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Home / Business

Matthew Hooton: How New Zealand tourism can reinvent itself

Matthew Hooton
By Matthew Hooton
NZ Herald·
11 Mar, 2021 04:00 PM6 mins to read

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New Zealand faces unique issues with mid-range package tourism in the medium and longer term. Photo / Getty Images

New Zealand faces unique issues with mid-range package tourism in the medium and longer term. Photo / Getty Images

Matthew Hooton
Opinion by Matthew Hooton
Matthew Hooton has more than 30 years’ experience in political and corporate strategy, including the National and Act parties.
Learn more

OPINION:

It's good to see a Cabinet Minister getting a bit of flak from their stakeholders. It confirms that the Prime Minister's dulcet Covid tones haven't lulled everyone to sleep. And it suggests a minister raising uncomfortable truths, even at the risk of a backlash.

Headline numbers make tourism a source of national pride. Since Tourism NZ's 100% Pure New Zealand campaign began in 1999, annual international visitor expenditure has more than doubled, from $4.9 billion to $11.5b before Covid.

100% Pure is probably the best and longest-running tourism campaign in history. As intended, it is understood offshore as promoting the excellence and purity of the overall experience, from adrenaline sports to fine dining. Domestically, it has become a national slogan, albeit in a narrower environmental sense.

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Yet, as for other New Zealand industries, most notoriously dairy, tourism's growth story is mostly about volume. Foreign earnings have grown no faster than visitor numbers, and perhaps a few percentage points less. Spending per visitor is at best stagnant and average spend per night is down around 10 per cent over 20 years.

The tale is familiar. Just as Fonterra might claim to have developed some fancy icecream, new high-end tourism products have popped up around the country. But overall, tourism has mostly just doubled its sales of the equivalent of 50kg bags of milk powder.

For both industries, easy growth out of China has been a factor, with 100% Pure and Fonterra launched at the peak of China's boom and New Zealand's "Four Firsts" push to become China's best little Western friend.

Sure enough, total visitors from China have exploded 25-fold from a mere 15,000 in 1999 to 375,000 in 2019, but not everyone is happy.

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Residual racism partly explains why. But so too do more legitimate concerns that the trade consists largely of mid-range package tours, arranged in China and using largely Chinese airlines and lower-value New Zealand operators.

At the start of the 20-year boom, tourism officials warned ministers that China's population meant it risked completely swamping and changing New Zealand's offering, without local operators capturing the value.

Those warnings were ignored by the Clark and Key governments, concerned more about headline revenue numbers rather than actual value to New Zealand.

China stands out mainly because of the speed of its growth. In fact, it is one of the few markets from which average visit length and spending per visit is up compared with 20 years ago — but spending per night follows the overall pattern. This failure to grow value faster than volume is broadly the same for visitors from the other top five markets: Australia, the US, the UK and Germany.

Again like dairy, this threatens tourism's social licence. Its own market research suggests the percentage of New Zealanders who believe tourists are placing too much pressure on the country is approaching half. There are doubts that the industry creates much more than minimum-wage jobs.

Ever more New Zealanders are falling out of love with Queenstown and Rotorua and to a lesser extent the Great Walks and National Parks — probably those who saw what stress visitor numbers were placing on them before Covid. The environmental impact of freedom camping is particularly despised.

There's nothing unique to New Zealand about the volume-versus-value problem, as any recent visitor to the Taj Mahal, Great Wall of China, Louvre, Trevi Fountain or Everest Base Camp knows. Nor does the degradation in the quality of these experiences seem to deter the masses from wanting to tick them off their lists.

All of them and New Zealand will be swamped after global vaccination is complete. It is entirely understandable devastated tourism operators just want to hang on long enough to cash in.

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Image v reality: An idyllic scene at Roy's Peak, Wanaka - and the crowd waiting to replicate the shot. Photo / Supplied
Image v reality: An idyllic scene at Roy's Peak, Wanaka - and the crowd waiting to replicate the shot. Photo / Supplied

But New Zealand faces unique issues with mid-range package tourism in the medium and longer term. Except for Australians, whose average daily spend makes the stingiest Chinese package tourist look like a big spender, getting to New Zealand will always be expensive in time and money.

With pilots having been laid off and not having met minimum hour requirements during Covid, the airline business will take years to return to full capacity. Restoring full services to New Zealand will not be a priority for any but Air New Zealand and maybe Qantas.

Moreover, the carbon issue is not going away. Intercontinental flights for tourism are becoming ever more socially unacceptable, including in the US, the UK and Germany but also eventually in China. American, British, European and Chinese regulators will soon demand full carbon offsetting be priced in.

The upshot is that Covid, geography, market forces and regulators are all conspiring to increase the entry price for even getting to New Zealand relative to competitor destinations. Competing in the middle market will require squeezing costs out of what is delivered, further undermining quality.

Tourism Minister Stuart Nash has taken it upon himself to argue the only solution is to go further up-market.

"We must attract high-value and high-spending visitors who buy into our own vision of sustainability," he told last November's major tourism summit, to less than universal acclaim.

He is now taking a tough line on whether further subsidies should be available to bridge operators' financial gap before tourists return — copping a bollocking from Franz Josef locals when he and local MP Damien O'Connor fronted up in town.

He has been transparent that he does not expect every tourism business to survive.

Nash is sometimes accused of being in the wrong party, but it is more he is in the wrong Parliament and wrong era. His objective seems to be prompting a genuine debate within the industry about how it can offer and capture greater value in the post-Covid era. This has been unheard of in New Zealand politics for most of the last 20 years.

No doubt it will all end dismally for him. But if we want more than photo-op politicians in our Parliament and Cabinet, we should back him in laying out the challenge. It also wouldn't hurt for O'Connor, also Primary Industries Minister, to ask similar questions of his stakeholders in Big Dairy.

- Matthew Hooton is an Auckland-based PR consultant.

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