New Zealand Huts Department of Conservation, Part D:
Hut Economics: what does it cost to operate the NZ DoC Hut System?
by Sam Demas
(Note: this is part of the larger work New Zealand Huts: Notes towards a Country Study)
Determining hut economics is always the hardest part of studying huts. Quite often I get little or no useful information from the operators, particularly from private operations. With a government-operated hut system this has proved a bit easier in the case of New Zealand, though the data I have is an approximation based on some cost modeling that DoC has done over the years.
The bottom line:
- the estimated annual cost to operate DoC huts is about $12,000,000,
- DoC takes in about $7,500,000 per year in hut-related revenues, and
- that leaves about $4,500,000 in net annual expense from the DoC budget.
These figures are only estimates; see caveats and details below. All amounts are quoted in NZ Dollars. Note: these estimates only do not account for the following categories of expense:
- expenses for central services such as the web site and booking system, hut brochures, and Visitor Centers,
- situations where clubs get a share of the hut revenues,
- revenue from concessions, which are very difficult to break out specifically for use of huts.
Background:
In a January 2018 meeting Brian Dobbie, (Technical Advisor, Recreation, Heritage and Technical Unit, DoC Central Office, Wellington) explained that DoC does not directly track the cost of operating huts. Instead, DoC funding is allocated by “destination”, and is not broke out by component parts.
For example, Brian explained that a lump sum is allocated annually to operate a particular national park. This lump sum is based on historical budget data, on representations by the park concerning current needs, and on cost models DoC has done over the years. But he emphasized that the funds are not allocated to or tracked by specific park operations areas such as huts, tracks, campsites, road maintenance, helicopter expenses, etc. My heart sank when I heard this, as it appeared I might once again not be able to get useful cost data. However, Brian said he was very familiar with the DoC cost-modeling data and was prepared to provide rough estimates of hut-related costs and revenues.
His oral report to me on the results of these cost models are outlined below, based on notes I took on our conversation. The data are based on surveys conducted over a period of years and on data from the AMIS database. They are apparently the best data available for average annual operating costs for DoC huts.
Following are the data Brian provided with the caveat they are top-of-the-head approximations based on his years of working with the DoC hut system and associated budget data. The two broad categories are 1. hut costs and 2. hut revenues, followed by 3. an estimate of total for the DoC hut system:
A. Hut costs/expense:
- These are some of the key cost centers. I believe only the first three categories are listed in rough order of magnitude of overall expense:
- Helicopter costs: flying out sewage waste and servicing toilets; flying in heating and cooking fuel; and flying in staff and volunteers doing maintenance and inspections, etc.
- Fuel for cooking and heating;
- Hut, toilet, and shed maintenance;
- Seasonal hut wardens for the Great Walks;
- Depreciation
- Geological, avalanche and flood monitoring;
- Operating radio systems;
2. These are annual operating cost approximations per hut for different categories of huts, followed by a total for all categories:
- The annual operating cost per hut on three of the most heavily used Great Walks (Milford, Kepler, and Routeburn is NZ$200,000.
- Annual operating cost per hut on the lesser used Great Walks is about NZ$100,000 per year.
- Annual operating cost per hut for large serviced huts (i.e. > 20 bunks) is NZ$50,000 – NZ$70,000.
- Annual operating cost per hut for smaller serviced huts is NZ$30,000 – NZ$50,000.
- Annual operating cost per hut for standard huts (where people forage for wood for heat, there are lots of pit toilets, there is not as much use/wear and tear, and fewer mattresses) is $NZ5,000 – NZ$6,000.
- TOTAL ESTIMATED COST PER YEAR FOR DoC HUTS: $12,000,000
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B. Hut revenues 2016/2017:
- 36 Great Walks and attendant campsites revenues:
- Milford NZ$ 1,200,000
- Kepler NZ$ 1,000,000
- Routeburn: NZ$ 800,000
- Other great walks: NZ$ 2,00,000
- TOTAL Great Walks Revenues = NZ$ 5,000,000
2. The 18 Serviced Huts on booking system:
- TOTAL Serviced Booked $ 500,000
3. Other serviced and 400 Standard Huts
- Sale of hut tickets and passes: $1,500,000
- Other: $500,000
TOTAL REVENUE ALL HUT CATEGORIES = $7,500,000
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C. Note on gap between revenues and expenses on Great Walks Huts as an isolated category of Doc Huts:
- Costs:
- There are 33 Great Walks Huts, 10 are on the three highest use tracks (Milford, Kepler and Routeburn) and we on the other Great Walks.
- Using Brian’s annual operational cost estimate of $200,000 for huts in high use Great Walks Tracks, and $100,000 per years for huts on lower use tracks:
- High use tracks = 10*$200,00 = $2,000,000 per year
- Lower use tracks = 23*$100,000 = $2,300,000 per year
- Total operational costs for 33 GW huts = $4,600,000 per year
2. Revenue:
- Dobbie’s estimate is for 36 GW huts and attendant campsites: $5,000,000.
3. What is the gap between Costs and Revenues in operating Great Walks Huts?: It is difficult to say, given the presence of campsites in the mix. I’ll use the number -$500,000 as a rough estimate, i.e it costs $500,000 more per year to operate the Great Walks huts than the revenue received for use of them.
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D. BOTTOM LINE ESTIMATE IN DIFFERENCE BETWEEN TOTAL COSTS AND REVENUES OVER ALL CATEGORIES OF HUTS:
ESTIMATED TOTAL HUT COSTS: $12,000,000 (See A. above)
MINUS EST. TOTAL HUT REVENUES: – $7,500,000 (See B. above)
= NET DoC EXPENDITURE FOR HUTS: $4,500,000 ( i.e. expenditures over and above revenues from use)