Tour giant battles double whammy

Friday 16th May 2003

Tourism Holdings is well-placed for the post-Iraq and Sars recovery after slashing costs and rationalising its Australian operation while managing the company through the current downturn, says CEO Dennis Pickup.

New Zealand's biggest tourism business, THL has downgraded its profit forecast by about $2 million to between $4.5 million and $5.5 million due mainly to sharply reduced inbound visitors in the past two months.

"But there will be a recovery," Mr Pickup said. "You either believe in tourism or you don't and apart from the blips the industry has had 5% annual growth these recent events have all impacted on New Zealand but nowhere near as badly as on Australia."

Mr Pickup said the industry had this year expected a strong high season extended by the lateness of Easter but Sars and the Iraq war had been a "double whammy" that badly hurt operators.

He is frustrated by what he sees as a worldwide over-reaction to the virus and said the perception of its danger had become a reality that was beyond sensible comparison.

He pointed out that about 400 people had died from the disease while the Spanish 'flu epidemic of 1919 claimed up to 50 million, two million were victims of the 1958 Asian flu and 700,000 died in the 1969 Hong Kong 'flu epidemic.

"And the World Health Organisation has said that Sars should not prevent people from travelling, that with effective monitoring and screening in place there is no reason they should not travel in the same numbers as previously," Mr Pickup said.

"Internationally, people travel on confidence but with all the publicity from the instant coffee media there is a lot of unfounded fear and uncertainty around. There has been a huge reaction to Sars and it is hurting the industry badly."

Mr Pickup said the New Zealand May to July low season was expected to slump about 12% with forward bookings indicating Asian arrivals would be down between 30-40% and Japanese 20-30% lower.

However, with 90% of THL's assets in transport the company was not over-exposed to those markets that preferred coach tours, while the major FIT self-drive visitors were from the UK, US and Europe.

"The overseas perception is that Sars will be cleared after August and traffic after then is starting to look very good with levels about the same as the past two years," he said.

"We are battling huge events beyond our control but we are well placed for the resurgence and have reduced our cost structure dramatically, particularly in Australia where we have cut staff by about 300 and modernised our Maui and Britz motorhome fleets to reduce maintenance costs.

"About 80% of our operation is fixed-cost so when things are running well we make money but you can't slash and burn in the bad times, so it is a balancing act. We have got to run the business in this environment and that is what we are doing."

THL operates the two motorhome and rental car brands, Johnston's Coachlines, Auckland Air Bus, Great Sights and the back-packer focused Oz, Kiwi and Feejee Experience tours, which was last year franchised to Brazil.

The company also owns attractions including Waitomo Caves, Kelly Tarlton and the Milford Sound Red Boats.

Mr Pickup said Australian tourism had not recovered from the 2001 New York terrorist attacks and the Ansett collapse which took a huge amount of airline capacity out of the industry, particularly to the Northern Territory and Outback areas where THL is strong.

"Virgin Blue is really an eastern corridor carrier so travelling around Australia has become more difficult, with fewer options and prices which have gone sky-high," he said. "Australian tourism is a depressed market with serious problems capacity drives tourism and they will never get that lost Ansett capacity back.

"New Zealand, though, has a lot going for it.

"It is seen internationally as a secure peace haven backed by the 100% Pure campaign. Lord of the Rings has been astronomical for us and the Lonely Planet Guide has rated New Zealand the world's No 1 destination."

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