Shaky grounds for Kaikoura’s business community

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The Kaikoura earthquake on November 14 last year registered 7.8 on the Richter scale. Rock slides covered the major highways in and out of the city; the seabed rose around 1.5 metres; and nearly 500 businesses of 734 registered in the Kaikoura District required some kind of assistance.   

See this striking video from stuff.co.nz which shows the before and after effects of the quake.

The earthquake forced many individuals and businesses to rely on Government help. As of November 30 2016, 333 Kaikoura businesses had applied to the Government’s Earthquake Support Subsidy that granted $500 per full-time employee per week to quake-affected businesses.

Many of these were tourism businesses whose livelihood relied on the steady stream of tourist traffic from State Highway 1. Sadly though, landslides from the earthquake destroyed much of this highway and repair work is not due to finish for another year.

Mel Skinner, Economic Lead for the Kaikoura recovery effort, says from a financial perspective, the continuation of financial support is vital.

“With a loss of about 60% of the market due to road access, businesses need financial support beyond the subsidy and we are currently working with central government on how we can provide that.”

The challenges

Limited through-traffic combined with changes to the seabed and coastal tides hampering the launching of tourism boats, has left many marine businesses feeling the pinch.

Business Manager at Dolphin Encounter Kaikoura, Lynette Buurman, says without robust access by road, their business' potential to recover from the quake is severely impacted.

"We are facing the prospect of no through traffic which I estimate brings in about 50% of our customers.”

“There is a high level of concern among the business community as to how we can survive without the summer cash flow to get us through winter 2017,” adds Lynette.

“This has a flow on effect that could see businesses under resourced for the commencement of the 2017/2018 tourist high season and limit the abilities of some to meet the pre-season costs of gearing up for this period,” she says.

Mel adds that the key issue for the majority of businesses on top of cash flow, is loss of market and mental tiredness.

“The fact that tourism makes up large percentage of Kaikoura’s economy means the effect of the earthquake on the district’s GDP will be greater than that suffered in Christchurch after the 2010/11 earthquakes, where tourism only made up 3.3% of the economy.

“Over 50.4% of employment in the Kaikoura district relies directly on tourism, with approximately 35% of the remaining workforce providing support services to companies and individuals working within the tourism industry.”

It’s interesting to note that the in the week prior to the earthquake, Kaikoura had an increase of 24.60% international expenditure, compared to the same time in 2015. This then plummeted to a negative spend of -3.83%, due to cancellation refunds outweighing positive transactions.[1]

Environmental factors

Businesses like Whale Watch Kaikoura are also feeling the burn. Due to the seabed rising by around 1.5 metres, there is insufficient water to safely launch the larger vessels throughout the day.

General Manager, Kauahi Ngapora, explains, “This means there are now tidal restrictions around when tours can safety operate which means we can only operate at 20% of our operational capabilities.”

Lynette adds that it’s also impossible to operate the dolphin tours within fixed departure times as the restrictions of the tide provide a changing schedule each day.

The solutions

Unlike many businesses that are entering into 2017 with grand plans to expand, for Whale Watch Kaikoura it’s all about getting back on track.

“Our major goals for 2017 involve rebuilding our visitor base and recovery of the business, all while doing what we can to support our people. We have developed a business recovery plan which is a living document due to the constantly changing operational environment. A people support plan is also being completed and Kaikoura will have a visitor recovery plan,” says Kauahi.

Dolphin Encounter’s Lynette Buurman adds that as well as getting back on track, the business is looking at ways to change how they operate and they're also looking at the possibility of introducing new products.

“Having a proactive and positive relationship with our bank is also imperative to get us through this hardship.”

Mel Skinner adds that it’s important that business owners have a realistic picture of what is actually possible.

“Ask what can you do within your business to retain as much cash flow as possible. Speak to your advisors, speak to the IRD and speak to your bank about the structure of your business. Be realistic. Make the hard decisions early, particularly if you need to let go of employees.”

She also adds that the band-together mentality is called for at a time like this.

“Don’t view other businesses are competitors. Work together and ask for help.”

Kaikoura - your next best bet?

Ever considered investing in one of New Zealand’s most picturesque seaside towns?

Mel says that if you work in a flexible industry and are not tied to a location, then why not think about moving and investing in Kaikoura in the future?

“It is stunningly beautiful and great lifestyle. We are working hard with central government to implement high speed broadband and are heavily focused on extending the airport facilities to allow easy commuting between Wellington and Kaikoura. We have a major focus as a community on education, sports and recreation and facilities to support families is a key part of our recovery plan.”

If investing in Kaikoura isn’t an option for you; however, then many businesses owners are expressing their desire for people to come and visit and participate in their community by spending money there. This will help their small local economy to recover and get moving again.

So perhaps think twice when you go to book that winter holiday in Queenstown - Kaikoura is a stunning part of our country with world-class wildlife, exceptional seafood and lovely people!

[1]Ministry of Business, Innovation and Employment, 2016, https://mbienz.shinyapps.io/quake/


Emily is a Senior Advisor in the Deloitte marketing team who knows that behind every great business lies a great story. She loves talking to inspiring people who are thinking outside the box to create a thriving SME sector in New Zealand.