Tourism on the verge: New Zealand tourism is under pressure. With growing numbers and rising prices, how can we add real value to this important industry?
New Zealand is experiencing a boom in tourist numbers, no doubt, with some 3.6 million tourists annually and double-digit growth rates for the last two years: tourists added 5.6 per cent – or $12.9 billion – to GDP, and employed 188,136 people – or 7.5 per cent – of the workforce. As resources are stretched, there are calls to target value rather than tourist numbers.
Years of tourists’ positive word-of-mouth have created a ground-swell of good will and more airlines fly into the country to harvest the windfall: both create a strong pulling power. We will likely see a further increase of between 12-15 per cent in visitor numbers yet, as prices climb and with barely sufficient accommodation available, how can New Zealand keep delivering value?
Even the shoulder seasons are beginning to flatten, particularly in the South Island where the accommodation sector booked a 10 per cent growth rate in 2016 compared to the previous year. The Lions’ Tour in June  brought some 25,000 additional visitors and an $85 million windfall. Yet these tourists found it difficult to get a place to sleep, with freedom campers continuously maligned and price gouging not uncommon.
The tourism sector now looks forward to the America’s Cup in 2021. Four years away, it will take place during the peak season, putting even more pressure on the accommodation sector and likely to lead to a drop-off in domestic tourism.
Feeling squeezed out of their own backyard, Kiwis will find it cheaper and more convenient to go overseas.
The cracks are beginning to show: prices for accommodation, entertainment and activities are at an all-time high – and New Zealanders are beginning to complain. Lacking proper social impact studies, it is local newspapers that are highlighting increasing protests about too many freedom campers, steep hut fees and crowding. They signal the end of Kiwis’ love affair with overseas tourists. Soon international tourists, too, will note that New Zealand is pricing itself off the market as it provides less rather than more value for those coming from far away.
Comparing prices in major cities across the globe in 2015, the Swiss corporate and financial service organisation UBS reports that the prices of goods and services in Auckland (excluding rent) are surprisingly similar to those in Tokyo, Chicago and London, and not far behind the most expensive cities of Zurich, Geneva and New York. The price for a three-course evening meal in a good restaurant in Auckland, for example, is right up there with the most expensive cities in the world, even without alcohol. While Tokyo charges double, Zurich asks for only $40 and Geneva for $30 more than Auckland, and London is a bargain with $50 less per three-course meal.
The same UBS study further reports that, so far, the handful of Auckland five-star hotels charged approximately half of what their competitors charge overseas, while the more prevalent three-star hotels are now no longer far behind prices in expensive cities around the world. So, how likely is it that “the highest value-segments” Tourism New Zealand seeks to target will spend more while staying longer?
In truth? Unlikely, because we are simply not prepared for further increases in tourism numbers as New Zealand’s value-for-money ratio is declining rapidly.
Firstly, it is unlikely the New Zealand government will provide timely research and strategic assistance to identify pressure points, and assist communities to deal with the outfall of tourism bursting at the seams. The government’s neo-liberal ideology does not provide for resource protection. Worse, we cannot expect either of the main political parties to provide sustainable tourism policy. They don’t have the capacity, like the Greens or other minor parties, and they all have been putting their trust into a handful of economists with little specialist knowledge at an ever-shrinking “ministry”.
Secondly, productivity and value-added is measured only in dollar terms, but not in well-being. This short-sighted view has been the reason for the demise of destinations overseas. Like at the Costa Brava, Rimini or the Caribbean, the common trend has been low wages, lack of career paths, increasingly disgruntled locals and the demise of the resource.
So, what can be done?
Communities need to wake up and push for change. In order to harness more value from tourists, higher value needs to be created first. Communities need to push for a redistribution of tourism revenues to the places where tourism is consumed and – after years of neglect ¬– they need to catch up. They need to provide more and better facilities for domestic and international tourists, and to decentralise demand.
City councillors need to upskill. Rather than letting the entrepreneurs fight it out, they need to educate themselves and include locals so they may realise tourism’s benefits together. They must create the ground for tourism businesses to help build and extend the local brand. By empowering themselves and others through collaboration, they can create value sustainably. This value comes not only through “hard” measures like better infrastructure, but also through “soft” measures such as unique local service attributes. These need to be supported by locals and “lived” by committed staff – not a transient, foreign workforce that dilutes value.
Tourism destination brands are the harbingers of value-added, but they run opposite to neo-liberal ideology, which favours resource exploitation and asset stripping.
PROFESSOR JURGEN GNOTH
Department of Marketing
Photos: Alan Dove