Global crisis 'yet to have full effect' on tourism

Photo / Daily Post, Rotorua

The full effect of the economic downturn has not yet been felt by New Zealand's $20 billion tourism industry and is likely to hit from now onwards, an economic report commissioned by the Ministry of Tourism has found.

The report, which looked at the impact of past adverse events on New Zealand's tourism industry, revealed visitor arrivals have fallen in only four years out of the past 21 despite the raft of challenges faced by the industry in recent years.

Shane Vuletich, the economist who undertook the research, said that in many cases events such as the 9/11 terrorist attacks and Sars (severe acute respiratory syndrome) had not produced a total decline in arrivals because New Zealand had a diverse range of source markets.

"In the past New Zealand has benefited from a strong portfolio effect."

But one of the challenges for 2009 was that all New Zealand's source markets had been affected by the economic downturn.

Vuletich said New Zealand had been lucky in the timing of the credit crunch as many long-haul travellers had already made their bookings. But those booking now were doing so in full knowledge of the global situation.

"The New Zealand tourism industry has not yet experienced the full effect of the downturn because many of the summer season bookings were made several months ago. The full effect is likely to be felt from this point onwards."

But Vuletich believed visitor arrivals would fall by only a single-digit figure this year despite pre-Christmas predictions of at least 10 per cent, because of the strong reaction from the industry to counter it.

Since October last year the New Zealand dollar had fallen, while airlines, accommodation providers and attractions were offering discounts.

Vuletich said tourism businesses were used to adjusting to ebbs and flows of visitors because of the seasonal nature of tourism.

"These businesses are adept at reacting to changes in demand. They are very adaptable and can alter labour and pricing quickly."

But he warned the industry faced long-term risks as a result of the downturn including reductions in air capacity and distribution channels which were hard to re-establish, and lack of investment resulting in no new infrastructure being built and a degrading of existing assets.

Some tourism businesses would also fall by the wayside.

"There are some undercapitalised businesses that will definitely suffer because they won't have access to credit," Vuletich said.

"But I don't think the sector as a whole is heavily at risk because of going through this change on an annual basis."

TOURISM'S TOUGHEST TIMES

1991: Fallout from global sharemarket crash/recession.
1997/98: Asian financial crisis.
2008: Credit crisis/recession.