MythBusters & Fact Checks

November 13, 2019

Protectionism was a better governmental policy/system for accommodation properties to operate under.

 

Under the "old" Norfolk Island self government model accommodation properties were required to have licences for each unit they operated for the purposes of tourist accommodation (similar to taxi licences). This system was seen as a way to protect the industry and eventually inhibit growth. These licences were initially issued by the Norfolk Assembly for nominal costs and when it was thought too many had been issued they were restricted. The costs of the licences blew out to 25k each which the market dictated entirely due to the restriction. If you wanted to start an accommodation property you could only do so after privately acquiring the licences you needed at 25k each, a huge deterrent to competition. When the licences were eventually removed (by the Norfolk Assembly at the behest of the Dept of Infrastructure as part of the newly adopted Roadmap document) they almost immediately became worthless. At this time there were 1750 registered accommodation beds available for tourists on the island. It was thought at the time that new accommodation would flood the market. Something that hasn't happened. In fact the opposite has occurred. With protectionism removed some properties lost value in the eyes of lending institutions and some felt the squeeze of a lack of tourists. What we have seen is a diversification of the market and downward pressure on pricing. Both good outcomes for the consumer. We have also seen fringe businesses who couldn't adapt to the new environment suffer financially as others thrived. 1750 beds was never a sustainable number. Nobody wants that many tourists a week anyway. It was just a by-product of a failed policy. Now we see the failing businesses call for a return to the very system that got them into this mess in the first place. Non sustainable, means a natural attrition of business will occur. With only 500-800 tourists on the island per week it is inevitable.

Solution: Remodel business plan to reinvent and reinvigorate the business. Eg accommodation properties can cater to retirees or long term tenants, even hospital patients. Government grants may also be available to assist in these new endeavours.

 

Business has suffered during recent times on the island due to lack of tourists. 

 

If businesses have suffered in the last two to three years on the island it is probably due to a lack of planning and foresight more than anything else. Tourism numbers have been around 28000 to 30000 since 2015. Some struggling businesses have blamed the award wages for this turnaround in their fortunes. We would argue that with over two years warning of the implementation of wage increases business had ample time to factor in these changes to their budgeting. Higher wages will also increase spending power of consumers with a knock on effect for business (as long as they have something the consumer wants). Other businesses will tell you that supply is an issue, but with more than a subsidised freighter per month and regular shipping there has been an improvement along the supply chain. Obviously shipping delays will occur but we are all used to that here and planning around this is second nature.

Solution: Upgrade, diversify, make yourself stand out, go digital, find your point of difference, network with other businesses, educate yourself, find a business mentor. (Recently a business stopped operating due to import restrictions being placed on NZ products whilst another business on the island could easily have helped with their product sourced from Australia at no extra cost. Even going so far as to have the product custom labelled and delivered.).

 

 

 

 

 

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