Restore Rotorua

Lakes Council (the Council) has failed to inform and consult with the local community regarding changes to tourism accommodation based in the heart of the Rotorua CBD by granting a non-complying resource consent to Kainga Ora in respect of “transitional housing” for the homeless at the Boulevard Motel on 265 Fenton Street. Similarly, the Council has failed to inform or consult with the local community regarding six final resource consent applications currently before the Council from the Ministry of Housing and Development (MHUD) for “emergency housing”. We support our homeless being housed, but between Kainga Ora, MHUD and existing MIQ facilities, there is insufficient accommodation left to support our local tourism industry which means Rotorua will struggle to recoup the losses from Covid-19. Tourists are not able to find decent accommodation near the heart of our city, which means our hospitality sector will also suffer. Taken together, the granting of non-complying resource consent applications will create a negative cumulative effect in a small commercially concentrated geographic area and in our most important central spaces. We are also concerned at the Council’s failure to take into account the environmental impacts of transitional and emergency housing on traffic, noise, odour, water, wastewater, fire hazards, and economic effects, cumulative negative effects on the rental and housing market when granting resource consents and the Council has failed to take into account the best interests of the community in their decision making. We are releasing today a Report done by NERA Economic Consulting which finds that:

• The tourism sector is the largest employer in Rotorua accounting for 17% of Rotorua’s GDP.

• Rotorua has previously had around 60 hotels and motels but has suffered a significant reduction in the supply of hotels and motels in 2021 of approximately 22% in comparison to other local tourist locations who suffered a reduction of approximately 3%. Removal of the likes of the Boulevard Motel from this supply pool only exacerbates the problem further as a reduction in the accommodation quantity supplied. The mixed-use model for motels, where tourists can stay alongside tenants in emergency and transitional housing, is being phased out. As of early 2021, there were 45 motels being used as mixed-use motels. Now, Boulevard is one of 30 motels that the government is seeking to use exclusively as transitional and emergency housing, which effectively halves the number of motels available for tourists and visitors of Rotorua that are essential to survival of our local businesses.

• Businesses that are heavily reliant on tourism such as cafés, restaurants and bars would struggle to service their debts, and managers are like to be placed in a difficult situation to let go of staff or face insolvency.
• There will be an over-concentration of transitional and emergency housing in the golden mile of Rotorua which is zoned for commercial activities. For instance, Boulevard Motel, and the six pending resource consent applications, and MIQ facilities are all contained within a 2km radius which is wholly or fully in the commercial zone.

• The reduction in tourist accommodation in Rotorua will flow through to a reduction in tourist expenditure at businesses in Rotorua. There is evidence of a recent reduction in tourist expenditure in Rotorua relative to Taupo, which is consistent with the relative reduction in accommodation facilities. From 2018, domestic tourism spending in Rotorua has typically been at or above that of Taupo, but there is a distinct break in this pattern around August 2020, with spending in Rotorua now consistently below Taupo spending;

• The use of the 34-unit Boulevard Motel alone for transitional housing is likely to result in a loss of annual domestic tourism expenditure to Rotorua businesses of approximately $3.4m, that is $100,000 loss in expenditure per motel unit, for a 12 month period. This loss reflects only domestic tourism expenditure at Rotorua businesses arising from reduced guest nights at a single motel and does not account for reduced tourism expenditure due to the use of hotels for MIQ facilities and the large number of other motels that are used in transitional/emergency housing in Rotorua. By extrapolation to the six motels with pending resource consents for emergency housing, the total annual loss of domestic tourism expenditure (including Boulevard Motel) is approximately $18.2m. We note that the resource consent for the Boulevard Motel allows for a review within 36 months of the consent being given effect. The six pending resource consent applications are contracted for an “initial” one-year period and allow for a reversion to tourism accommodation as “long-term accommodation options” come on stream, but anticipate that contracted motels will be required for emergency housing “for the next few years”. However, there is insufficient detail on precise timeframes. Thus, when borders re-open, there will be the potential for international tourism expenditure, which is greater, per tourist, than domestic expenditure, but will be foregone if there is insufficient accommodation capacity for these tourists;

