Brian Fallow takes a look at tourism, the sector of the economy perhaps most impacted by Covid-19 and travel restrictions

Brian Fallow takes a look at tourism, the sector of the economy perhaps most impacted by Covid-19 and travel restrictions
Photo: Andrea Schaffer, Flickr.

By Brian Fallow*

No industry is more challenged than tourism in these times of peril and pestilence.

Hopes have been rising for a reopening of the Tasman border but on the broader issue of international tourism Prime Minister Jacinda Ardern had a stark message for the industry on Tuesday: “We will not have open borders for the rest of world for a long time to come.”

First, some numbers. These come from Statistics New Zealand’s annual tourism satellite account and are for the year to March 2019.

International tourism expenditure accounted for 20% of total exports and 42% of total tourism spending.

Tourism overall, domestic and international, represented just under 10% of gross domestic product – 5.8% direct value added and 4% indirect.

The sector employed 229,000 people directly, including 29,000 working proprietors, or 8.4% of the total number of people employed. When those whose jobs depended indirectly on tourism were included the share of total employment rose to 14.4%.

Of the 3.9 million overseas visitor arrivals that year 2 million were on holiday and 1.5 million or 38% were from Australia.

These sorts of numbers are macro-economically significant and strengthen the industry’s hand as it urges the Government:

·To continue some kind of sectoral support in next week’s Budget for when the economy-wide wage subsidy scheme expires,

·To relax restrictions on domestic travel when the country moves to Alert Level 2, and

·To reopen the Tasman border as soon as safely possible.

The impact of the crisis is already brutal in some places, says Tourism Industry Aotearoa chief executive Chris Roberts.

“The Hermitage hotel at Mount Cook is closing. That is the heart and soul of Mount Cook village. The Heritage Hotel in Hanmer Springs is closing too, and the helicopter operators aren’t operating at Fox glacier and Franz Josef so those towns face a dire outlook,” he said.

“We have surveyed our members and every single one is facing difficulties. A third are intending to hibernate, to close for now but open again when the time is right. Only a handful, less than 2%, tell us they are intending to close down permanently. But I think that as time goes on, depending on how fast the recovery is, more of those hibernations will become permanent.”

Estimates of job losses range from a quarter to as much as a half, so between 100,000 and 200,000 people , Roberts said.

The industry’s problem is that tourism is a luxury trade. Travel for leisure is nice to have, not need to have. It is not the ideal product during a gruesome recession which hits incomes, job security and wealth.

To the extent it depends on air travel it will also struggle with concerns -- medically valid or not – some people will have about spending hours cooped up with quite a lot of other people breathing recycled air, no matter how meticulously filtered.

So while relaxing official restrictions on domestic or trans-Tasman travel would clearly be helpful, it is no panacea.

The Government is expected to announce on Thursday more details of the rules for Alert Level 2.

Roberts said a lot of effort over the past week or so had gone into trying to convince it that safe domestic travel is possible under Alert Level 2, that businesses would be able to trace customers.

“The hold-up appears to be the lack of a national tracing system or app. The Government is nervous about allowing travel without that sort of Australian or Singaporean app in place. We are nervous that our businesses will be held back, potentially for some time, if forced to wait on that system,” he said.

“By no means are we imagining a return to normality in terms of the amount of domestic travel around the country but any movement would be better than none.”

As the focus shifts to encouraging more domestic tourism on the part of people who might otherwise have holidayed abroad the industry would have to overcome a lack of good data on what Kiwis look for in a vacation. “We know far more about international visitors – what they spend and what they are looking for in a holiday – than we do about domestic visitors.”

On the prospects for a trans-Tasman “bubble” Roberts said there seemed to be a lot of support on both sides of the Tasman.  “There is a lot of work going on on this across the tourism and aviation industries and border agencies of both countries, looking to work through all of those issues in a comprehensive manner.”

But that was likely to take some time. “It could be a month or more to work out what a safe border looks like, but the intention is to get all that work done and have something that both governments can agree to,” he said.

