The country's network of Great Rides only has enough money next year to maintain the tracks - maybe. Photo / Graeme Murray
For Travel - June 28
The country's network of Great Rides only has enough money next year to maintain the tracks - maybe. Photo / Graeme Murray
For Travel - June 28
Diminishing funds, low wages and productivity and the regions relying on central government money are perpetual tension points in the tourism sector, according to the briefing to Tourism and Hospitality Minister Matt Doocey.
Cost-cutting from the previous government has already impacted funding for the 23 Great Rides across the country, which are estimated to generate $1 billion for the local economies where the trails are.
Those cuts have shrunk the funding pool next year to $8 million, $5m of which comes from the roughly $40m annual fund from the international visitor levy (the $35 levy makes about $80m a year, half of which is ring-fenced for tourism and half for conservation).
”The total funding of $8m is unlikely to be sufficient to enhance the Great Ride network but may be enough to continue ongoing necessary maintenance,” the briefing says.
An immediate priority for Doocey was to decide on funding for e-Bike charging on Great Ride trails.
He will also make a decision this year on the $35 levy, and given the economic headwinds the Government faces, it’s almost certain to increase; Doocey’s ministerial predecessor wanted to increase it in 2022, but Cabinet decided to delay it due to the Covid-19 pandemic.
The Timber Trail is one of 23 Ngā Haerenga Great Rides of New Zealand. Photo / Visit Ruapehu NZ
MBIE to minister: Don’t fund it
The Ministry of Business, Innovation and Employment briefing said there was a constant tension over funding for tourism-related costs, and the sector often defaulted to relying on Crown funding, such as through the Tourism Infrastructure Fund.
”The daily population in Queenstown can, at peak times, be twice the resident population. This effective demand dictates the water and wastewater capacity required at a location, but councils or ratepayers might not have the ability or willingness to pay for this capacity.
”Because tourism is both highly seasonal and labour intensive, it also creates housing and transport pressures at peak times.”
However, the briefing said the question of who pays was an economic one, not a fiscal one.
”That is, the role of government is not to fund this, it is to ensure that those who benefit contribute to this. This will require legislative change.”
Such funding mechanisms already exist, including targeted rates, concessions, and the Stewart Island visitor levy.
”We consider that providing local authorities and the Department of Conservation, in particular, with additional tools to both charge and manage demand would have significant benefits for local communities and enhance the visitor experience without impacting overall visitor volumes.”
The briefing said that tourism has inherent challenges of “weak productivity” and “negative impacts on the natural environment”.
”MBIE is of the view that unmanaged tourism growth over the medium- to long-term is unlikely to tackle New Zealand’s broader economic challenges, including productivity and lifting per capita incomes.”
Tourism and Hospitality Minister Matt Doocey. Photo / Alex Cairns
Reasons for this include:
Tourism flows to activities and sectors that tend to have lower productivity (such as retail goods).
It is labour-intensive. Tourism expenditure directly contributed 5.4 per cent of New Zealand’s GDP in 2020, but employed 7.9 per cent of the workforce
International demand is highly seasonal, leading to a reliance on temporary labour. Items of value are also under-utilised, such as rental cars parked up for winter.
”For key parts of the sector with high fixed costs – airports, transport and accommodation – productivity gains will only come with volume growth (exacerbating congestion and capacity costs elsewhere in the system),” the briefing said.
”Wages are on average $6.68 per hour lower than the median wage, with the estimated tourism median wage at $24.98 compared with $31.66 across New Zealand.”
New Zealanders have generally not wanted to work in the low-pay sector, so it has relied on overseas workers. But temporary labour can reduce incentives to train staff and invest in technology to improve productivity, the briefing said.
Despite these tensions, the sector will continue to grow even if the Government did nothing; the World and Travel Tourism Council predicts an annual increase of 5.8 per cent in international travel.
And it will continue to contribute to the economy in multiple ways; 8 per cent of those employed are in tourism, and in parts of the country it underpins the local economy, particularly in Otago and the West Coast.
“For many smaller centres, visitor volumes enable the provision of services and amenities that the resident population could not sustain. This includes supermarkets, medical services, small retailers and hospitality businesses.”
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery and is a former deputy political editor.