• As further motels are contracted or purchased by the government for transitional/emergency housing, there will be cumulative effects from a loss of tourism expenditure. Even a small loss of expenditure may push some Rotorua businesses past their tipping point, given that they have already been affected by the loss of tourism expenditure from international tourists. Pre-Covid-19, annual international visitor expenditure in Rotorua was $354m, or around 40% of total visitor expenditure in Rotorua. The ongoing lockdown in Auckland and restrictions on travel beyond the Auckland border are also likely to be having an effect, given that Aucklanders provide the highest annual visitor expenditure ($145m per annum) of all domestic and international visitors to Rotorua;

• This may result in financial viability concerns for some businesses and maybe particularly stark for small businesses such as cafés, restaurants, bars, and tourism operators that are heavily reliant on tourism. The consequences of these concerns would include difficulty servicing debt, the need to reduce workforces or some businesses exiting the industry, resulting in unemployment. With the tourism sector as the largest employer in Rotorua, and tourism accounting for around 17% of Rotorua’s Gross Domestic Product (GDP), compared to 6% nationally, adverse economic effects on the tourism sector could be particularly detrimental;

• Any direct loss of expenditure would also lead to indirect “multiplier” adverse effects on interrelated businesses that supply goods and services to Rotorua tourism businesses, again with the potential to lead to debt servicing difficulties, unemployment and/or industry exit. As context to these indirect effects, for the tourism industry in New Zealand overall, where there is a direct effect on GDP, there is a further indirect effect of nearly 70% of the original direct effect;

• Any direct and indirect reductions in tourist expenditure will result in a reduction in Rotorua’s GDP. Rotorua GDP peaked at $3,813m in the December 2019 quarter, before falling 4% to $3,664m in the December 2020 quarter. GDP has since recovered slightly, to $3,807m in the June 2021 quarter, but any reductions in tourism expenditure will undermine Rotorua’s continued recovery;

• The reduced accommodation capacity can make it difficult for conferences, conventions and sporting events to be held in Rotorua, and there is anecdotal evidence consistent with this. To the extent that events are moved elsewhere and/or there is reduced overnight attendance additional to the reduction in tourism described above, this will further reduce tourism expenditure in Rotorua;

• There have been reports that the increasing use of transitional/emergency housing in Rotorua has increased crime rates in nearby areas. Increased crime can impose economic costs on society, including medical costs, property losses, loss of income, and increased security costs. An increase in crime can also reduce economic productivity and investment, adversely impacting economic growth; and

• While motel owners that sell to or contract with the government to provide transitional/emergency housing will profit from doing so, this profit is likely to be sufficient to just offset the loss of tourism business to the motels themselves, and therefore any net benefit to motel owners will be marginal. Our District Plan indicates that the city centre entranceway should primarily be for commercial purposes. The city centre is not appropriate for transitional and emergency housing, and there are other places around the city that are better suited and up for exploration. Each location should be assessed on a case-by-case basis and with fair and open resource consenting processes, especially when the proposed consents appear non-compliant with resource management law. Restore Rotorua has engaged lawyers to advise on the resource consenting processes that the Council has engaged in, and will continue to keep an eye on all pending approvals of potentially non-complying and non-notified resource consents applications for such activities which contradict the District Plan. We feel Fenton Street and the centre of town has become less safe for locals, we feel we have lost the amenity, ambience and heart of our city which once made Rotorua a top tourism destination. Restore Rotorua is confident that it is possible to achieve both objectives of housing the homeless and remaining a top tourist destination. It does not have to be either/or, but a win/win. We will be inviting the Council to engage with us in the best interests of all who live in Rotorua. Restore Rotorua would love your support. Please like and follow us on social media. Share with your friends, family and businesses here in Rotorua. Collectively we can have a voice to make a positive change to our city. If you would like to know more or if you'd like to make a financial contribution to help with legal costs, please email [email protected]

The Restore Rotorua Team