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Motel owners like Jan Guthrie have had sleepless nights since they crunched the numbers on a targeted rate that Auckland Council is proposing to levy.
Jan, who owns Orewa Motor Lodge, will have to pay Council an additional $28,000 a year if the proposal goes ahead, on top of the $17,000 she already pays in general rates; other local moteliers are facing similar sums.
Council’s Annual Budget 2017/2018, out for consultation now, suggests shifting the burden of paying for ATEED to attract visitors to Auckland (at a cost of $27.8 million annually) from general rates onto the shoulders of accommodation providers, who will pay an amount calculated on their property’s CV. The original option of a bed tax paid directly by visitors, which reflects occupancy, was shelved because it must be imposed by central government.
Currently ATEED’s $27.8 million is covered by around 2 percent of general rates – Council proposes to instead invest that 2 percent in transport infrastructure.
From the consultation document it appears cut and dried – that operators will pass on the charge, which will be paid by visitors, not Aucklanders.
“Accommodation providers, such as hotels and motels, pay a rate that works out to be approximately 4 per cent of their revenue. If they pass the cost of the targeted rate onto visitors it would increase the cost of a nightly stay by around $6–$10 for a typical hotel,” the document says.
However, industry representatives, business owners and Councillors say there are many issues and inequities in what is proposed.
Troy Clarry, owner of Whangaparaoa Lodge Motel in Little Manly has worked in the sector all his life and chairs the Auckland branch of Accommodation NZ. He says while he understands that Council needs the money for roads, its assertion that tourists will ultimately pay the levy, when the charge is passed onto them, has a major flaw – the further out of the city you travel, the more accommodation demand there is from Aucklanders. Troy says 25 percent of his guests are Aucklanders, which he says is typical for the Coast.
The proposed targeted rate will bring his rate bill to $39,840 per annum – an effective rate increase of 290 percent.
Along with Jan, and Beachcomber Motel owner Geoff Schunselaar, Troy questions the value that ATEED brings to businesses like theirs. Although local motels have rooms booked during the World Masters Games, many other events have little or no impact on their revenue. The moteliers are also angry that operations such as Air BnB and Book a Bach are excluded from the proposed rate.
“ATEED promoted Air BnB for the Masters Games which I cannot believe as they were begging hotels and motels to open up dates and decrease rates which the majority did,” Troy says.
Geoff Schunselaar of Beachcomber Motel in Orewa says he is angry and frustrated to see his rates could increase by more than $24,000 per annum.
“Council is trying to bankrupt small businesses like ours,” he says. “I’d like to see ATEED’s chief executive take a $24,000-a-year pay cut. We will have to pay that sum however busy we are, so if we have a bad winter we will be hit hard.”
All the moteliers say it will be difficult to pass the costs on.
Jan says Council’s estimate of $6–10 per room is based on 100 percent occupancy, whereas over a year, Orewa Motor Lodge’s is more like 80 percent. On this basis she will need to increase room rates by $20.
In addition, she says she will have to lose a staff member and is looking for other savings – this includes finding new suppliers to reduce expenses and deferring capital expenditure such as an upgrade of the motel’s 15-year-old phone system. She is also re-thinking her sponsorship of two charities.
“This year ATEED needs $27 million – but what say next year it’s $40 million? Do they just expect us to keep coughing up?”
She says the targeted rate alone will account for 7 percent of her total revenue, which is at the top end of Council’s estimate.
Destination Orewa Beach operations manager Hellen Wilkins says her organisation is very concerned for local businesses, and is making a submission.
Her research shows that two Orewa motels of similar size – with differing valuations but similar room numbers – would be up for very different sums: their targeted rates under the proposed model would be $29,120 per annum and $83,850 per annum respectively. “The latter motel would need to increase its room rate by $22.97 per night to cover this targeted rate. This is not viable,” Hellen says. “$10 per night (for example) added on to room rates to cover this targeted rate can be absorbed in Auckland and Takapuna whereas it could be enough to encourage visitors to bypass accommodation in places such as Orewa.”
Auckland Councillor John Watson shares these concerns. “There are glaring inequities for suburban hoteliers. Local providers have a completely different business profile from a central city hotel chain.”
“This hasn’t been thought through. It’s hard to justify a targeted rate that is usually for a specific service when benefits from ATEED don’t really apply in our neck of the woods. I’m sure that will come through in submissions and I will be doing all I can to highlight those issues.”
Submissions on the Annual Plan are open until March 27 and details are at shapeauckland.co.nz, libraries and Orewa Service Centre.
Impact on other providers
- Apartments at the Nautilus in Orewa (currently out of action due to repair work) are another local accommodation option. Michael Osborne owns the Ramada management rights of the Nautilus, which lets out apartments for investor/owners. There are 35 owners in the hotel pool. He says if this rate is imposed, it would threaten the viability of that business. “Half the extra income that apartment owners get would be lost in increased rates,” he says. “We could enter an agreement with owners down the track as to who pays it, but there’s a real risk that they may see Air BnB, which does not have to pay, as an option. Our submission argues that owners of rental accommodation, even if it’s via Air BnB or Book a Bach – are commercial operators. We want a level playing field.”
- Orewa Top 10 campground is potentially up for a massive sum due to the valuable land it sits on, right on Orewa Beach. Cr John Watson says that if this increase is passed on to campers, it will have a big impact. As well as overseas visitors, a lot of locals spend holidays at the campground. Essentially the council owned campground will then pay that money to itself, before passing it on to ATEED.
