Local tourism still not enough to fend off Tourism Holdings loss

Wednesday, 23 December 2020

Tourism Holdings’ local business, including rafting and tours of the Waitomo Caves, relies heavily on overseas tourists.

Tourism Holdings has flagged a bigger full year loss than the market is currently predicting, as local demand fails to completely fill the gap left behind by international tourists.

The NZX-listed business, which specialises in campervan hire, adventure tourism and makes recreational vehicles, was hard hit by the closure of New Zealand’s borders.

Despite a campaign by the tourism industry to encourage Kiwis to explore their own country, the company said demand in November and early December – outside the school holiday season – indicated that its summer high season would be weaker than usual.

Travel in the late January to March period was ''now expected to be lower than originally anticipated,'' the company told the NZX.

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* Tourism Holdings profit falls by half to $29m

Despite Sydney's latest lockdowns, THL is still hoping for a trans-Tasman bubble around late February-March.

Shares in THL, which were trading about $3.20 at this time last year, fell 17c or 6 per cent to $2.37 on the news.

While it was too early to predict a full year result, THL said it seemed likely that the loss would be wider than the average the market was currently expecting.

Forecasts by selected analysts have put THL's average net loss at $12.8 million. The company made a net profit of $20 million in 2020, which was 30 per cent lower than the $29.8m in 2019. Its statutory net profit last year was $27.4m but it included a series of one off items.

Chief executive Grant Webster said the company’s finances were sound, as it eagerly awaited the opening of a trans-Tasman travel bubble.

‘’We’ve been very clear that our balance sheet is very strong. We’ve reduced debt significantly during this year through the sale of motorhomes, so we’ve got a very strong equity position.

In the US, motorhomes are being called ‘Covid cocoons’.

‘’We haven’t conducted an equity raise, probably one of the very few tourism companies in New Zealand or Australia that hasn’t.’’

Webster said the company continued to reinvest in the business to ensure that it was ready for recovery when travel restrictions were loosened. He was still hoping that would be late summer to autumn.

THL’s largest losses are expected to come from the New Zealand side of the business, which is heavily reliant on international tourism.

One bright spot had been its campervan manufacturing arm which had actually had a number of record sales months after offering a period of cut-price hire deals and a sell-off of some of its fleet. About 700 vehicles were sold at expected margins.

Webster said the issue was that Kiwis tended to go on holiday over a narrow period of time.

‘’The Christmas-New Year period's busy as you would expect, but when we look at forward bookings into March, when we look at November, those periods that aren’t school holidays, those periods when they don't have public holidays in them, they’re certainly quieter than what we anticipated.’’

Waitomo was certainly quieter as well. Some job cuts at the famous glow worm caves had been made in the middle of the year but no more had followed, aided by $2m in government job subsidies.

The Australian and US businesses were doing better. In the US, the bigger population had helped, as had the lower risk concerns around motorhome travel in Covid times.

‘’The RV hire market’s quite small, relatively speaking in the US, and because of our type of product and how widespread Covid is, we’re a perfect kind of product. In the US, some people are calling them ‘Covid cocoons’.

‘’You’re in your own bubble, you’ve got your own food facilities, your own bathroom facilities, you can travel to places that are remote.’’

THL's rental revenue in November and early December in the US had exceeded the same period last year and recent shelter-in-place restrictions were expected to have a minor impact on winter business.

The US business was expected to deliver positive earnings this year.

Meanwhile, in Australia, THL’s motorhome hire business had had a ''positive level of rental activity'' in the short period of time that state border restrictions had been fully lifted.

''This provides confidence that the Australian business will be able to operate profitably in the domestic market, assuming there are no domestic travel restrictions in place.''

Vehicle sales to date this year were positive and about double the growth over the same time period last year.

Nevertheless, the expectation was that the Australian business would deliver a negative before tax profit result, although to a smaller extent than in the New Zealand business.