Hostels and Backpackers brace for 'lost summer'

Cheap and cheerful? Guest and staff shortages have left hostels in a difficult position. Photo / Paul Taylor.

New Zealand's choice of budget accommodation is a crowded market. With a choice of YHA hostels, pod-hotels and hundreds of small, independent backpacker lodges – there were few places more popular for young, budget-conscious travellers.

That was until they were locked out of the country in March.

Now with fewer than 18,000 remaining on working holiday visas, 14,000 of which will expire before March next year, backpacking lodges are short on both visitors and staff. Hostels have little option but to hunker down and prepare for a lost summer.

"The reality is there is no good situation for any accommodation provider at the moment," said Todd Lacey, New Zealand area manager for Booking.com. However, the bookings website says the budget market is the most severely affected.

"Hostels are one of the worst hit if not the worst hit ones, because the fact is the source market for those hotels are international tourists."

Having focused on an extremely vibrant but narrow portion of visitors – international travellers between 18 to 25 years old – the sudden closure of borders has hit youth hostels and budget backpackers the hardest.

Not all locations are suffering equally, with specific destinations such as Queenstown coping better, but overall the picture is bleak.

Earlier in the year the New Zealand branch of Hostelling International indicated it would be scaling down on its activity at 35 sites around the country to reflect the smaller domestic-only market.

"Our goal is survival in the best way possible" said YHA New Zealand in a statement.
While YHA said it was dedicated to maintaining the New Zealand network, their priority was to "ensure we reach our 100-year anniversary in 2032".

The centenary celebrations for the world's largest hostel network look a long way off at this point.

The budget and youth accommodation sector is a busy sector. Pre-Covid there was a large independent market for hostels. Alongside YHA, large tourism operators like JUCY had also pivoted to try to find a niche in the growing market with novel offerings such as pod hotels.

"Until Covid came along we were doing pretty well," Brett Duncan, chairperson of the recently established New Zealand Hostel Association, said.

The hostels are geared towards young, sociable travellers from around the world. Historically, domestic guests accounted for less than 20 per cent of member hostels' occupancy. Even with larger hostels trying to appeal to group-bookings and school groups "average occupancy is down to just 28 per cent," Duncan said. "We're empty."

With no new international travellers entering the country and international guests in New Zealand choosing to be repatriated, the number of travellers on working holiday visas is dwindling.

One of the biggest issues facing the 25 members of NZHA and the wider tourism and hospitality is staffing.

"The vast bulk of our staff will be on temporary work visas and working holidays," Duncan said.

"We need these people to work with us, because Kiwis won't. We need our staff on-site for health and safety reasons. In most cases, Kiwis won't come live on-site."

This is in keeping with a recent report by Tourism Industry Aotearoa. Last week TIA chief Chris Roberts told the Herald that 45 per cent of its members reported difficulty in staffing roles.

Due to what Roberts described as "the 'lumpy' nature of domestic tourism" operators rely heavily on seasonal and part-time workers. TIA survey respondents said these were roles that would normally have been filled by temporary workers, and New Zealanders were reluctant to apply for them.

Duncan is hopeful that a transtasman route would be enough to keep some hostels above water with the demand from inbound Australians.

After the Great Financial Crash in 2008, it was the "budget" end of the market which showed the quickest recovery.

"The crisis-resilient traveller, 18-25, who are willing to take the risk - those are the ones that are going to be back first," predicts Duncan. "If we can at least get Australia, that will be a lifeline. It's going to take years to return to normal."

Immigration New Zealand told the Herald that by March 1 only 3678 visitors will still have a valid working holiday visa.

Eleven thousand Supplementary Seasonal Employment (SSE) visas were automatically granted to visas expiring between October 1 and March 31, 2021. However these "bridge visas" only entitle holders to take on agricultural harvest work for employers on the "SSE-approve employers" list. The SSE does not extend to tourism or hospitality work.

"Our borders are closely controlled in order to keep Covid-19 out," said the office of Immigration Minister, Kris Faafoi. "While only a small number of migrants can arrive in New Zealand, the Government is enabling the remaining migrant workforce to stay on. This will go a long way to support the labour needs of the horticulture and viticulture industries."