It is hard to come to terms with what has transpired since March and the impact COVID-19 has had on the Far North Queensland (FNQ) community.
The pandemic may have hit different businesses and industries in different ways but everyone has felt it. While locals know Cairns is more than just a tourism and hospitality town, it’s impossible to ignore the town’s dependence on the airport and visitors to fuel the local economy.
“Businesses assessed their overheads and made savings they hadn’t previously recognised. But even these best efforts can’t repair the massive hole in revenues.”
Cairns has a proud history of family entrepreneurs whose success was built on developing tourism products and marketing them globally. Australia’s tourism sector wouldn’t be what it is today without the contribution Cairns and the Far North have made to marketing the country to local and international visitors.
It has been very rewarding to see how ANZ’s customers in the region have responded to this crisis. Restaurants and pubs converted to take away stores, accommodation providers transformed to more permanent lease arrangements, retailers repurposed stock to appeal to domestic customers, wildlife parks introduced online tours and manufacturers converted to medical supplies and protective shields.
Businesses assessed their overheads and made savings they hadn’t previously recognised. But even these best efforts can’t repair the massive hole in revenues.
JobKeeper has been a life saver for many businesses and the banks’ deferral of payments has also helped ease the pressure. As September approaches, ANZ is looking at what further support we can provide to the community, including reverting customers to interest-only loan repayments while their revenues remain subdued. The news of JobKeeper’s extension will further support these businesses to trade at reduced levels and potentially break even.
However, the sad reality of this devastating crisis is that not all businesses will survive. Governments have done a commendable job with their support measures, including Queensland Rural and Industrial Development Authority (QRIDA) loans and federal government-backed bank loans. But the answer can’t always be more debt.
How people came into the crisis will, for many, determine how they trade out and get supported. Banks make decisions based on character, capacity and collateral - with character and capacity being the two most important considerations. In simple terms, we make decisions based on the ability of the management team and the business’s capacity to service and ultimately repay the debt.
While we also consider how we would recover our position, this is balanced against not wanting customers to further erode their equity if there isn’t a viable business case for the long term.
To date, ANZ has looked at historical trading positions to determine whether we’re able to provide additional lending to businesses impacted by COVID-19. This approach has since been expanded to take other factors into account, such as reductions in overheads and what breakeven looks like in terms of trade.
While it’s impossible for businesses dependent on tourism, retail, education and hospitality to predict future bookings, they can model what volume of bookings are needed to meet their commitments, both with JobKeeper and without. Customers can also table a plan of how they are adapting their business so it will be as profitable as possible in the new normal.
My thoughts are with anyone exposed to this crisis, which unfortunately is most of us. That said, I look forward to seeing the FNQ community move forward and return to profitability.
This will help guide the next generation of entrepreneurs who see opportunity in this new normal and regain our status as the world’s most desirable city.
Jeff Schrale is Head of Business Lending for Far North Queensland at ANZ. He is also a board member for Tourism Tropical North Queensland.
This article was originally published in the Cairns Post.