Tourism well placed to recover from September 11

By SIMON HENDERY

"What a difference a day makes" - the November cover of Tourism New Zealand's industry magazine, Tourism News, said it all.

The terror attacks that rocked the world on September 11 sent multi-million-dollar ripples through New Zealand's tourism sector, just as the industry was starting to look like it was infallible.

Before the terror attacks in the US, tourism chiefs had every reason to be smiling. Annual spending by international visitors had topped $5 billion for the first time during the year, cementing tourism's place as the country's biggest single "product" export earner.

The record 1.9 million travellers who visited New Zealand in the year to September spent $5.17 billion while in the country, up 12.5 per cent on the previous year.

This summer's peak tourism season was forecast to be a boomer. Arrivals were expected to be up a further 10 per cent.

Figures issued in August revealed that direct and indirect spending on tourism accounted for 9.7 per cent of GDP and that the jobs of one in 10 workers were in some way linked to the industry.

But rather than just revelling in the good news, industry leaders had been busy producing a ten-year strategy for sustainable growth based on maximising yields - no mean feat, as the tourism sector includes a hotch-potch mix of small and large operators whose traditional focus has been competing with each other for market share rather than working together.

Also in August, the industry's significance was recognised with a Government announcement that it would create a stand-alone Ministry of Tourism from January.

Then, on September 11, it all went wrong.

Visitor numbers took a dive in October and November (down 3.1 and 9.7 per cent respectively from the same months last year) as nervous holiday makers the world over cancelled their travel plans.

Unfortunately for New Zealand, our two biggest-spending visitor groups - Americans and the Japanese - are also among the most safety conscious travellers. Japanese visitor numbers fell by 48 per cent in November, and the numbers from the US were down 13 per cent.

While increases of 10 per cent had been expected before September 11 for this summer's peak tourist season, the industry now expects a 5 per cent drop in arrivals, and the Reserve Bank predicts a 7 per cent fall in visitor spending over summer - equating to a drop in revenue of several hundred millions of dollars.

But the industry is far from on its knees.

The Tourism Research Council is confident that pre-September 11 forecasts, of an annual average growth rate of 6.3 per cent for the sector between now and 2007, remain valid.

Those estimates predict that by 2007, New Zealand can expect to receive 2.7 million tourists a year, who will spend $8.1 billion while in the country.

The council points out that with earlier tourism shocks - the 1987 sharemarket crash, the Gulf War and the 1997-98 Asian economic crisis - visitor arrivals rebounded after each event.

And the strategic positioning that went on earlier in the year has put the industry on a firmer footing for recovery.

The Tourism Strategy 2010, released in May, proposed a shakeup of bureaucracy and pointed out that revenue could be almost trebled over the next nine years if the industry focused on increasing yields rather than simply expanding tourist numbers.

While short on the finer details of how its vision could be achieved, the 180-page strategy, pulled together by a powerful group of industry leaders, has provided a useful focus for debate and planning.

Even before September 11, our largest tourist company, Tourism Holdings, had been having a disappointing year.

In August it reported a full-year profit of $13 million, down 12 per cent from the previous year and less than half its initial forecast.

Like many New Zealand companies before it, Tourism Holdings had suffered a troubled expansion into Australia and the company blamed the weak Australian economy for the poor performance of its Maui, Britz and Oz Experience businesses across the Tasman.

While Tourism Holdings has put its teething troubles in Australia behind it, the company must now grapple with the post-September 11 tourism gloom on both sides of the Tasman.

At its annual meeting last month Tourism Holdings said it could not predict how trading would be affected during the current financial year.

The collapse of Ansett in Australia was a body blow to our neighbour's tourism industry, and caused some ructions here too, as travel plans of those on Australasian-wide tours were thrown into chaos.

But concerns about parent company Air New Zealand mattered more to the local industry, and operators here breathed a sigh of relief in October when the Government confirmed its $885 million bailout of the airline.

Tourism chiefs feared that as well as leaving gaping holes in the national travel network, the demise of our national carrier would have been a serious blow to the country's ability to market itself internationally as a destination.

During the year, the Government copped flak for a retrospective law change allowing it to recoup millions of dollars in GST from inbound tour wholesalers.

Operators - some of whom escaped the grab while others did not - argued that the move was mean-spirited at a time when the task of bringing visitors into the country was more important than ever.

As fears of terrorism gripped the world's travellers, New Zealand's appeal as a safe destination emerged as a strong selling point and a possible key to the survival of the local tourism industry.

The US terror attacks are expected to boost New Zealand's appeal as a destination for foreign students, strengthening the value of that industry above the $1 billion mark for the first time next year, up from $850 million this year.

Tourism New Zealand has warned that over-hyping the country's safe status could backfire, but the Convention Association said in October it would launch an aggressive marketing campaign to capitalise on New Zealand's clean, green image and isolated location in the South Pacific.

Extra spending by locals is expected to help keep the tourism business ticking over during the coming year.

The industry expects that New Zealanders, who, like the rest of the world, have shied away from international travel since September 11, will spend more of their holidays at home, boosting the $4.2 billion domestic tourism industry. New Zealanders left on 10 per cent fewer short-term overseas trips last month than they did a year earlier.

As the year drew to a close, another potential industry saviour emerged in the unlikely form of the citizens of Middle-Earth.

Global fascination with The Lord of the Rings looks set to heighten interest in New Zealand as a destination and Tourism NZ has been quick to capitalise on that interest.

The number of visitors to Tourism NZ's website doubled this month after Lord of the Rings content was added to the site to coincide with the world premiere of The Fellowship of the Ring.