Covid 19 Omicron: MIQ hotel contracts cost nearly $800 million over 18 months, data shows

Data shows that MBIE spent nearly $800 million in 18 months on leases. Photo/Michael Craig

By Katie Todd of RNZ

Hotels earned an average of $1.3 million per month as MIQ properties.

Data shared with RNZ shows that the Department for Business, Innovation and Employment (MBIE) spent nearly $800 million in 18 months on rental contracts.

Thirty-three hotels have granted MBIE exclusive use of all their rooms and have agreed to provide laundry and catering for returnees, including three meals a day.

According to data released under the Official Information Act, the amount MBIE paid to each hotel varied widely depending on the hotel, its location and its occupancy.

One hotel pocketed a $60,000 paycheck for November 2021, while another received $5.35 million for March 2021.

In total, MBIE spent $529.8 million on hotels in Auckland, $136.11 million on hotels in Christchurch and $115.3 million on hotels in Hamilton, Rotorua and Wellington, after taking over the hotel contracts of the Ministry of Health in October 2020.

MBIE MIQ hotel contract data.  Photo / Provided via RNZ
MBIE MIQ hotel contract data. Photo / Provided via RNZ

Andrew Geddis, a law professor at the University of Otago, said the MIQ was a critical part of the elimination strategy.

Simply letting Covid-19 into the country could have taken the economy down and cost more in the long run, he said.

However, he noted that the government would have had limited bargaining power when it started the contracts.

“When the government came calling to create the MIQ, they would have known that the MIQ was actually a price taker,” he said.

“They would have taken what the hotels asked for. So you can expect the hotels to do very well just because the government was so desperate to put the system in place.”

Hotels selected by the government had to be located near medical facilities, which has meant that almost all are part of large multinational hotel chains, Geddis said.

This meant that the MIQ “represented a significant transfer of wealth from New Zealand to overseas tourism industries”, he said.

Hotel Council Aotearoa chief executive James Doolan argued that was not necessarily the case.

Many foreign-branded hotels were actually New Zealand-owned, run under franchise agreements, so not all taxpayer dollars went overseas, he said.

Becoming MIQ facilities allowed hotels to retain staff and continue to operate at a time when the alternative was dire, Doolan said.

“Hotels that were part of the MIQ system were able to continue operating with revenue levels similar to pre-Covid levels. But all other hotels suffered massive revenue losses due to the loss of international travelers to Nova Scotia. Zeeland.”

Act party leader David Seymour.  Photo / Marty Melville
Act party leader David Seymour. Photo / Marty Melville

Law leader David Seymour believed the government had plenty of opportunities to cut spending.

This was particularly the case in the months following November last year, when Ministry of Health officials discovered that the risk posed by international arrivals transmitting Covid-19 no longer outweighed the risk of domestic transmission, he said.

“Ashley Bloomfield had said that MIQ was no longer needed in light of this. Yet the taxpayer shelled out an additional $220 million for MIQ rooms.

“I think it’s an extraordinary response and shows we haven’t been quick enough to balance our Covid response with other goals.”

The data comes a year and nine months after RNZ first asked to see the contracts.

MBIE initially refused the initial request on the basis of commercial sensitivity – and has always refused to identify how much it was paying individual hotels.

MIQ deputy secretary Andrew Milne said the decision was made after “extensive consultation” with the hotels.

“They pointed out that MIQ has been their only business for two years. This means that the only income they have had and the only monthly bills they have produced during this period are from MIQ. Therefore, from the point of view of the hotels, it would reveal extremely commercially sensitive information,” he said.

“The position of the hotels is that disclosing the amounts they received each month would effectively tell their competitors, potential buyers, the stock market and potential investors what those hotels have earned over the past 24 months.”

At the end of the month, the last three MIQ facilities will close.

However, MBIE said it was continuing to review long-term options for a national quarantine capacity to address any future public health threats at the border.

“MBIE is also developing a preparedness plan to bridge the time between the closure of the current MIQ network and the availability of future interventions proposed by the NQC,” Milne said.

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