The M Social Auckland hotel on Quay St, Auckland. Photo / File
Millennium Copthorne has been propped up by government support and revenue from its property portfolio but says the hotel industry is still in "survival mode".
Government tax credits, the wage subsidy and managed isolation contracts have been keeping the hotel operator and property investor afloat while regular revenues have dried up in the pandemic.
In an emotive half-year earnings report, group chair Colin Sim and managing director BK Chiu thanked staff, shareholders and suppliers for their support during the crisis.
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It was hard to find words to describe the last six months, they said, with the much-repeated variants of 'unprecedented' failing to "capture the depth of feeling" experienced since the full extent of the Covid-19 pandemic became apparent.
The first round of the government wage subsidy gave the hotelier $6.7 million towards its employees' salaries while it grappled with the crisis. The wage subsidy extension added a further $1.8m.
Still, hundreds of staff were made redundant across its 13 New Zealand hotels while others took a pay cut, or had their hours reduced, as the company adopted an "act early" strategy in anticipation of a catastrophic hit to revenue.
The blow was softened, however, as Millennium received a $20m tax credit after the government reintroduced the ability to depreciate non-residential buildings from the 2020/21 income year as part of the Covid-19 Business Continuity Package.
This one-off credit inflated the group's half-year after-tax profit, which rose 43 per cent to $34.1m despite facing an existential threat from the pandemic.
But the positive bottom line conceals a harsher reality. If you take away the tax credit, profit from hotel operations drops to just $3.7m, down from $17.5m last year.
"Put bluntly, hotels in New Zealand are all in survival mode and will remain that way for an extended period of time," Sim and Chiu said.
"There is no 'normal' anymore and predictions of a 'new normal' seem premature."
Part of abnormal life for a hotelier in pandemic-era NZ is operating managed isolation facilities for returning citizens. Millennium Copthorne runs two of NZ's 32 facilities holding returnees in two weeks of quarantine.
Both hotels, the Grand Millennium and M Social Auckland, will continue with managed isolation business during the second half of the year, which the company said would keep the hotels in operation and staff retained.
The government had spent $80m on quarantine operations by the end of June, with $298m set aside for the rest of 2020.
Today a law was proposed to charge some returnees $3,100 for managed isolation.
Meanwhile, another four of Millennium's hotels will remain closed until at least the fourth quarter of the year and, even then, will only open when the borders do.
Since customers have cancelled nearly all bookings for the remainder of 2020, Millennium Copthorne said it has to rebuild the business "more or less from scratch".
Shares in the company fell 1.6 per cent to $1.81 and are down 35 per cent year to date.
The "property company with hotel assets" said that any profit, for the time being, will come from its property divisions which have not been as badly affected by Covid-19.
Millennium's property development subsidiary, CDL Investments, contributed an after-tax operating profit of $13.74m, down from $15.1m in 2019. Sales came mostly from developments in Kewa Road, Auckland and Prestons Park, Christchurch.