The Great Tourism Reset or more of the same underinvestment? How Government wants sector to boost economy

Tourism growth in Queenstown has put too much pressure on local services. So who should invest in better infrastructure: tourists, ratepayers, the Government, or all of the above? Photo / 123rf

It’s the perpetual elephant in the tourism room: grow the sector to boost the economy, but not so much that it puts too much pressure on water pipes, roads, housing, hospital beds, everything. And who should pay for all that infrastructure investment? Tourism Minister Matt Doocey outlines his priorities in the sector, and what will be different this time.

The doors are open to all tourists, even those who might have to shit in the river.

This isn’t Tourism Minister Matt Doocey’s new mantra for the industry, but he rejects his predecessor Stuart Nash’s attacks on backpackers and freedom campers who “shit in our waterways”. Nash was making the point that he coveted big-spending rich visitors.

Doocey isn’t welcoming any inappropriate toilet behaviour, but he says of Nash’s comment: “You won’t see me making any value-laden judgments about who’s a deserving and undeserving tourist.”

He recently met United Airlines vice-president Patrick Quayle while taking the inaugural United Airlines flight from San Francisco to Christchurch.

“Patrick talked openly that he first fell in love with New Zealand as a backpacker, and now he’s returning later in life as the head of one of the biggest airlines in the world, opening up air routes into the country. I just think we need to be mindful of that,” Doocey says.

“Think about some of the smaller towns on the west coast of the South Island where tourists can go, spend money in the local cafe, maybe stay the night, maybe work behind the bar. I want to support that as well.”

Tourism Minister Matt Doocey has been touring the country talking to industry stakeholders. Photo / Andrew Warner

Leave it to the regions

Who the Government wants to come is one thing. How the sector is led is another point of difference.

“As Tourism Minister, I’m not going to come in and dictate to areas,” Doocey says.

“It’s for them to decide for themselves what role tourism plays in the local economy and their community, and how they can manage those tourist numbers.”

Whether this will lead to better outcomes is anyone’s guess.

We’ve already seen how leaving water infrastructure to local authorities has turned out, with some councils doing well but others doing very poorly, leading to an overall infrastructure deficit of up to $180 billion. This summer, Wellingtonians have endured a water ban and are now looking at a possible 15.4 per cent increase in rates to fix their leaking pipes.

Tourism Minister Matt Doocey is against the suggestion to ban cruise ships from Milford Sound. Photo / Celebrity Cruises

The fiscal context - years of forecast deficits and the tightening of the public purse strings - also means the Government is hardly rushing money out the door.

But tourism is an economic force that Doocey wants to unleash; he’s already poured cold water on plans to ban cruise ships and fixed-wing aircraft in Milford Sound.

“How do we grow the economy and return the books back into the black? Part of the economic success story going forward will be tourism,” he says.

“Tourism can be a great economic catalyst within rural and regional New Zealand. I’m really impressed by the structure in place with the Regional Tourism Organisations and the destination management plans.

“I support the work they’re doing, identifying how they can smooth the peaks and troughs over the full 12 months of the year.”

‘The role of Government is not to fund this’

But there isn’t adequate funding to implement those plans, according to a Tourism Industry Association (TIA) paper published at the end of last year.

Other challenges highlighted in the report, which focused on the industry’s 2050 vision, include a lack of system leadership, poor data and research, and finding workers in a sector that New Zealanders typically snub.

But underinvestment is the persistent elephant in the room.

Take Queenstown. The summer population can swell to twice its resident population, putting pressure on roads, public toilets, waste disposal services, wastewater and water supply - which, as signalled in last year’s cryptosporidium outbreak, is already vulnerable.

Then there’s the inherent challenges of the industry, with its low wages and weak productivity.

“MBIE [the Ministry of Business, Innovation and Employment] is of the view that unmanaged tourism growth over the medium- to long-term is unlikely to tackle New Zealand’s broader economic challenges, including productivity and lifting per-capita incomes,” officials told Doocey in their briefing to the incoming minister.

