Thursday, May 24, 2012

Len Brown's Spend & Hope

It looks like socialist mayor, Len Brown has saddled hapless Auckland ratepayers with a 10-year rolling-maul of rate increases well beyond the likely rate of inflation. Brown's mantra of taxing towards prosperity has allowed the signing off of "nice to have" pet-projects that include:

* $2.86 billion city rail loop.
* $18.6m cruise ship terminal.
* $16m superyacht facility.
* Free swimming pools for children 16 years and under.
* $10m for waterfront theatre. 

One of the more bizarre items on Len Brown's shopping list is a budgeted $3.2m to purchase a playmate for Auckland Zoo elephant, Burma. 

Accommodation providers will be wary of attracting the brunt of rates hikes and the possible introduction of a "bed tax" that was embedded into the Council's draft long term plan. A proposal to levy a daily impost on each visitor staying in commercial accommodation would be used to "contribute towards council transport costs and to offset rates rises" looks increasingly likely as the increased rates burden start to bite. 

While Accommodation providers will be burdened with rates increases and the possibility of a fresh new tax, it looks like Auckland City Council is also trying to manipulate the local accommodation market by touting for investment in a new downtown five-star hotel.

Councilors love getting involved with hotels - especially 5-star facilities. Offering incentives (corporate welfare) and meddling in the free market allows councilors great ribbon cutting photo-ops. A gleaming brand-new hotel is seen as a badge of progress and a mystical key that unlocks streams of cash from previously lost tourism opportunities. The reality is that any edifice that is built due to behind the scenes sweetheart deals and the cronyism of public officials will have serious unintended economic consequences including cannibalising competing businesses. 

The managing director of Millennium & Copthorne Hotels, BK Chiu has some interesting observations:
The head of a major hotel company has criticised Auckland Council for touting for investment in a new downtown five-star hotel, saying no more hotels are needed as the country is already saturated.
BK Chiu, managing director of Millennium & Copthorne Hotels New Zealand, told investors in the NZX-listed company the group had already made a submission to the Auckland Council about its plans and how they might affect the hotel industry.
Downturns in tourism out of Europe, the United States and Australia were continuing to hurt existing operators, he said at the group's annual meeting in Auckland yesterday.
No-one would build a hotel in Auckland based on current room rates, he said.
"Part of our submission [asks], `how have hotels been doing in Auckland?' – and I can go back 10 years."
Indexing over the past decade shows room rates have not kept up with inflation, he said.
Hotel occupancy for the year to December 2011 was down to 64.3 per cent across the hotel group, which has 34 hotels nationally, down from 66.4 per cent in 2010.
The group's submission about Auckland's future urged the council to stick to creating demand as Wellington has successfully done.
"Let us look after the supply side," Chiu said.
New Zealand typically built capacity to the maximum which just hurt the industry and created wildly fluctuating room rates.
"We've seen it in Auckland, we've seen it in Rotorua, we've seen it in Queenstown," Chiu said.
"There's enough rooms in Queenstown to last the next 25 years assuming you have 3 per cent growth."
Source: Click HERE

Click the "Get Widget" link below to place this widget on your website or blog!