New Zealand Tourism Supply 2050


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A description of the key supply side drivers that will shape the future of tourism to New Zealand by 2050. Part of the project

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  • Source: explained:Even though economic growth has slowed throughout the world in recent times, significant growth is reported from Asia and Central Europe. Hither-to low income economies are rapidly moving up into middle income economies where many have growth rates in excess of 10%. The rise of middle-income economies offers future opportunities for tourism products and visitors as organisational and personal prosperity improves.For the future:Even if New Zealand’s economic performance continues as before, the gap between the high and low growth economies will continue to shrink and provide more opportunities for visitor related expenditures. Just as visitation levels from India and China to New Zealand and elsewhere has soared from low bases in the early 2000’s, similar behaviours may be expected from other emerging Asian economies (Viet Nam, Cambodia, Mongolia, Bangladesh and the “stans”) as time progresses towards 2050.
  • Source:, J. P. (2008). Challenges for the Hospitality Industry: Beyond Price. New Zealand Tourism & Hospitality Research Conference 2008. J. Fountain. Hanmer, Canterbury, New Zealand.Driver explained:Tourism in New Zealand has a number of hurdles for the future – one of which is that its economic performance is scarcely at investment grade level. PWC reports weighted average cost of capital for listed companies – the level of which indicates the risk-adjusted competition for investor’s funds. Although this report is restricted to listed companies, it provides a guide to the risk associated with sectoral investments.There is considerable investment in tourism infrastructure within New Zealand, but it is not at the listed-public-institutional level: it resides mainly in the property sector as well as in the hands of private investors and a few unlisted public investors. Even thought there are many excellent examples of prosperous tourism ventures in New Zealand, the average prosperity is rather low and presents unappealing potential to agnostic capital providers – as demonstrated in the second chart.For the future:The task of attracting a steady supply of capital for tourism in the future would be improved if the returns on capital employed were other than in the lower quartiles of NZ’s production sectors. Reliance on private rather than institutional investors would limit the future to small scale and diverse products such as are currently offered by many small and a notable few medium sized enterprises. Can this be changed? Is the current financial incentive for investment in tourism sufficiently competitive to provide an ongoing, superior level of product offerings that reward everyone?
  • Source:, I. (2001). Searching for nature and imagining NZ. Journal of Travel and Tourism Marketing, 10(1): 115-122. Driver explained:The impact of Climate Change on tourism will be evident by 2050 as the doubts or forecasts held today will have crystallised one way or the other. Even so, there is a start reality: world dependency on fossil fuels will continue to grow unabated until well into the future. Annual growth rates for these non-renewable energy sources such as gas, coal and oil are not only higher than most alternatives but the volumes dwarf other renewables (in terms of tonnage).Reconciling this inconvenient view with the product aspirations of visitors leads one to wonder about the elasticity of idealism. Will customer behaviour change (“I’m not going to travel until the carbon footprint decreases”) or will the behaviour be tinged with unrequited aspiration (“ I do wish we’d used less fuel on this wonderful trip!”). Tourism products are obviously discretionary and are increasingly subject to marginalisation by strident claims for climate-moral behaviours – in contrast with behaviour towards carbon consumptive life-products such as heating, local transport and production. For the future:Long tourism product chains run the risk of assault at political and social levels: the former seeking to redirect expenditures into local economies and the latter a reflection of personal moral responsibility for carbon-abstinence wherever possible. Maintaining historical growth rates (> 4% p.a.) for international visitors will bee challenging but there may be a compensatory effect where domestic or short-distance tourism actually flourishes in response to attempts to utilise the capacity of existing product infrastructures.
  • Source:Washington Post, (2009). Regulating Carbon, September 21, 2009. explainedThis observation from the Washington Post highlights the compact of faith that beckons for the future. An ideal conjunction of public policy and private innovation is needed to advance beyond the carbon-dependent economies of the wealthier nations. Setting prices and expecting innovation to follow – rapidly enough to ensure that demand does not slump to catastrophic proportions – is a risk that few governments have been prepared to take. Clearly any innovative solutions to carbon consumption at current rates will carry the moral hazard of applicability to all mankind – in much the same way that lifesaving pharmaceuticals are either supplied inexpensively or the technologies are simply threatened with expropriation by countries in dire need (e.g. HIV drugs, etc).There is also the dilemma of intermediate elasticity of supply and demand: the introduction of expensive carbon-related imposts on supplies of tourism products will reduce demand rapidly, threaten jobs and imperil already underutilised capacities for core functions (accommodation, transport and attractions).For the future:Governments in technologically rich nations appear to be having difficulty in orchestrating both the goal of carbon restraint and the journey towards achieving it. Does this mean greater international co-operation for solutions – as would be the case with a pandemic – or will it be a case for exclusive gain – winner take all for a period of time? Deming [1] noted that the greatest gains accrue from co-operation rather than competition. Might this be the way forward.[1] Deming, W. E. (1982). Quality, productivity, and competitive position, Massachusetts Institute of Technology, Center for Advanced Engineering Study, Cambridge, MA.
