The Press SATURDAY, JULY 5, 1969. Overhauling Tourist Hotel Policy

Press, Volume CIX, Issue 32032, 5 July 1969, Page 12

The Press SATURDAY, JULY 5, 1969. Overhauling Tourist Hotel Policy

The Tourist Hotel Corporation leaves no doubt in its latest report to Parliament that it has been facing many perplexing problems. Some of these have arisen because of changes in Government policies over the years; some are the problems of any hotel business rising costs, staff training, seasonal fluctuations in trade, and unforeseeable setbacks resulting from bad weather or economic conditions. One of the problems is the unfavourable appearance of the corporation’s accounts; and it is fair to speak of " appearance ” because, as the corporation runs hotels in places where private enterprise might not succeed, the final results do not tell the whole story. Nevertheless, the accounts must seem discouraging to the corporation and its staff. The corporation has a clear enough policy, and it is probably sound. It will concentrate its efforts of promotion and expansion on five main resort areas (Te Anau and Milford, Mount Cook, Franz Josef, Wairakei, and Waitangi). The corporation wants to dispose of three hotels (Lake House at Waikaremoana, Eichardt’s at Queenstown, and tiie Pukaki Motor Inn). Its other hotels will be maintained; but they will be expanded only as demand warrants.

In the 1? years of the corporation’s management, half of its hotels have made working profits. Last year all but one—the Waitomo Hotel—made losses after interest and depreciation had been allowed for. The final loss was more than $1 million. As this loss, representing interest and a decline in the value of assets, was remitted by the Government, it amounted to a State subsidy of $4 for every bed occupied. Were it running these hotels, private enterprise would have had to charge tariffs at least $4 higherassuming, of course, that similar custom was attracted at such rates. The subsidy is essentially State assistance to the whole of the hotel industry; the corporation's hotels are vital to the tourist industry, and especially important in attracting overseas visitors. Last year they earned more than $2 million in overseas exchange.

The new policy emphasises the corporation’s fundamental purpose of supplying hotels in resort areas to which private enterprise is not attracted. The State might allow the corporation to compete with private enterprise in more profitable areas in order to make good its losses elsewhere; or it might continue to finance the losses out of taxation—including taxes on the profits of the private hotel companies. There is a third course: for the Government to write off capital advanced to the corporation and to treat this as expenditure for national development It would be neither fair to private competitors nor good for the efficiency of the corporation to ignore the capital costs of the TJLC. hotels that compete with private enterprise. Those hotels, at least should work on the same terms as private enterprise. Since the corporation has adopted a policy of concentrating on the main resort hotels, which are not in competition, the way is open for a change in the corporation’s accounts. Of the remaining hotels, those which work side by side with private enterprise should not be relieved of their capital charges. If such a plan were adopted the working profits of the main resort hotels would more or less balance the net losses of the other hotels. It would replace the annual subsidy by a direct State contribution to the capital cost of the resort hotels; and it would make the corporation more akin to a commercial enterprise. The true worth of the corporation would be much more apparent to its staff and to the citizens who own it