KEY POINTS:
Overseas visitor arrivals continue to grow but the high dollar is cutting their buying power and industry figures warn the impact of the high currency may not be felt for years.
Trevor Hall, chief executive of Tourism Holdings - whose attractions include Kelly Tarlton's and brands include Maui and Kiwi Experience - said the company had a good summer despite the high dollar.
"The thing that always concerns us about a rising dollar is the fact that the spending power of the visitors is reduced," Hall said.
According to Statistics New Zealand, overseas visitor arrivals in March were up 5.4 per cent on last year at 239,203 and up 2.8 per cent for the year at 2.4 million people.
About one third of travel was generated by word of mouth.
"I guess the question to ask is how many people have left from this very good summer that we've had ... going back into their home markets and saying New Zealand's expensive," he said.
"That's the impact that we're going to feel as a destination in the next two to three years."
Some parts of the tourism industry had already felt some effects. Hall said the backpacker market showed some weakness at times in the summer.
"Those people look at things like exchange rates and how far their dollar's going to go and they will shorten their time in an expensive destination and increase their time in a lower-cost destination."
Last week the Kiwi dollar hit a 22 year high against the greenback but it was also gaining on other currencies.
"All currencies around the world have fallen against the New Zealand dollar," he said. "I think we've got like a 6 or 7 percentage point lead ... we've gone 18 per cent against the US dollar where Australia's gone 12 [per cent]."
Pricing for the 2007/2008 summer season was being set now on factors including a high exchange rate and inflation, Hall said.
"So you could see some of those package prices that were in the European market last year jumping quite significantly."
Paul Yeo, chief executive of the Inbound Tour Operators Council, said rising package holiday prices could make New Zealand less competitive.
Package holidays were popular in Asian markets, Yeo said.
The Chinese market is growing with visitor numbers up 19 per cent in March to 8878, boosted by Air New Zealand starting direct flights to Shanghai last year. However, the highly valued Japanese market fell for the 21st straight month, down 11 per cent to 13,179. A growth of short-haul destinations and the high exchange rate were previously blamed.
For independent travellers who book their own holidays the effect would be less visible, Yeo said.
"But when they get here their pound or their US dollar doesn't go as far as it probably did in the past."
It had been a good summer for the industry, with February and March both strong and April probably up to expectation, Yeo said.
New Zealand held a strong allure for tourists and "if somebody wants to come here is two or three cents in the dollar going to stop them from actually coming?" The exchange rate would come down but in the end it was out of the industry's control, Yeo said.
"There's no sense getting too worked up over it," he said.
"To a certain extent you've just got to actually ride with it and adapt."
Hall said the management of interest rates was outdated and needed to be changed.
"The concern going forward is that it just seems like a one-way bet," Hall said. "If we keep on having this pressure in the housing market we're just going to keep on getting a lift in the exchange rates."
Tourists
Visitors to New Zealand in March:
* Up 5.4 per cent on last year at 239,203.
* Chinese visitors up 19 per cent to 8878.
* Japanese visitors down 11 per cent to 13,179, falling for the 21st straight month.
