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Friday , August 18 2017
auckland New Zealand

Auckland Council’s targeted rates could set national precedent

Early this week, industry leaders, and accommodation industry representatives joined Auckland Council at a hearing to decide the future of the targeted accommodation rate proposed by the council earlier this year.

The hearing took place on Monday morning March 20, 2017. Along with TIA’s Chris Roberts, motel owners and other affected parties, Rachael Shadbolt general manager accommodation Hospitality NZ / Accommodation NZ gave a presentation on the inappropriateness of the proposal.

Rachael-Shadbolt_webheadshot-300x272 Auckland Council's targeted rates could set national precedent
Rachael Shadbolt, GM, Accommodation, AccommodationNZ

In a phone interview, Wednesday morning, Ms Shadbolt gave AMG a post-hearing update:I think we are destabilising the argument. It is clear that the councillors thought the proposal was one thing, which is a bed tax, and it’s not, it’s a targeted rate.”

“The more we give them commercial accommodation 101, the more they are beginning to understand why it’s just not that easy, and why this isn’t fair or equitable.”

Ms Shadbolt says it’s impacting more people than councillors realised: “it’s not just targeting 330 commercial accommodation; it’s actually targeting something like 3100 landlords and property owners.”

So how were the submissions received? “Look I think we had a lot of lightbulb moments,” Ms Shadbolt said, “but our written submissions are going to be really clear to reinforce what we said on Monday”.

“They are unpicking what this really means, slowly getting their heads it.”

With so many more affected than Ms Shadbolt believes the council realised, industry bodies are determined to continue to state the case for their members for the duration of the consideration period.

Following the release of the Auckland City Council’s Annual Plan, which proposed to implement a targeted rate on commercial accommodation providers based on their capital value, Hospitality NZ were vocal in their opposition, due to concerns at the inequity of this targeted rate only affecting one sector (commercial accommodation).

Their dedicated page stated: “This could see a 150% to 300% rates increase for businesses.

We do not believe this is fair and have raised our concerns on this issue at local and central government levels.”

Rachael Shadbolt’s speech on Monday included endorsement of TIA’s chief Chris Roberts’ presentation, which had “covered off the impact this rate will have on the hotel sector and other large scale accommodation providers”.

A statement released on the TIA website stated: “The Council’s rational for this targeted rate is based on the flawed belief that accommodation providers are the main beneficiaries of visitor spend in Auckland.

“In fact, of the $7.51 billion total visitor spend in Auckland in 2016, just under 10% or $723 million was spent on commercial accommodation. The balance goes to a wide range of sectors.

“So, the commercial accommodation sector gets 10% of the direct benefit if Auckland Tourism, Events and Economic Development (ATEED) is successful in its efforts to grow tourism, but is being asked to pay 100% of the cost.”

This inequity is even more marked in smaller operators, many of whom say they benefit very little from ATEED activities. Rachael Shadbolt also conveyed to hearing attendees that concerns were not isolated to Auckland operators and that motel owners country-wide were looking on in a degree of horror at what might become a precedential model for other councils.

On Wednesday morning, she reiterated this aspect to AMG: “The commercial accommodation sector nationwide is watching this with interest. They know this is the thin edge of the wedge.  If Auckland council decides to implement the targeted rate, it would give a mandate for other councils to do the same.”

And the likely outcome? “I’m not going to put money on whether it goes ahead or not – however, we believe we have made some good in-roads into educating the councillors as to what the proposal really is; a targeted rate on CV, not a visitor’s or bed tax .”

“We’re turning a few people to seeing out point of view,” she reported, but also said it was vital to keep on feeding in information about how this will affect the commercial accommodation sector.

With submissions going in on Monday, Ms Shadbolt says April and May represent a crucial window for council to be persuaded by  ongoing discussion and education.

We will hear more from Rachael Shadbolt in our next issue of AMG, due out in April. “My column is going to talk about alternative funding options,” Ms Shadbolt told AMG via email on Tuesday March 21. She also described the Auckland Council’s model as “inelegant, blunt and narrow”.

The proposal is part of the Auckland Council’s 2017/2018 Annual Plan (also known as the Annual Budget). Consultation runs from February 27 until 4pm March 27, 2017. Read more.

