Tourist operators say a chronic labour shortage because of problems hiring overseas workers could choke the booming tourism sector.
Tourism, this country's second-biggest export industry, is expecting record numbers and spending this summer but leaders say a shortage of seasonal workers could cause difficulties coping with the number of foreign visitors in particular.
One hotel operator says Queenstown has the "house full" sign up this summer but will struggle to serve all its guests.
Tourism Export Council chief executive Lesley Immink said inflexible working holiday schemes were a big threat to the industry.
Her organisation represents tourist businesses who sell their products and services overseas and said the sector was short of thousands of workers, many in skilled roles such as hotel middle management and tour guides.
"We flagged three years ago that we would be at this point. With the predicted growth this would be the number one crucial issue in the tourism industry. There's no point in promoting New Zealand offshore if we can't remove the barriers."
Government departments say they are worried about exploitation of temporary staff and say it has extended numbers in its working holiday schemes to well beyond planned limits, but Immink said it was not moving as fast as was needed to adjust to the worker shortage.
"It's chronic. With working holiday visas for the majority in the regions they can only work just three months out of 12; we need a 24-month visa where they can work for six to seven months," she said.
Employers were keen to hire New Zealanders ahead of foreign seasonal workers but many did not want to go to small tourist regions.
"It's like the general population, most want to work in Auckland - they don't want to go and work in the regions."
The general manager of Goldridge Resort, Penny Clark, said the "ideal" of having Kiwis filling housekeeping or hospitality roles didn't fit reality.
"You could ask why aren't Kiwis doing that stuff, Kiwis are doing that stuff but they're doing it on their working holidays in London, Paris or anywhere else. Those with gumption get up and go."
But Nigel Bickle, Immigration Service deputy chief executive, told the Tourism Industry Association conference last week that numbers on working holiday schemes that had been capped at 52,000 were now running in excess of of 60,000.
"It's growing like topsy. We have a whole range of uncapped working holiday schemes and we're adding to the schemes." He said most of the schemes had few restrictions about the number of employers visiting workers could have.
"As a country we're also concerned about things like migrant exploitation - quite frankly we have to guard against that."
The department had just laid charges over human trafficking and there was political pressure to deal with the high youth unemployment rate, running at 26 per cent which would have been front page news in the past, said Bickle.
"From a policy perspective we think we've got it about right. First and foremost the supply of labour has to be complementary to New Zealanders."
The industry is particularly concerned about restricting the number of Chinese on working holidays to 1000 as they have crucial language skills in this growing tourist market where visitors from China are spending longer and more money here.
Bickle said there was work on modifying the Chinese work scheme.
Associate Tourism Minister Paula Bennett said the Government wanted to see more young New Zealanders stay in the tourism and hospitality industries and regarding them as a career and not just a first job.
Pay could be low to start with but it could be the route to owning their own business.
"We've just got to raise their ambitions. There's no reason why they can't own the company."
3 Things affecting the tourist industry this summer
Getting adventure operators audited and certified by a new Government safety regime. Problems getting all audited created a one-month delay.
2 The Hobbit will continue to attract foreign visitors. Tourism chiefs say awareness of "Middle Earth" will peak in international markets this summer.
3 The pressure on capacity will grow. Tourism operators say it's a good problem to have but some jobs will go unfilled and there is high demand for top quality accommodation.