KEY POINTS:
There is plenty of opportunity in the Kiwi tourism industry for MFS Living and Leisure Group even if its bid for Tourism Holdings fails, company chief executive Marshall Vann says.
"If THL works it's a good outcome, but it's not the only one out there," he says, conceding
the bid from MFS Living & Leisure "seemed to have created a lot of angst" in New Zealand.
"In Australia, who owns Vegemite? Kraft in America. It's happened to us too," says Vann.
The Australian chief executive says he has been approached by five other NZ tourism operators since launching the THL bid to see if he would like to buy them as well.
"We will be sympathetic to the local community. It is never going to help my business to send a South Korean in to run the Red Boats in Milford Sound. The whole business is about locals," he says.
Vann has already visited some of the larger THL shareholders. The deadline for shareholder acceptances is July 21. "It's about who can stare the longest," he says.
Shareholder acceptance of the $2.80 per share offer, which values THL at $277 million has been slow so far. The offer, made on April 30 for 100 per cent of the company's shares, has so far won a 13.5 per cent take-up although the group got a welcome boost from 10 per cent shareholder, the Cushing family, when it sold its stake on June 7.
David Cushing was an independent board director and THL's board has recommended shareholders accept the MFS offer. MFS Living & Leisure needs 90 per cent acceptance and still has to win over other large shareholders Sterling Grace, Axa, Tower and ACC, as well as 5,500 small individual investors.
Jason Familton, research analyst at First NZ Capital, is telling shareholders not to accept at this stage as the offer seems low following an independent valuation, which puts THL's shares at between $2.67 and $3.07.
The offer from THL excluded expected "synergies benefits" to MFS Living & Leisure, says Familton.
Vann is said to be promising the needed investment for THL's attractions at about $50 million a year.
MFS Living & Leisure, which owns the Otway tree-top walkway in Victoria, has walkway experts looking for opportunities in New Zealand, says Vann, who is "extremely interested" in the leisure dollar potential here.
According to the Tourism Industry Association New Zealand, the total tourism industry in NZ is worth $17 billion - $9.5 billion of that comes from domestic tourism or leisure, trumping the $7.75 billion from international visitors.
MFS Life & Leisure likes to invest in countries with a strong middle class and provide them with leisure facilities for time-poor families.
"We are looking for diversity by product and diversity by geography," says Vann. "THL and us together would be a more diversified vehicle."
The combined company is likely to share casual staff. Vann also sees opportunities for staff to then be sent to NZ for work.
The chief executive is interested in developing more facilities around the well-known THL tourism spots, such as the Waitomo Caves.
MFS has invested in attractions at its Australian skifields at Hotham and Falls Creek.
"There are similar issues in NZ," says Vann. "It's important to just look at some of the attractions. They are not as good as we would like them to be. You have got to do more than the attraction. You spend a lot of money getting them to make that decision [to go]. You want them to stay."
He says: "With leisure it's down to the quality of the attractions and the distribution channels."
Vann went to Milford Sound to see the Red Boats operations and was surprised there was no quality accommodation. "We would look at doing things," he says.
THL CEO Trevor Hall, who has been assured of a job in the takeover and voted for the deal, says: "When you look at the profile of MFS assets, you are building with purchase of THL a... business where you are not so fully dependent on one operation. There are ebbs and flows in tourism."
The future for tourism is bright, says Hall, who thinks improvements in long-haul air travel are good for NZ, but he feels there is still a plethora of unprofessional tourism operators that let the side down.
Hall is also calling for tourism to be taken more seriously by government.
"Tourism is critically important and is not given the legislative framework, or the senior portfolio attention in Wellington," he says.
Hall predicts a critical staffing shortage in two years' time if the tourism industry continues to grow.
"There seems general consensus in the industry the future is bright, but there are some challenges ahead," says Fiona Luhrs, chief executive of TIANZ. According to TIANZ, New Zealand gets less than 0.1 per cent of the international visitor market. The hot destinations at the moment are China, Vietnam, South America and South Africa, says Luhrs.
New Zealand was having annual visitor growth of up to 12 per cent a few years ago with America's Cup and Peter Jackson films and now it is down to 3 or 4 per cent.
"Our focus is on doing whatever we can on tourist businesses to be more profitable," says Luhrs.
"A lot of people in the industry are not necessarily there to make a profit, they're there for the lifestyle. We do need to be an industry that gets good returns, is sustainable and be there for the long haul."
"One of the key things for our industry is the quality of the product we offer ensuring our... need for good investment in the infrastructure," says George Hickton, Tourism NZ chief executive. It's about attracting the right sort of visitor. "We need more hotels that are five star. Our level of [hotel] rates are very low by international standards," says Hickton. For example, Auckland hotel rates have increased by just $10 in the past five years.
Hickton says Tourism NZ is targeting Australians to come here for four or five-day mini-breaks in cities and out into the regions, and he is relaxed about a the takeover of THL.
"Singapore owns our hotels," he says, describing MFS as a "fresh pair of eyes" in the market.