  • Source: Hawksworth, J. (2006). The World in 2050- Implications of Global Growth for Carbon Emissions and Climate Change Policies. Retrieved Driver Explained:Some of the options for the future supply of more carbon-free tourism products relies upon significant changes in public and private energy policies. The goal of reduced carbon uptake is particularly challenging if economic growth is to be maintained whilst change occurs. New investment policies and leadership in embracing new and potentially problematic technologies lie ahead. From our current perspective, many of these options look insufficient to make the sort of difference needed if energy-intensive activities are to reach the goal of re-achieving 1990’s levels.Once visitors arrive at a particular location, daily energy consumption is based on a more static model where local transportation, heating and light can be optimised using available sources such as wind, solar and biofuel. Longer distance travel between attractions is much more problematic as it will likely involve air travel – requiring intensive energy sources such as are currently deployed (avgas, etc) and alternative technologies are unlikely to be implemented in the early-to-middle part of the scenario horizon.
  • Source: Aviation Improvement Rates: Moriarty, J.P. (2010) “Historical Improvement Rates: Interviews with Air NZ Staff”. Base efficiency improvement averages about 15% per decade.Transport Policies: Ministry of Transport in, Airport Authority Hong Kong. Driver explained:Connectivity to the world is being driven by multiple factors: technology frameworks that deliver energy and carbon efficiencies that lower costs of travel, improve the experience and extend benefits to a wider range of markets, policy frameworks applied locally in harmony with global goals for carbon reduction connectivity models that couple technology improvements with time efficiency: geographically efficient hubbing that provides faster access between destinations.For the future:For Australasia, potentially new hubbing centres such as Perth (offering 14,500kmm flight paths to London – slightly outside current maxima) improve accessibility to a wider range of European visitors in much the same style as Hong Kong or Singapore has achieved with current technologies.
  • Source:[1] Whitehead, A.N. (1927/1985). Symbolism; its meaning and effect. The McMillan Company, p88Driver explained:Speed of change operates at two levels: the personal and societal. Asynchronicity between these two rates of change creates the frictions Whitehead cites in his quote. Visitor products may have the potential to change through new technologies but to what extent might this ‘wreck’ the experience? For instance, automation is at the stage where it all but obviates the need for human intermediaries in Visitor centres or Call centres (relegating lower service standards to those who lag - e.g. kiosk-driven airport check-ins) but for products that are landscape and culture-driven how does this achieve greater potential – apart from cost reduction?For the future:Finding the right balance between what can be and what New Zealand’s tourism products need to be to secure visitor satisfaction is the issue. NZ’s tourism experiences are not Disneyland’s – where asynchronicity is the product – neither is it an outdoor diaorama where interpretation is fully synchronous. How do landscape and cultural products maintain synchronicity for a widening visitor profile in the future?
  • Source: [ International Visitors, Forecast 2010] & [Domestic Overnight, Forecast 2010]Driver explained:Both international and domestic overnight visitor patterns are highly stratified and reflect efficiency of purpose. International visitors don’t stay long – a median of 10 days; focus on key themes (Thermal/Cultural & Landscapes) and maintain an efficient itinerary. This approach is necessary given the distances and time involved. At one extreme, there is the itinerant backpacker that stays for months, visits every region and engages with all manner of adventuresome products. At the other extreme, there is the group arrives in Auckland, visits Rotorua, Queenstown and Milford Sound before departing via Christchurch five days later. The issue for product development is the extension of visitor length of stay via the pulling power of essential experiences. Rotorua and Queenstown are singular in this respect; the core product is landscape, but there are also a myriad of activities to enrich visitor experiences beyond the core. For the future: The trend over the past 10 years has seen declining length of stay – due mainly to the weighted average of Australian visitors favouring short breaks. Products are seasonally clustered and predominantly English-language based. The rise in prosperity by middle income nations in the Asian hemisphere defines the challenge: can our products adapt to these visitors and provide real growth or will we just make incremental gains on the current top 5 suppliers of visitor-days (UK, USA, Australia, Europe and Japan).
  • Source: [1] Cullen, R. et al., (2007). Enhancing financial and economic yield in tourism: public sector: central government benefits and costs of tourism,, p 32.Driver explained:Who pays for Tourism? Tourism’s benefits are broad, but its cost base is narrow. For example, the Lincoln University study referred to above found that, in 2003, the ratio of tourism’s taxpayer benefits to its costs was 3.33 – healthy indeed. Examination of any New Zealand tourism satellite account will also show that private sector inequities exist: retail enjoys over 45% of direct tourism value added yet is not associated with tourism’s proprietorship. Where culture and landscape dominate the core of New Zealand’s tourism product, where is the equivalent of product management? In New Zealand’s case, much of the public estate is intrinsic to the product because it is common to the recreational and cultural heritage of the population. Is tourism a marginal activity on top of a way of life that makes us who we are – or is it a distinctive discretionary activity – like a resort, attraction, activity park, or archeological fixture – that should be managed holistically to maximise its social value?For the future:There is no proprietorship model for tourism in New Zealand. There are no formal mechanisms that govern the direction of promotion or product improvement but there are such mechanisms for private sector product quality! Should tourism’s capital formation processes (primarily private-sector driven) be linked to product promotion (primarily public sector driven) and improvement (shared between the public and private sector)?