“We would hope to see the border open as soon as it can safely be done but we are probably looking at about October before it could realistically happen.”

Looking further ahead Tourism Minster Kelvin Davis has asked Tourism NZ, along with the Ministry of Business, Innovation and Employment and the Department of Conservation and industry stakeholders to “re-imagine” how tourism will operate in the post-Covid world: “How we market domestically and internationally, who we market to, and how we manage visitors when they arrive on our shores.”

Perhaps on the principle of never wasting a good crisis, it could be an opportunity for a major reset in an industry at risk of falling victim to its own success.

In a trenchant critique of the sector released last December the Parliamentary Commissioner for the Environment, Simon Upton, said it ran the risk of killing the goose that lays the golden egg.

“So much of what New Zealand has to offer centres around an absence of people, starting with a flora and fauna that had not encountered humans until 800 years ago. A sense of remoteness and isolation, both physically and in time, lies at the heart of how so many special places are experienced. Many of our visitors come from places where it is almost impossible to escape the pressure of population,” he said.

But an inexorable growth in numbers risked an irreversible decline in both environmental quality and human experience of it.

“The experience of Milford Sound [for example] can be a day spent on a bus to and from Queenstown, vehicles waiting a long time to get through the Homer Tunnel, and overcrowded carparks, all for a brief visit to a place that is crowded and noisy.”

Roberts says the sector was already grappling with the issue of value versus volume. “We were trying to work out how to deal with rising visitor numbers while maintaining the quality of the product. Now those visitors have gone away we can’t take our eye off the ball…We have to have smarter thinking around congestion at some of the most popular spots.”

He cites the Milford Opportunities Project, headed by former Meridian Energy chief executive Keith Turner, as evidence of that.


*Brian Fallow is a former long serving economics editor at The NZ Herald.

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47 Comments

In the post COVID19 world, countries will be divided into two groups -- contained group and herd immunity group until a a vaccine is successfully developed.

NZ obviously belongs to the contained group and should open up borders with countries in the same group as soon as it 100% safe to do so.

Of course, in practice, it requires the Government to do LOTS of preparation work to enable such things happening. Given, the limited capability of the current government in achieving anything, it is highly unlikely to see such sensible arrangement achieved before any vaccine is developed.

Sorry, tourism industry, it is time to lower your profit margin, bow to domestic tourism and cater NZers.

10
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NZ, Australia, Taiwan, Fiji, Samoa, Tonga? With Taiwan in charge of cordinating medical risks.

I'd support that. Taiwan has done really well.

I wonder what China would think if we embrace Taiwan.

You're not going to get much business from the pacific islands, so hardly worth the risk.

If you are in the game, you'll have to be rethinking your model and quickly. Domestic and possibly Aussie will be the only show in town for a while.

I do pity the people who have lost their jobs in this industry. Perhaps this might provide some of them an opportunity to start up their own business between times.

Guides for mountain bikers or tramping into lesser known tracks could be an idea worth exploring, using social media as your platform to target your market.

Who knows the government could see the value in upgrading some of these lesser known tracks for times ahead.

Will this mean cheaper Queenstown properties ? Maybe the help will actually be able to afford a modest flat nearby

Tourism belongs to times of surplus
In otherwords its history
Like pensions, retirement … delayed gratification tokens in general

Cant have tourism without a growth based economic system …. and (now) economies to scale

Airlines are stuffed without all those premium paying last minute booking business travellers (subsidizing) the cheaper masses
Restaurants / sights don't work at 10% full etc
And are those with some possible disposable cash (the boomers) ready to risk international travel any time soon ?

Yes

Sounds like the definancialization of our natural beauty here in Enzed. Good. Give the tour guides jobs in possum hunting, stoat trapping and goat shooting. I'll buy whatever products come from these industries, be it nipple warmers or meat.

It won't be just here. Spare a thought for all the African wildlife (or wildlife around the world) that tourism has helped save.
If only we didn't try to monetize every damned thing that exists.

