THE PRESS FRIDAY, JUNE 22, 1984. An increase in tourist trade

Press, 22 June 1984, Page 16

THE PRESS FRIDAY, JUNE 22, 1984. An increase in tourist trade

The record profit announced by the Tourist Hotel Corporation is good news for the taxpayer, as it is for the tourist industry as a whole. The T.H.C.’s prosperity confirms the expected upsurge in the number of overseas visitors, and reflects the improving condition of tourism in New Zealand. This augurs well for the industry’s future, provided that the industry keeps up the momentum. The taxpayers, who are the ultimate shareholders in the corporation, get a return for the investment and assistance that has been directed through Government loans, secured by debenture, through deferred taxation in the corporation’s lean years, and through export market development incentives. The corporation, like other parts of the industry, qualifies for these incentives because tourism generates overseas exchange. A growing tourist trade means more overseas exchange and this, too benefits the taxpayer. The T.H.C. announcement means that the corporation has enjoyed four successive years of profitable trading. The losses that were sustained for many years after the corporation’s formation in 1957 at last have been recovered. For only the second time in its existence, the corporation will pay company tax on the profits earned, because only in the last two years have its cumulative finances been in the black. This leads to the conclusion that, although the record profit is welcome for its own sake, it is more significant for the trend that it helps to establish. The profits of the last four years have not been achieved at the expense of new development or by financial juggling; they have been achieved through greater sales and better rates of occupancy of the hotel rooms.

The $l.B million profit announced by the corporation’s chairman, Mr J. E. McClean, is a profit before the payment of tax and extraordinary items. Full details of the corporation’s accounts for the last financial year will not ■ be disclosed until the corporation’s annual report is tabled in Parliament in a few months time. Some Reasonable assumptions may still be drawn from what has been made known. The profit has been achieved after the repayment of an almost equal amount to the Government in loan servicing. Interest alone, amounts to almost $1 million a year. The profit will have required a sales turnover in the year of about $4O million. This, in turn, would represent an increase in sales — since the freeze has limited any increase in rates — of about 12 per cent. This added percentage is a very respectable increase in trade on top of the 11 per cent increase in the previous year, and

on top of the increases of more than 20 per cent in each of the two years before that. The freeze on incomes and prices has made it easier to gauge the increase in tourist numbers from the corporation’s improved profitability. Fewer complications are present — such as changes in hotel tariffs and room rates, or increases in wages and salaries — so the higher demand for accommodation can be perceived. Mr McClean reports that many of the T.H.C. hotels had 100 per cent occupancy during the peak holiday season. The result for the year also reflects a trend that has been noticed generally in the industry: a sustained demand for accommodation outside the usual peak periods has led to significantly higher levels of occupancy for the whole year. The industry at large, not just the corporation, is showing signs of real growth, and the growth is not being restricted to a high season. Something like two-thirds of the guests at T.H.C. hotels are overseas travellers. Customarily a rather complicated formula of probabilities has been used to estimate the likely return to the country in overseas exchange that the T.H.C. has generated in this tourist trade. If the same formula is applied to the trading result just announced, the $l.B million profit also signifies about $25 million in overseas exchange to the benefit of the country. When it is realised that the T.H.C. captures something like 3 per cent of the national turnover in licensed accommodation and liquor trade, the significant contribution that tourism makes towards the balance of payments can be appreciated, notwithstanding the fact that the T.H.C.’s share of the overseas tourist market is much greater than 3 per cent. The tourist industry is labour intensive and

provides many jobs. The T.H.C. employs a varying number of staff, largely because of the seasonal nature of the trade in some of the more remote hotels. Nevertheless, on average, 1000 people have jobs with the corporation at any one time, and the number reaches a peak of 1200 or so. These people, too, will benefit from the levelling out of peaks and troughs in room occupancy. More of the casual jobs are likely to become permanent appointments. The corporation is a key element of New Zealand’s tourist industry. Many other elements share in its success. Tourists who stay at Mount Cook, for instance, may well have stayed at a hotel or motel in Christchurch on their way; they have probably used Christchurch taxis several times, and may also have benefited trade in Christchurch restaurants and shops. When the T.H.C. does well, so must many other people associated with the industry.