The Performance of Services Index for Otago and Southland was at 12 points for April — plummeting from 30.8 in March and 49.5 in February.
In the index a reading of below 50 means that the sector is in decline and above means it is expanding.
"As we were in Alert Level 4 lockdown for most of April, most service providers including tourism, hospitality, accommodation and retail were unable to operate," Otago Southland Employers Association chief executive Virginia Nicholls said.
"There were also a number of significant events that were cancelled, including the Wanaka air show, which meant that there were huge losses for this sector and the region."
Some businesses in the services sector were negotiating with landlords about reducing rents, Mrs Nicholls said.
"Some landlords had met their tenants halfway with rent reductions, but there were some others who were not quite so generous.
"These discussions are ongoing."
Many in the tourism sector for the month of April were focused on survival and that had led many businesses to begin restructuring and redundancies, Mrs Nicholls said.
The tourism sector received a $400million injection in the Budget last week but there was hope there would be more.
"In the Budget there was some welcome funding to promote tourism across our region," Mrs Nicholls said.
"The industry is waiting for more detail, but hopefully this will enable us to have campaigns to showcase our amazing region in the domestic market as we head into the winter season."
Most of the construction sector were not working during April, which meant that there was little work for the service providers, the index found.
The University of Otago, Otago Polytechnic and SIT were also significantly affected, with some students heading home to continue their education online.
"The student and academic staff exchanges with other tertiary institutions were unable to occur, and many international students were not able to get into the country."
There were no positive comments for April, the index found.
"With all of the issues that these businesses were facing, there was disbelief when the minimum wage was increased on the 1st of April," Mrs Nicholls said.
There was also frustration at "the slow response by Immigration NZ" in managing the situation with migrant workers.