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"the focus shifts to encouraging more domestic tourism on the part of people who might otherwise have holidayed abroad"
This is going to apply to every country on the planet. Everyone will try to 'encourage' their domestic populations to 'stay home for your next holiday' and in all likelihood, that's what is going to happen.

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Operators might be in for a shock if they want to maintain their premium traveler prices for locals.

with surplus supply those prices are history.

market forces will see to this.

"Of the 3.9 million overseas visitor arrivals... 1.5 million or 38% were from Australia"

In short, opening NZ borders with OZ will be the difference between closing down or surviving for many tourism businesses and their employees

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You think?
"In Australia, almost 1 mln workers have lost their jobs... Even for those who haven't lost employment, household finances are under pressure. These sudden changes are not only going to hurt demand in a major way, they will also change household spending attitudes for a very long time."
(From closing thread, today)

Yes, for many tourism operators how soon the border with OZ reopens will be the difference between closing down or not. There are still plenty of people with money to spend, both in NZ and OZ.

Oki Doki.
So are you going to take the chance, in the immediate future, that you might get trapped overseas on holiday, just as those +80,000 were in New Zealand, and untold thousands of Kiwis in other destinations, recently? All it needs is one little blow out in the contagion rate and you might find yourself with no way home, to your family and ( most importantly!) your job.
That's what any Aussies, and any other group, are going to have to weigh up. Is now a good time to go to NZ or will later be better? NZ will always be there, so 'later' would be high up on my list if I were overseas.

I'm guessing insurance premiums would be rediculous for any holidays for trips to/from NZ. Chances of another outbreak then your trip gets cancelled (say family trip worth $5,000 for a week or two over to Gold Coast). Question is, would you go without insurance, or would insurance companies want to touch it?

If you can get insurance.

The insurance will exclude pandemics. Which I understand was already the case in most policies.

If house prices start falling watch them close their wallets.

Something to think about:

1) Will tourists from overseas need to quarantine for 2 weeks before they are able to travel to their holiday destination?
In locations where there have been zero new infections in the local community (i.e zero community transmission), the new infections have been from incoming travellers (mostly returning residents)
2) Will tourists need to self quarantine themselves upon return to their home country?
The quarantine restrictions surrounding travellers from abroad will be a key potential constraint.

If overseas tourists
1) need to quarantine 2 weeks in NZ before travelling around NZ,
2) then holiday for 2 weeks in NZ,
3) then self quarantine upon return to their home country for a further 2 weeks (so either in the form of further holiday leave, unpaid leave for those unable to work from home).

That is potentially 6 weeks for an overseas holiday - all costs to be paid by the traveller.

A question for people to ask themselves:
1) Is that something you would do if the circumstances were reversed? (e.g if you were to travel to Australia?) or
2) would you choose to stay in your home country for a 2 week holiday?

The idea of joining bubbles with Oz is there is no isolation in either direction.

If we have say 6 months with zero infections then NZ has a decent reputation for honesty and other countries will let us in without quarantine. However the flight would have to be Kiwi or Kiwi & Australian only and not stop en route - it will be hard for me to get to France to see my son.

At least if we have only Australian tourists they will know which side of our roads is the correct one to drive on.

Yea I'd rather tourism become cheaper and worth doing locally for Kiwis, rather than it being cheaper for us to fly across 2000km of water to another country and spend money there. I've probably lost about a grand in early bookings for a trip this year which now won't go ahead, I won't be in a rush to spend that kind of money again so far out for a cramped, overpriced experience in my own country if that's all that's on offer.

Cant see cheap flights coming back anytime soon, unless they are subsidised by governments (including businesses that benefit) who's main industry is tourism.

Reducing tourism will free up a lot of road safety budget/resources.

Like most industries, adaptability will be key to survival for tourism operators

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A tour of ghost housing developments, perchance?

Watch the archaeologist unearth a survey-peg?

Teach 'em Little Boxes as they're walking to and from?

