KEY POINTS:
The last time the tourism industry was hit by an economic downturn was after the Asian crisis in 2000.
But that will be just a blip compared to what operators are now facing, says Paul Yeo, head of the inbound tour operators council and the travel agents' association.
"That was a Clayton's downturn."
There was also the terrorism factor after September 11, he recalls.
"But it also had some up-spin because New Zealand was perceived as a safe destination. Australia got hit more than we did. New Zealand rode out the last downward cycle pretty well."
Yeo reckons the last time New Zealand's tourism industry faced such strong headwinds as it does now was in the years after the 1987 sharemarket crash.
But it was also a very different industry back then.
"A lot of the players were more traditional and big. In the last 10 years there has been a wealth of new entrants.
"The domestic travel market was also stronger as less people travelled overseas on the back of the strong growth."
He believes it is many of these businesses who will feel the pain first.
"Where it will hurt are those who joined in the early part of the century. Some will be okay. But some on the periphery will be the ones most at risk.
"A lot of people who have come into this business have put all of their skin on the line."
While there's no talk of going backwards yet Yeo says even plateauing growth may be too much for some.
"When you've had 4 or 5 per cent growth and it goes down to just 1 per cent, people are not used to it."
For the last decade New Zealand tourism has enjoyed the economic boom-times.
Visitor numbers have skyrocketed as more and more international tourists have sought out New Zealand's clean, green image.
But as winter sets in there are signs that the long holiday enjoyed by the industry is at an end.
Last month visitor arrivals plunged by 8 per cent on the previous year's April figures - although that's blamed on an early Easter.
The growth of tourists coming to New Zealand has fallen from a year on year average of 4 or 5 per cent to just 1 per cent in the last year.
The strength of the dollar has also made it more expensive for international tourists to come to New Zealand, although there are divided opinions over whether the dollar has stopped visitors actually coming to New Zealand.
But there is a new problem for the industry - one that few are disputing is cause for concern.
The word on everyone's lips is oil. How much higher will it go? And how will airfare increases affect tourism for a nation which is just about as far away as you can get from all the world's main population centres?
Tourism is New Zealand's largest export earner - in the year to March 2006 (the latest figure available) international visitors contributed $8.3 billion to the economy.
Combined with domestic tourism it is worth more than $18 billion to New Zealand's economy and last year represented 8.9 per cent of GDP.
In comparison, New Zealand's dairy industry is forecast to be worth $9.6 billion next year and represents 6 per cent of GDP.
One in every 10 New Zealanders are either directly or indirectly employed in tourism.
Deutsche Bank chief economist Darren Gibbs says it's a vital part of the economy and any downturn would clearly be bad news.
"The rising costs of travel in light of the rising costs of fuel will probably see numbers of international visitors drop. Clearly it's negative for the economy."
Visitors from Japan have dropped off significantly since December 2004. Similarly Korean and Taiwanese visitors are also down.
Last month also saw the first signs that long-haul visitors from Britain are faltering.
Trevor Hall, chief executive of New Zealand's largest listed tourism company, Tourism Holdings, says many small operators don't look far enough into the future to know if there is trouble coming but there are already signs from the bigger companies.
This week Air New Zealand down- graded its profit forecast for the second time in a month.
For Tourism Holdings Hall sees the current climate as challenging.
"My view is as a destination we are definitely in for challenging times. I personally see New Zealand as a brand continuing to be strong and so will be softened from global downturn, but fuel is a concern.
"If fuel backs off, and it has a bit today, and the dollar comes back that's positive for the industry but we certainly need to recognise we have challenging times."
Hall says it is too soon to call whether next year's summer season will be significantly down.
"It's too early to call. It's only May. The high season doesn't start until November. It could re-correct, oil could come back."
But if it doesn't Hall said businesses would be looking at their cost bases, a move which could see job cuts across the industry.
Dave Hawkey, chief executive of Real Journeys - one of New Zealand's largest coach and ferry operators in the Milford Sound - says he expects to see consolidation as smaller businesses feel the pinch.
His firm has already noticed the numbers dropping off compared to this time last year and is preparing to weather the tough times as best it can.
"The prognosis going forward is one of caution. But we are still optimistic about tourism in the medium to long term. Our outlook is still positive."
For Budget car rental national sales manager Ross Morley surviving the tougher times is all about planning.
He says Budget had not noticed any drop-off yet but it is trying to pre-empt its business in Europe to protect itself against a downturn.
Normally its sales people went to Europe in August to try to encourage buyers but this year they were already there talking to people.
"We really have to plan now."
Morley believes the US and the UK remain good markets despite the recent drop-off but says a number of head-winds are making it tough.
As well as the economic downturn in the US Morley said was also being influenced by it being election year - a time when many Americans choose not to travel.
The enthusiasm for New Zealand brought by Peter Jackson's Lord of the Rings films had also worn off. "That was publicity you could never buy."
"I think the industry is going to struggle. We are not totally top of the pops at the moment. Globally we've got a lot of competition and we have got to compete against them.
"Australia is spending more money but we are struggling or just staying behind."
New Zealand's Budget announcements included no increases in tourism funding and Tourism New Zealand, the body in charge of promoting New Zealand, has decided to throw its efforts at Australia and China.
Tourism New Zealand chief executive George Hickton said at the annual industry trade show Trenz this week that it has all but pulled out of marketing in Japan and Korea as their severe economic problems meant it felt there was little it could do to encourage visitors to come to New Zealand.
Chinese and Australian visitor numbers have been growing but there are concerns that New Zealand is not spending enough on targeting the Chinese market. Last year Tourism New Zealand was given $7 million to specifically target China and last month it launched a campaign targeting Shanghai.
But a visiting Chinese travel agency representative, Darline Liu, told reporters it was nowhere near enough to get the message across. The signs are all pointing to tougher times for the industry but not all the news may be bad. With more expensive airfares New Zealanders may also think twice about heading overseas and spend their holidays at home.
And, says Yeo, it might not be a bad thing if some on the fringes get shaken out.
"The strong will survive.
"I am still positive we will continue to do well. It's just that part of the down cycle."
TOURISM EARNINGS
1999 - $12.4b
2000 - $13.7b
2001 - $15.3b
2002 - $16.2b
2003 - $17.2b
2004 - $17.5b
2005 - $18b
2006 - $18.6b
Source: Statistics New Zealand
ON THE JOB
2003 - 176,000
2004 - 172,900
2005 - 175,600
20061 - 83,100
Source: Statistics New Zealand