Paul Davies Paul Davies

Where is the travel industry headed?

By Paul Davies, Partner, OneTeam Chartered Accountants Ltd

The good news is that consumers’ desire to travel is strong – something you probably already know from your own clients. Tony Alexander (ex BNZ economist) released the results of his recent survey in his report on Thursday 18 February.

The surveys are taken from his database and based upon 1250 responses. The responses that he received showed that half the responders were planning to go overseas within one year of the borders opening. However, these figures indicate that plans are getting pushed out the longer we stay in hibernation mode. See the difference between November 2020 and February 2021.

My concern for our clients (100-plus travel and tourism) is ‘can they survive another six to 12 months with little international business?’. The answer is no for many of them. Travel businesses have always been brilliant at adaptation – think commission cuts, implementation of fees, staff shortages, financial pressures, GFC and now Covid-19. In comparison with other businesses that we deal with, the travel and tourism industry have had a lot of support from their franchise or industry group, they are not alone with their issues. The business owners have been smart at adapting – but when they run low on cash the options are limited. Right now, most businesses that we deal with have cut costs, reduced staff, obtained funding and made plans to get through the end of March 2021 or maybe the end of this year.

What happens then, what options are left?
• You could terminate your lease and work from home – some landlords have been really understanding here.
• Can you reduce overhead costs, and wages further?
• Pivot to domestic where you can – some clients have been really creative with this.
• Some have taken another job to help pay the bills.
• Have a look at Work and Income’s Flexi Wage scheme to maintain employment – this may provide a slim lifeline to keep staff on or help them pivot. Or this may be an option when you re-hire as business comes back. See www.workandincome.govt.nz/employers/subsidies-training-and-other-help/flexi-wage.html.

Covid Resurgence Support payments will be available from 23 February. To be eligible, businesses must experience a 30% drop in revenue or more over a seven-day period after the increased alert level (Sunday 14 February at 12pm). See www.ird.govt.nz/covid-19/business-and-organisations/employing-staff/financial-support/resurgence-support-payment.

The payment would include a core per business rate of $1500 plus $400 per employee up to a total of 50 FTEs ($21,500). The payment is structured to provide most support to smaller firms who are most likely to face cashflow issues but will be available to all businesses and sole traders. This resurgence support payment will not be of much use to travel businesses as they are already down but it may be worth doing the calculations.

A seasonal business must show a 30% revenue drop compared with a similar week the previous year.

paul@oneteamca.co.nz

www.oneteamca.co.nz/travel-and-tourism

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