Although the surge in tourism has brought lower spenders, especially from China, visitors from the USA are opening their wallets wider. Top spending Germans cutting back a little

Content re-posted from MBIE*

Spending by international visitors reached a record $10.4 billion, in the year ended September 2017, a four per cent increase when compared to the year ended September 2016.

This was the first time spending by international visitors exceeded the high seen in the year ended June 2016 ($10.3 billion).

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Lower spend per visitor contributed to a slowdown in total spend growth

International visitor numbers continued to climb over the last year (up nine per cent in the year ended September 2017(1)), however total visitor spending did not grow at the same rate. One of the main reasons for this was a fall in mean (average) spend per visitor, down from $3,300 in the year ended September 2016 to $3,180 in the year ended September 2017 (down 4 per cent), although this fall is not statistically significant.

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The strong New Zealand dollar contributed to a change in spend per visitor

The value of the New Zealand dollar increased relative to most other country currencies compared with the previous year. The average value of the Australian dollar, Chinese yuan, US dollar, British pound, Japanese yen and the Euro against the New Zealand dollar were all down compared to their values over the year ended September 2016.

This means that if visitors from these countries had a fixed budget they would have received, on average, less New Zealand dollars for their money in the year ended September 2017 than they would have in the year ended September 2016.

The nominal Trade Weighted Index (TWI) measures the value of the New Zealand dollar against the currencies of other countries. The exchange rate of each currency is given a weight based on the amount of trade between New Zealand and the currency zone. The TWI seems to have an inverse relationship with the mean spend per visitor so when the TWI rises (due to a rise in the New Zealand dollar), the mean spend per visitor tends to fall.

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Significant increase in spending from US visitors

Australian visitors remain the largest international market for tourism spending in New Zealand, totalling $2.6 billion in the year ended September 2017. The next largest market was Chinese visitors who spent $1.4 billion, followed by US visitors who spent $1.2 billion.

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Rise in visitor numbers drives US spending

US visitors spent a total $1.2 billion, in the year ended September 2017, a significant growth of 14 per cent, from $1.1 billion in the year ended September 2016. One of the main contributors to the increase was the rise in US visitor arrival numbers, up 18 per cent in the year ended September 2017, compared with the year ended September 2016. US visitor arrivals have increased strongly since direct flights began between Auckland and Houston at the end of 2015.

German visitors spending less per visit on average

Of our top visitor markets, German visitors typically spend more per visit on average than visitors from the other markets. However average spending of German visitors fell from $6,300 in the year ended September 2016 to $5,100 in the year ended September 2017, a 19 per cent decrease over the period. A number of factors may have contributed to the fall in mean spend of German visitors including:

• A fall in the average length of stay of German visitors from 52 days in the year ended September 2016 to 47 days in the year ended September 2017(1).
• A fall of five per cent in the average New Zealand dollar vs Euro exchange rate in the year ended September 2017, compared with the average in the year ended September 2016. This could imply that German visitors to New Zealand received less New Zealand dollars for their euros on average over the in the year ended September 2017 than they did in the year ended September 2016.

Exchange rates affect each international visitor market differently

In most international markets, exchange rates appear to have a strong correlation with mean spend per visitor, although the relationship varies by market. The mean spend of Chinese visitors, for instance, appears to be strongly affected by exchange rates, while German visitor mean spend appear less affected in recent years.

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UK spending doubles for the quarter due to Lions Series

UK visitors to New Zealand spent $181 million in the third quarter of 2017. This constituted a 104 per cent growth in spending when compared with the same quarter in 2016.

The DHL NZ Lions Series 2017 is likely to have significantly contributed to this growth, with a 68 per cent increase in UK visitor departures in the September 2017 quarter, compared with the same quarter in 20161. Although most of the DHL NZ Lions Series 2017 was in June 2017 (the second quarter), spending was reflected more in the third quarter (most likely July). This was because the tour finished in earlier July and the survey was sent to visitors after departing.

This article is a re-post from the MBIE website. You can see the original here.