Growth in the number of tourists coming to NZ is slowing. Photo / Getty
New Zealand's tourism boom is over, with warnings that growth could fall to zero over the next year and have a wide impact on the economy.
While tourism is still growing, the rate of growth has fallen sharply from 12 per cent two years ago to 2 per cent now, and the important Australian and Chinese markets are both down in the past four weeks.
Chinese arrivals in New Zealand have slipped sharply during the past year despite Chinese travel to other parts of the world - apart from the United States - continuing to soar.
The tourism sector has outstripped dairy as New Zealand's single biggest foreign exchange earner, last year topping S16.2 billion, and the industry is a major employer.
Tourism Industry Aotearoa (TIA) figures show 365,000 people were directly or indirectly employed in the sector - about 13 per cent of the workforce.
Air New Zealand has had to reduce profit expectations because of weakening tourist numbers and an analyst has warned that the country's main gateway, Auckland Airport, could see its earnings suffer in coming years.
The chief executive of TIA, Chris Roberts, said there had been signs for some time that the boom was cooling.
''The peak in the New Zealand tourism boom was about two years ago. We're now down to 2 per cent and we're probably going to come pretty close to zero at some point this year but we're not going backwards.''
Importantly, spending by visitors was now growing more quickly than tourist numbers - up 3 per cent in the past year.
Roberts said the industry seemed to be taking a very mature approach to the slowdown.
''They realise that this strong growth couldn't continue forever. It's a breather, a chance to reassess and deal with some of the challenges of growth.''
New Zealand's second biggest market, China had slipped and arrivals could drop by as much as 10 per cent this year.
Chinese holiday arrivals in the year to May had fallen by 7.4 per cent to 316,000. Spending by Chinese last year was up 14 per cent to nearly $1.7b.
''The timing is a little unfortunate given that it is the New Zealand-China Year of Tourism,'' said Roberts.
There were signs earlier this year that New Zealand was at risk of falling out of favour with the Chinese leadership, but Roberts said those operators who had been there recently had reported that this country was still well thought of.
''We may have slipped a little from being one of the favoured partners - we're falling back into the pack a little. Operators are a little concerned but they're not panicking.''
He was uncertain when the China market would pick up.
''The consensus is that China will pick up again and when it switches back on in China it switches back on very quickly.''
Tourism Minister Kelvin Davis was in China last month and said the relationship between the two countries was strong.
He said he wasn't concerned about the drop-off and there was nothing in particular he could identify as leading to the slump, but factors such as the trade war between China and the US were persuading Chinese passengers to stay at home. Global factors were affecting the overall market.
''We've had exceptional growth over the last few years and it was unrealistic to expect it to continue at the same pace," said Davis. " Despite that, by 2025 we're still expecting there to be about five million visitors."
Last year there were 3.8 million visitors, including tourists, people visiting relatives and on business.
On July 1 the government introduced a $35 border levy for visitors, except those from Australia and the Pacific Islands.
Davis said that was not seen as a deterrent and the softening had been happening for some, before the charge was imposed.
''It hasn't just happened since the first of July.''
The government's tourism strategy targeted value over volume. ''It's not just about growing the numbers; it's growing value.''
Tourism Industry Aotearoa forecasts low growth and more uncertainty
• Australia flat
• China falling - arrivals down 10 per cent this year
• North America demand solid
• Britain down due to Brexit worries
• Germany, Japan, Korea also weaker
• India down because of visa delay issues
• Taiwan, Philippines experience growth
• Weaker NZ dollar will help spend
• Domestic tourism (more than half the sector) up 2-3 per cent
But National Party tourism spokesman Todd McClay said the slowdown was concerning.
He said he'd had spoken to Queenstown tourism operators who said they would be lucky to break even this year.
The new border levy - which his party had opposed - could be a deterrent, as could the requirement for most visitors to get visas, which they didn't have to before, he said.
''If we fall out of favour because we're seen as too expensive and too difficult, then jobs could be lost,'' he said.
The Chinese and Indian markets in particular were suffering, with spending down $120 million in the last year.
''That's money straight out of the economy,'' said McClay.
Economist Cameron Bagrie said a strong tourism sector was essential.
''We need the tourism sector to hold up for the next couple of years because there's some pretty big hits dished out in other parts of the export sector.''
Forestry was being ''pummelled'', other primary exports were vulnerable to global fluctuations and any economic fallout would hit at a time when there was domestic weakness.
The Australian visitor market had suffered due to house price falls across the Tasman now spreading through the entire economy and affecting discretionary spending.
While visitor numbers were still up in the year to May (3 per cent to 600,000), in the past four weeks they fell 1 per cent year on year.
And although the kiwi dollar had fallen against the US dollar, it was strong against the Australian currency.
''It's not what you'd say is working in the Australian tourists' favour.''
Uncertainty from Brexit had affected the British market and the weak pound had also hit that market, with numbers down 14 per cent to 102,000 holidaymakers in the year to May.
Bagrie said the border levy could make a difference around the margins for individuals but there was ''a pretty big list of things that do add up and detract from New Zealand's attractiveness as a place to visit''.
One potential cloud forming for New Zealand's tourism is the growing "flygskam" or flying shame movement that urges travellers to avoid flying because of its impact on the environment.
Roberts said operators at a series of regional meetings recently were all concerned about the movement growing, mainly in Europe.
''We're certainly keeping a close eye on it and it will certainly increase the onus on New Zealand to show we're taking climate change seriously. We can't change where we sit on the globe but we can show that we're taking action where we can.''
Jason Hill, a founder of Tourism Investment Partners which is trying to get a fund of $125 million off the ground, said businesses which needed cash flow to fund further investment would find it tough.
''But from a holistic point of view it's not a bad thing to have a slowdown,'' said Hill a veteran of the tourism sector whco was Ateed's tourism boss.
''There are a number of events on the horizon that people will hope will boost growth,'' he said in reference to the America's Cup and Apec meeting in Auckland in 2021.
Hill said his own planned fund was still talking to potential investors and had extended the time frame for launch.
''We may or may not get there but we'll give it a good nudge.''
He didn't think access to capital was a problem with banks now developing a greater understanding of the tourist sector and a number of Australian funds investing in South Island businesses.
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