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Guided educational tours of the tombstones called 'hotels' to teach the children that once upon a time people used to fly on mythical things called aero planes and pay money to sleep in these tombstones in between wine tours, hot pools and jet boat rides.

That would be a laugh if it weren’t so bloody scarey !!

Yvil, how do you think you will try and adapt? Will you take on tenants rather than visitors?

Under the zero carbon cult there is no tourism anyway so things just ground to a halt a bit sooner that the activists planned.

As the resident troll has so opportunely pointed out, tourism as practiced, was in trouble.

Upton said as much https://www.newsroom.co.nz/2019/12/19/955037/tourism-growth-pushed-at-th... but even without carbon emission issues, fossil-fuelled flight was a short-term dinosaur. And even if we'd saved the FF for flight and plastics, we'd not have had an 'economy' capable of 'paying'for it.

I had a bet with a major tourism operator (was working for him at the time) that tourism as we know it would be dead by 2030. I'm probably not going to ask him for it...........

...and only if you had been banging out about pandemics rather than peak oil you could have collected!

Still don't get it profile … sigh

Its peak debt
We reached the end of the road for leveraging debt in the place of declining (net) energy

Ill keep it simple

Energy provides the good stuff
Debt allows us to timeshift and enjoy the fruits of tomorrow earlier … it adds lots of IOUs and promises that evermore energy can keep delivering the good stuff...
We reached a point where the bets about tomorrow were so fragile that a little old pandemic is blowing the system to pieces

Comprehende?

Is a 1 in 100 year black swan really a "little old pandemic"? Even net savers such as Germany are doing stimulus, less buyers for their goods.

Debt was always going to be the undoing of many, USA included. Printing money ad infinitum is a problem, and it's worrisome now that NZ is doing it too and calling it neutral in terms of Governmental balance sheet. NZ will be back to 1990's debt to GDP%.

As for the energy, we'll have other solutions in the future.

Do you like to have money to save? Only the government can provide net financial assets to the private sector. Private sector debt levels are the problem in NZ and they have been exacerbated by the government running budget surpluses over many years. (Sectoral Balances).

When I view the tourism industry I see a vast desert with the odd tumble weed blowing past and Ry Cooder playing somewhere in the distance.

Sing along everyone!

Can airplanes be modified so that they dont recycle cabin air and encourage the spread of all manner of bugs to the detriment of all passengers wellbeing? Maybe they can also fix the toxic oil contamination that occurs from time to time while they are at it?

tourism industry aotearoa themselves may be scratching for funding themselves soon with so many member organisations struggling,as could the tourism board if the only potential tourists are australian and they are a captive market.

Like any business some will be worse off than others. International tourism basically dead for at least six months and probably up to a year. Feel sorry for the bus drivers, hotel/motel receptionists and the lower level employees. The owners and particularly those on the easy money mortgages for Air BnB, motels/hotels, residential development in tourist hot spots I have little sympathy for. They must bear the consequences of their investment decisions. If their properties are called in because of security they'll just be in the dole queue like many others. I suspect these mortgage defaults will not have as nearly I bigger impact as residential defaults on the banks. All of this puts stress on the banks. The risk of an OBR event in the next six months to a year is that much higher than it was a few months ago. Difficult for a layman to assess the risk and Joe Public won't know about an OBR event until announced. Any pre-warning will have a bank run on all banks that'll make Northern Rock look like child's play. The govt will not bail the bank/s out as depositors are an easy way to keep the bank afloat without involving tax payers money which is already under stress.

So who and what was behind the big immigration push. Has it made us better of or worse off. Each new job in tourism made us poorer as a nation?
https://www.youtube.com/watch?v=UluYedQUg84&t=66s

I think tourism is start again stuff, but they won't be the only ones. The event industry, just like the airport business, are both up for some new thinking. Surely someone's got to come up with a plane that doesn't use oil. Maybe sailing will be the new norm with quarantine done on board?
Whoever get's the vaccine right is going to make a fortune.