengths leave it well placed to weather the storm.
''Our analysis shows that the capacity of Air (NZ's) cuts are deeper than its competitors and historically its responses to black swan events have been rapid and rational."

Auckland Airport (neutral rating from underperform): It was largely insulated to lower near-term passenger numbers through minimum annual guarantees
in its retail business, underlying growth in its investment property operations, and the regulatory model that rebases aeronautical pricing every five years (should demand stay lower for longer).

SkyCity (outperform): The company's exposure to inbound tourism is moderate, although there is some risk to domestic visitation. The share price reaction appears dislocated from the risk, with valuation and an attractive yield providing downside protection.

Tourism Holdings (outperform): THL's Covid-19 exposure has amplified other challenges including the weak US vehicle sales market and the Australian bush fires. Earnings will be impacted by lower near-term demand, particularly at Waitomo, while forward bookings for RV rentals remain relatively healthy, say the analysts.

How to cope

Roberts said the impact had been felt unevenly throughout the country. Markets heavily dependent on China such as Auckland had been hit harder than others with a lower proportion of Chinese visitors such as Wellington, Wairarapa and Hawke's Bay.

Tourism businesses needed to be flexible, and where necessary talk to banks and the IRD.

TIA had not called for direct government help for individual businesses.

China Southern Airlines has scaled back its services but is still serving NZ. Photo / Greg Bowker

Domestic visitors spend $24b a year market and Roberts said there was opportunity to build on that.

There would be bargains at places normally occupied by overseas tourists at this time of the year.

''Your presence will be warmly appreciated.''

The Government had given regional tourism organisations $1m to promote their areas and there could be an opportunity for a bigger hearts and minds campaign to encourage Kiwi staycations.

In Australia the Government was spending A$25m ($26.14m) on a holiday at home campaign, which started after the bushfires peaked in January.

Turning the tap back on

Roberts said China - New Zealand's second-biggest market after Australia - would recover but timing was uncertain. While there are more encouraging signs of a slowdown in the coronavirus spread in China, ''there is no immediate turning on of the tap because we're don't have the flights''.

Auckland Airport is the main gateway for non-stop flights from China. In January they peaked at 45 a week but a month later had plunged to between five and eight a week as tough restrictions on non-New Zealanders from China came into force.

Scott Tasker, Auckland Airport general manager of aeronautical and commercial. Photo / Supplied

The airport's manager of aeronautical commercial, Scott Tasker, said the Chinese airlines' decision to dump capacity was completely understandable given the restrictions.

''I think we have to feel very lucky they have continued to operate some services and continuing to provide connectivity for New Zealanders and residents looking to return home from China.''

The airlines, China Southern, China Eastern and Air China, were continuing to provide belly space for cargo for high-value food exports and imports of manufactured goods.

''They are doing a very good job of maintaining what they can."

He had met Chinese airline managers and they were upset at how their homeland had been affected but also very steadfast in the belief they needed to keep some connectivity to allow people movement and trade to continue.

''They are standing ready to rebuild when the time comes,'' said Tasker.

It was notable that even though they had stopped flying to other destinations in Asia, they were continuing to services to Auckland, Sydney and Melbourne.

''Tourism and travel is a resilient business globally. What we know is that it has always bounced back strongly from geo-political or terrorism events and that will happen again.''