Quakes to deliver short, sharp shock to NZ tourism sector

Dust cloud: Christchurch City following last month's earthquake. Photo / supplied

The tourism sector will bear the brunt of the Christchurch and Japanese earthquakes, but a short-term plunge in tourist arrivals should be short-lived and largely over by the middle of the year, says new research from Goldman Sachs & Partners New Zealand.

Updating its outlook for sector, economist Philip Borkin forecasts a 10 per cent drop in international arrivals in the second quarter of 2011, similar in magnitude to the reactions seen after the September 11 terrorism attacks in 2001 and the global SARS scare in 2003.

While there is no "template" for how tourism markets are affected by major natural disasters, the evidence from other countries tends to show a short, sharp reaction followed by a reasonably swift return to normal patterns.

Accordingly, international visitor arrivals are forecast to rebound from July onwards, and be back at their pre-quake levels by the end of the year, while the anticipated 66,000 arrivals for the Rugby World Cup in September and October are expected to be unaffected.

However, the impact of the short-term downturn in arrivals would be made more severe by an expected 40 per cent drop in arrivals from Japan, in the aftermath of its massive earthquake and tsunami this month.

Japanese visitor spending averages $4500 per visitor, compared with a $2300 spend averaged across all visitors.

Assisting a bounce-back will be average growth from in major source countries in line with the average annual growth rate of 3.4 per cent, weighted for visitor arrivals, since 1990. Additional airline capacity would also both add seats and keep pressure on prices.

"We forecast visitor arrivals to contract 0.3 per cent in the 2011 financial year (to June 30), largely driven by the near-term disruption from the Christchurch earthquake," said Borkin.

Arrivals growth should then rebound solidly by 5.6 per cent over the 2012 financial year, compared with a previous forecast of 6.2 per cent for the period.

New Zealanders departing for international destinations had held up somewhat better than weak domestic economic indicators might have suggested, but this may reflect the strength of the New Zealand in major destinations, except Australia, he said.

Spending on international travel might also help explain some of the weakness in domestic consumption.

However, higher fuel and food prices, ongoing household debt reduction, and aggressive discounting on big ticket consumer goods were all likely to soak some of the appetite for outbound travel in the next year, Borkin predicts.