  • Source: explained:These two diagrams illustrate future dynamics and skillsets for tourism products in New Zealand. An Industry study in 2004 proposed the future skillsets for major tourism sectors and concluded that much higher competency levels would be required to sustain customer satisfaction with their associated products. In reality, so much of the tourism product is personal: even though the costed labour content varies considerably. Two issues arise: product quality is associated with people quality, but people quality is a function of aptitude, training and longevity in the industry (inter-product knowledge is very important as most products only hold visitors for a few hours at a time). However, these desirable tourism attributes face intense competition from other sectors of the economy as the trend for greater skill increases. The Department of Labour ‘Dynamics” diagram shows the four main forces of Globalisation, Demographic Shift, Technology and Resource Pressure. Tourism is already experiencing the effects of resource pressures with its seasonality and high turnover rates. Unfortunately, a New Zealand tourism product that does not also reflect ‘New Zealandness’ is uncompetitive. Whilst other sectors might have options to import cheaper seasonal labour from elsewhere, preservation of the essence of a New Zealand tourism product probably requires a New Zealander! For the future:Future product authenticity is unlikely to be marginalised to the degree that place is prioritised over people. Authentic experiences provided by the ‘people of the place’ imbue a product with richness that cannot be duplicated elsewhere. Achieving this in a manner that generates profit as well as satisfied employees and customers in the face of growing competition for resources is one of the biggest challenges facing the expansion of tourism in the economy.
  • New Zealand Tourism Supply 2050

    1. 1. Tourism Supply<br />Economic Tectonics: <br />Have’sand Have not’s<br />Sustainable Structures & <br />Expectations<br />The New Third World: <br />Economic structures<br />Husbandry: <br />Power, Resources<br />& Regulations<br />Connectivity to the World<br />Speed of change: <br />The impact and <br />distribution of science <br />and technology <br />applications<br />Competition for Labour<br />Wall Street & Hollywood: <br />Short termism and profit<br />Product Clusters <br />Proprietorship: <br />Structures of engagement<br />1<br />
    2. 2. 2<br />Economic Tectonics:<br />Have’s and Have Not’s<br />
    3. 3. 3<br />Economic Tectonics:<br />Have’s and Have Not’s<br />
    4. 4. 4<br />Husbandry: Power, Resources & Regulations<br />“A middle aged female professional from Germany imagined New Zealand as the last natural country in the world”. <br />“People’s generalised fear of environment destruction created the important<br />socio-cultural frame for New Zealand to create the global appeal as a tourist<br />Destination” (Ateljevic, 2001).<br />
    5. 5. 5<br />Husbandry: Power, Resources & Regulations<br />Government power does not extend beyond goal setting!<br />“Gradually raising the cost of carbon, which Congress but not the EPA can do, would send signals throughout the economy that would help shift the nation to fuels and practices that wouldn't warm the planet. Research into such fuels and practices would become attractive to investors, and new technologies would emerge. Efficiency would become cost-effective. The government would set the goal, but the market, science and common sense would dictate how the country reached it.”<br />
    6. 6. 6<br />Sustainable Structures and Expectations<br />
    7. 7. 7<br />Sustainable Structures and Expectations<br />
    8. 8. 8<br />Connectivity to the World<br />For Airports of 21stCentury, market is not defined by distance, but accessibility!<br />Accessibility = Time + Money + Reliability<br />
    9. 9. 9<br />Connectivity to the World<br />
    10. 10. 10<br />Speed of Change: <br />“It is the first step in sociological wisdom, to recognise that the major advances in civilisation are processes that all but wreck the societies in which they occur” [1]<br />
    11. 11. 11<br />Speed of Change: <br />
    12. 12. 12<br />Wall St and Hollywood:<br />Short-termism & profit<br />
    13. 13. 13<br />Wall St and Hollywood:<br />Short-termism & profit<br />
    14. 14. 14<br />Product Clusters<br />In 2009, visitors stay for median time of 10 days, see an average of 3 regions and engage in 7 activities.<br />International Flows 2010f<br />International Visitor product corridors are highly biased towards four centres, Domestic overnight stays reflect a VFR bias towards the 4 main centres.<br />Domestic Overnight Flows 2010f<br />
    15. 15. 15<br />Product Clusters<br />
    16. 16. 16<br />Proprietorship<br />“Central government received $613 million more in revenue than it would have had tourism not exist in the economy. On the other hand, it expended $184 million in the various activities it supports relating to the tourism industry. This provides a Net Financial Benefit to central government from tourism of $429 million”. [1]<br />
    17. 17. 17<br />Proprietorship<br />
    18. 18. 18<br />Competition for Labour<br />Labour Dynamics<br />Future Tourism Product Skills<br />
    19. 19. 19<br />Competition for Labour<br />