China a prime target but marketing money about to run out

China's expected 6 per cent growth in GDP makes it a promising source of visitors. Photo / Greg Bowker

New Zealand should focus on attracting visitors from China because it is one of the few countries in the world where people are still getting richer, an economist says.

But the future of New Zealand's ability to market to China may be at risk because Tourism New Zealand has funding only until next month.

BNZ chief economist Stephen Toplis yesterday told the hotel industry that growth in New Zealand's $20 billion tourism trade relied on source markets continuing to grow their wealth, and the only market where GDP was expected to grow in the next year was China.

"With the exception of China all of New Zealand's other key source markets are expected to have negative GDP growth," he said.

Australia was still holding up but it was not growing, said Toplis. China's GDP was expected to grow 6 per cent this year.

Toplis said a visitor's decision on whether to travel a great distance was based on the wealth and wellbeing of that person, not the exchange rate.

He said in past recessions, New Zealand's visitor numbers had continued to grow because the source markets were still better off than New Zealand.

But this time it was different.

Despite having been in recession since last year New Zealand was in a better situation than many other countries, he said.

"New Zealand in an absolute sense over the next 12 months is looking awful but compared to the rest of the world it looks great."

Tourism New Zealand general manager Tim Hunter said this year was going to be much harder for the industry and it was mindful that GDP was a determinant in which markets had potential.

"We are going to have pick markets and get in there and push hard."

But Tourism Industry Association chief executive Tim Cossar said China was a worry because funding to target the destination ran out next month.

The Government gave Tourism NZ $7 million in 2007 to target the market but it was only for a two-year term.

Tourism NZ chief executive George Hickton said the special China funding was due to run out at the end of June but the marketing body was in talks with the Government over the state of its budget.

"We clearly want to continue marketing there."

Hickton said it would not look to run another advertising campaign in China until August or September so it had time to talk about it.

He said China had high potential but the market needed management.

Meanwhile Toplis said talk of greenshoots really applied only to the financial markets which tended to recover 12 to 18 months ahead of the real economy.

Toplis said tourism was likely to recover late in the cycle.

"Tourism is a high-beta sector - on the upside you do better but on the downside you do a little bit worse. You would expect that because of the discretionary spending associated with it."

He predicted a cumulative decline of visitor numbers of 10 per cent this year. "For you as a tourism sector it really doesn't get much worse."

He also warned industry members to be careful about their expectations for growth in the long term.

"Don't kid yourself. The pace of growth will be a lot lower than what we have been accustomed to over the last 10 years."

Toplis predicted growth of 2 per cent to 2.5 per cent rather than the 3.5 per cent seen over the past 10 years.