New Zealand tourism businesses face the double whammy of Kiwis spending their holiday money overseas while many overseas visitors are still effectively barred for months.
During the pandemic a chunk of the $9 billion usually spent on overseas trips a year has been spent in this country, propping up the domestic tourism sector.
ANZ economists say the Government’s pathway towards reopening borders means there is light at the end of the tunnel for Aotearoa’s tourism sector but things could get tougher before they improve.
While vaccinated visitors from nearly all countries can enter the country without staying in an MIQ facility from April 30, under current plans they must self-isolate for seven days which is a dealbreaker for most tourists.
Those coming to New Zealand to visit friends and relatives won’t be deterred but they don’t spend on tourist attractions.
“It’s no secret that the tourism sector and related industries have been doing it very tough since our borders closed in 2020, and at first blush the timing of border reopening, while great news in an absolute sense, suggests it’s going to be a tough slog to the finish line,” the economists say.
The April 30date means the sector – which vied with dairy as the country’s top foreign exchange earner before the pandemic -will have to endure another peak season without international visitors.
This could be exacerbated by a fall in domestic tourists as Kiwis from mid-January can return from Australia and avoid MIQ (just spend seven days in self-isolation) and from anywhere else in the world from February 13.
That milestone was more than early enough to give Kiwis the opportunity to plan their overseas holiday in the winter months.
“This is a double whammy for the NZ tourist operator, as having Kiwis stuck in NZ these past two winters has provided a partial offset to lost activity in the summer. For some, that may have been the difference between staying afloat or not,” the economists say.
“Next winter, however, Kiwis’ pent-up demand for international travel means previously intercepted tourist dollars will likely head offshore. In other words, things could get tougher for NZ tourism before they get better.”
In some regions domestic tourism has been running at record levels during the pandemic as home-bound Kiwis – who pre-pandemic spent about $9 billion a year overseas – saw parts of the country they hadn’t seen before.
Tourism NZ says that before Covid-19, 60 per cent ($23.7b) of New Zealand’s tourism expenditure came from New Zealanders
New Zealand tourism is normally very seasonal, says the ANZ.
Foreign visitors like to come here in the warmer months (when Kiwis prefer to stay home), and Kiwis prefer to go abroad in the colder months (when foreign arrivals typically hit their lull).
The economists say it’s possible the summer of 2022/23 is much stronger than usual given pent-up demand, but there could be another problem.
“There simply may not be enough capacity to accommodate that.”
Fallout from the pandemic will end up accelerating the tourism industry’s transition from volume-led growth towards value add, and that’s simply not the operating model for some.
“All up, a reversion to usual seasonal patterns any time soon feels like a very optimistic assumption. The peaks are likely to be lower, the troughs deeper – for a time at least.”
One tourism group, Destination Queenstown, said it was pleased the Government had provided the business community with some much-needed certainty around reconnecting New Zealand with the rest of the world, however the wait may be too long to save some local operators.
“The self-isolation requirement is likely to deter international travellers, particularly Australian visitors, who were Queenstown’s biggest international market pre-Covid,” said Destination Queenstown chief executive Paul Abbot.
“I expect the Australian Government will promote and incentivise domestic travel, so when faced with that or coming to New Zealand to self-isolate for a week, the majority are likely to opt for domestic travel.”
Since the Government announcement on Wednesday, there have been various cancellations of Australian conference and business events for the Queenstown region.
This included several cancellations of confirmed and prospective business events adding up to a value of around $20m to $30m. These figures are expected to continue to rise and be much higher, said Abbot.
“I urge the New Zealand Government to reconsider and remove the self-isolation requirement. Our operators are already facing a bleak Christmas period, and this is likely to further add to their levels of stress and financial hardship. We will lose a big chunk of 2022 winter travel if this requirement is in place.”
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