Tourism slump fallout yet to hit

Australia's healthy visitor growth has counterbalanced some rather sick major markets. Photo / Supplied

Global recession has sped up changes in the tourism industry but some effects may not be felt fully for years, say industry leaders.

Tourism Holdings chief executive Grant Webster said companies across the industry had pulled back on capital investment and paid down debt.

"They actually used that cash flow to stay afloat and it's going to take them some time to actually get back into a position where that capital investment is going to catch up," Webster said.

"So we won't see that effect in the industry for a couple of years to come because the product's okay, you can defer things, you think of a campervan or a hotel room you're not going to notice in one year that it's one year older," he said.

"But in two or three years time when that sort of mounts up is where there's a longer-term issue for the industry."

Tourism Holdings, whose businesses included Waitomo Glowworm Caves and hiring campervans, had reduced some of its fleet, paid down debt and for the six months ending December 31 posted its strongest operating cashflow in years, Webster said.

Tourism Holdings was now catching up and re-investing heavily, he said.

Tourism Industry Association chief executive Tim Cossar said it felt like the impact of recession was behind the industry.

"Certainly Trenz [tourism industry conference] this year I note a much higher degree of confidence in the future than perhaps we did at the same time last year," Cossar said.

There was growing consumer confidence in some key markets, including the US and Australia, although the UK was still an issue, he said.

"I think in the future you're probably going to see a lot going on from within the Pacific rim as a proportion of the total [visitor numbers]," Cossar said.

Tourism growth from the Pacific region did not mean the number of people flying long-haul to New Zealand would decrease but the balance might change, he said.

"If you accept the principle that China's going to become more dominant, India's going to become more dominant and South America, or particularly Brazil, is going to become more dominant ... that's going to have an effect on us in terms of where those visitors come from."

A lot of operators had increased their marketing reach in some Pacific markets, Cossar said. "I think it's probably a trend that was happening but I think the more challenging economic environment probably hastened that." Events in Europe were causing a little angst in the sector, with financial, political and social stability fundamental drivers for visits, he said.

"It's not that Greece or Spain or Ireland particularly are that big a source markets for us, it's more the flow-on effect into Europe and into the power economies where we do source a lot of our visitors from."

Numbers from the past season had held up, Cossar said. "But this issue is relatively recent, we're only seeing it being played out now ... it's being played out in the world stock markets and things right at this very moment."

Tourism Auckland chief executive Graeme Osborne said he would be a bit measured about whether the industry had come through the recession.

"We've been lucky to have Australia during this period and if you take out Australian growth the rest of our major markets are not looking that healthy," Osborne said. Visitor arrivals from Australia in the year ending April were up 12.6 per cent to 1.1 million.

The balance of international visitors would return to more long-term patterns but with some emerging markets coming through, he said. "South America for example, India and the emergence of new airplanes, the 787, it's going to make some destinations more accessible than they were previously and India is certainly one of those."

Tourism New Zealand chief executive Kevin Bowler said in the very long term New Zealand's most important markets would become the Pacific rim markets. "I think increasingly the Pacific rim is going to be our important catchment area and that's why we're so focused on China and the US at the moment to make sure that those markets have good stable platforms in them," Bowler said.

Air New Zealand and Tourism NZ will between them invest about $130 million in the US market during the next four years, with a target to increase annual visitor numbers from 200,000 to 300,000 over five years.

SHORT TERM OVERSEAS VISITOR ARRIVALS

Year ending April

Australia
Numbers - 1.1 million
Change - up 12.6 pc

UK
Numbers - 251,630
Change - down 4.7 pc

US
Numbers - 194,352
Change - down 1.3 pc

China
Numbers - 100,122
Change - down 11.2 pc

Japan
Numbers - 78,875
Change - down 17.6 pc

Total
Numbers - 2.5 million
Change - up 3.1 pc

- Source: Statistics New Zealand

INTERNATIONAL VISITOR SPENDING

Year ended March

Australia
Amount - $1.77b
Change - up 9.4 pc

UK
Amount - $729m
Change - down 20.4 pc

US
Amount - $531m
Change - down 13.1 pc

China
Amount - $360m
Change - up 17.1 pc

Japan
Amount - $348m
Change - down 22.3 pc

Total
Amount - $5.96b
Change - down 2.2 pc

Excludes international airfares.
- Source: International Visitor Survey