Tourism sector confident despite GST rise

Tim Cossar. Photo / Daily Post

The vibe is positive at this week's tourism industry annual showcase, industry leaders say, despite the impact of higher GST.

Inbound Tour Operators Council chief executive Paul Yeo said there would be a good mood at Trenz but he expected questions from many international buyers about how the GST issue would be handled.

GST was increased in last week's Budget from 12.5 per cent to 15 per cent as from October 1, which Yeo said would ideally have started on April 1 next year because it took time to adjust prices.

"Particularly in our industry where prices are set 18 months to two years in advance and they're stuck in brochures or in contracts which have long lead times offshore," he said.

The extra cost of the GST rise was likely to be absorbed by suppliers and tour operators in New Zealand, rather than overseas wholesalers and travel agents.

However, once the higher GST had filtered through it would not have much impact on the attractiveness of New Zealand as a destination, Yeo said.

"I don't think so," he said. "It's the transition that's the difficulty, we're faced with cost increases all the time like anybody is."

Meanwhile, inbound tour operators who packaged tourism products and sold them overseas had to pay GST on their service fee, he said.

Australian-based tour operators could package New Zealand products without paying GST and the council was concerned some people would relocate overseas, close down or lay off staff as they would find it increasingly difficult to compete with overseas operators.

"It's a bit of a painful transitional side but it's not going to destroy our industry, and our industry is incredibly positive and we've got a lot of faith in the future."

Tourism Industry Association chief executive Tim Cossar said GST was a topical subject as people arrived at the conference being held in Auckland until Thursday.

The cost was likely to fall on suppliers or intermediary parties, including inbound tour operators, Cossar said.

'We're not talking mega, mega price increases," he said.

"We're talking about margins but what's important about that is we're in a fairly tight margin market, it's a tough market so margins are fine and it's very competitive."

The atmosphere seemed positive, with good buyer interest from overseas, he said.

"I think things are on the up. I think people are feeling more confident than they were at this time last year ... [when] we were probably right in the thick of recessionary times."

The Budget included an extra $30 million for tourism and a cut in the company tax rate from 30 per cent to 28 per cent.

"This week it's always difficult to say how much business will be written but the relationships that are built during this week or maintained ... are probably worth significant millions of dollars to the New Zealand economy."

Trenz 2010

* Tourism industry annual showcase.

* More than 270 international buyers expected.

* 250 leading tourism operators on show.

* $9.3 billion economic contribution from international tourism expenditure.