Rachael Shadbolt continued to highlight the effect the targeted rate would have on smaller operators (“often husband-wife teams”), citing a particular member’s thorough testimony of how the targeted rates would affect both their business success, and indeed their family’s livelihood.

We have republished this account below with Rachael Shadbolt’s permission:

Recent media comments from Mayor Goff suggested that the accommodation sector hadn’t been open, honest or sharing of information with regard to the targeted rate discussion.

Instead of getting righteous about the implication that we haven’t been, I’m going to share a very open and honest email I received from one of my members about this proposal and what that will likely mean for her family.

The email read: 

  • We have 20 units. 
  • We currently pay $30,000.00 per annum in rates. 
  • We lease this business so our fixed costs are significant as the business owners.
  • These include the rates
  • Our motel provides accommodation for the owner/operator so this is our home as well as our business. 
  • We have spent a lot of capital on refurbishments and upgrades over the last few years
  • We made that decision when we were suffering financially through the recent recession to focus on positively driving our own business through direct marketing, securing recession proof clientele and continued upgrades. 
  • Our core business is the business traveller.  We do not rely on ATEED to bring us our guests.
  • If we do have this targeted rate introduced I can’t even begin to work out how to calculate this into my room rates:
  • There are so many unknown’s like:
    • future Occupancy level’s – these go up and down every day
    • future changes in the CV – which we have no control over and will likely only go up
  • Indirectly we do get some benefit from ATEED but that would be more because of a shortage of hotels.  When this happens it actually forces our regulars to either not bother coming to Auckland, find another property or fly in and out on the same day.
  • For us one of our major clients are government.  We have fixed their rate for 2017/18.
  • Our client base is very price sensitive.  Many of the other clients we have secured through the tendering process are fixed for 2017 and in some cases, have the option to extend up until March 2018.
  • We are within walking distance to business parks, and this is where our core business is. Auckland businesses bringing their staff into town. So ultimately that Auckland business pays for this targeted rate too if we do manage to pass it on.
  • We work hard to meet our market and to add value to our services – this hard work means 24/7 commitment and lots of personal and family sacrifices.
  • We do not want our motivation for doing business to be about our need to meet unreasonable fixed costs.
  • Our original plan when we bought the motel lease in 2005 was that we would be able to work hard, save hard and buy a house in Auckland for our family and life after the motel. 
  • The recession took care of that little dream and it has taken years to get ourselves back to a point where we are feeling like our hard work is finally paying off. 
  • It seems grossly unfair that when we are finally able make a reasonable living we are targeted and penalised
  • This whole proposal seems incredibly naive, amazingly convenient and grossly unfair.
  • I am frustrated that the Auckland Council have presented their proposed targeted rate in such a way to the general residential ratepayer that leaves them no option but to agree with the idea because, to not agree, means less services, less infrastructure or a rate increase for them. I have worked this out to be around 90 cents a week per residential rate payer.  Not bad compared to a targeted rate increase of around $50,000 a year.
  • Has Auckland Council forgotten that we are rate payers too?

About Suzy Barry

Suzy Barry
Suzy Barry is the editor of Accom Management Guide, New Zealand. She brings over a decade of editing and journalism to the title, and has experience in wellness tourism.

One comment

  1. any targetted rate based solely on capital value is fundamentally flawed – Buller District Council tried this some time ago & it was a failure. It was merely hitting commercial ratepayers with an added bill with no consideration of factors such as location, implied benefit, omission of other forms of semi commercial accommodation operators etc It failed to describe & define why the use of CV was relevant to the provision of tourism & development promotion & probably bordered on illegal. It failed to explore the options available for setting a targetted rate – being fixated on the simplest blunt instrument. Some horrendous examples eventuated, a brand new small cafe ended up paying more than the large service station over the road, places in the rural area which were virtually empty 6 months of the year were hit very hard for little benefit. Holiday homes with absentee owners paid little if anything despite being in direct competition with the many small operators in the District. The Council CEO suggested it should just be passed on to the customer…so the extra rates, the increased overheads, agent commissions etc etc. go on the price & there was no mechanism to measure any KPIs, discussion on expenditure – do these people have any concept of how many bednights extra are needed to nett the payments back ? It seems to me that Councillors & policy wonks with no understanding of the industry honestly believe that my $140 per night is gross profit. Bet they wouldnt work for my real hourly rate !!!

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