There’s also a reliance on migrant workers because New Zealanders typically don’t want tourism jobs. This puts even more pressure on local infrastructure, even though many Queenstown workers can’t afford the high rents and are increasingly commuting from Cromwell, or sleeping in their cars.

Queenstown hospitality worker Diego Leon lives out of his car after a winter tourism rush rendered him homeless.

The National Party campaigned on widening that workforce by allowing more people to access working holiday visas, and letting tourism operators to pay the minimum wage instead of the median wage (though a TIA report last year found that 53.9 per cent of operators paid at least the living wage, or $26 an hour).

National also promised a new Great Walk and a $5m fund for regional events, paid for by the International Visitor Levy (IVL). The funding, then, would come from the international visitors paying the $35 fee.

The IVL pot is about $80 million a year, with the other half ring-fenced for conservation. The rate will almost certainly be increased this year, but by how much Doocey won’t say. “What I can say is $35 five years ago is not $35 today.”

Other contestable funding streams from central government are for regional events, or from the Tourism Infrastructure Fund, which Doocey says is now finished.

This aligns with other advice in MBIE’s briefing, which says the question of who pays was “an economic problem rather than a fiscal one”.

“That is, the role of government is not to fund this, it is to ensure that those who benefit contribute to this.” Such funding mechanisms already exist, including targeted rates, concessions and the Stewart Island visitor levy.

“We consider that providing local authorities and the Department of Conservation, in particular, with additional tools to both charge and manage demand would have significant benefits for local communities and enhance the visitor experience without impacting overall visitor volumes,” the briefing said.

This is a difficult balancing act: how much to charge so tracks and huts can be kept tidy and biodiversity protected without pricing ordinary New Zealanders out of the market. Some are arguably already priced out of the Great Walks; the nightly hut fees for a New Zealand adult are between $30 to $78, though international visitors pay more.

Hut fees on the Abel Tasman Coast Track are $42 a night for New Zealand adults and $56 a night for international visitors. Photo / Tamzin Henderson

Will the Government come to the funding party?

The investment burden should ideally be shared, says TIA chief executive Rebecca Ingram.

“I’m keen for us to have a joined-up conversation - industry, local government and central government - around how we can create a sustainable funding mechanism for tourism, one that’s fair, nationally consistent, where each piece of funding has got a clear job, and we’re holding to account at delivering to that job,” Ingram says.

Any user-pays system needs to have tangible benefits, she adds.

“An international visitor has a reasonable expectation - if they’re paying an international visitor levy or paying to enter Milford Sound, or there’s an accommodation levy - then that turns up, in my experience through New Zealand, in terms of facilities and services.”

The industry also has its eyes on a bigger share of the $4b that the Government collects in taxes and levies related to tourism.

“The tourism industry is significant in terms of our economy and the benefits we create are so significant. So I see an ongoing and important role for central government in funding some elements and some roles,” Ingram says.

As for local authorities, they’re all cash-strapped and facing infrastructure deficits and a time of “peak rates”, according to last year’s Future of Local Government Report.

The paper suggested a number of ways to boost funding, including an annual central to local government transfer starting at $1b, all GST paid on rates to go to local government, and for central government to pay rates on its properties.

If Doocey has any inclinations about what funding role, if any, central government will play, he’s not making them public.

He has been touring the country to engage with local stakeholders with a simple message: “Nothing’s off the table.”

That includes a bed tax in Queenstown, which Prime Minister Christopher Luxon said he was opposed to when he visited during the election campaign last year; it would effectively be a new tax on all those in commercial accommodation, including New Zealanders.

In 2019, Queenstown Lakes District Council held a local referendum where 81 per cent supported a 5 per cent bed tax, which would bring in about $25m a year. It would require legislation to implement, meaning the Government - or Parliament, if a member’s bill came before the House - would have to back a new tax.

Reminded of Luxon’s opposition to a bed tax, Doocey repeats the same sentiment: “Everything is on the table.”

What then gets chosen from the table to be implemented remains to be seen.

But if there’s insufficient funding for much-needed infrastructure, the elephant in the room - which has already been there for some time - isn’t going anywhere.

Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery and is a former deputy political editor.