Kia Ora and welcome. It’s good to be here and I really appreciate the invitation.  I’m going to speak for fifteen or twenty minutes and then I’m quite happy to answer some questions. I seem to come to Rotorua quite a bit because of course it’s a real tourism hub but I gather that this group today is from all around the country so I think we’ve got a good spread of opinion from  right across your sector.

I would especially like to thank Bruce Hyland, Chair of the Board, for inviting me along. As Associate Minister I am trying to get around as many different groups in the sector as possible.

Of course John Key is actually the Minister and I can tell you he is taking a very close personal interest in the sector and he’s actually taken the portfolio because he feels it’s an important area of the country’s economy and he’s very determined to make a difference. And as I think you’ll know from what you have seen of John Key he doesn’t go into anything in a half hearted manner so he’s taken this portfolio on because he really wants to make a difference in the tourism sector and he certainly realises what an important part of the economy it is.

I understand that the focus of your conference is about marketing and strategy and how you are going to deal with the challenges of the current environment and there’s no question that it is a particularly challenging environment and I’m sure you’re going to have some points to make to me about that that I can take back to the Prime Minister.

But just looking at the overall tourism environment, it is a vital part of the economy.

International tourist expenditure accounts for $8.8 billion or 18.3% of New Zealand’s total export earnings.  So tourism and agriculture are pretty much neck and neck in terms of their wider contribution to the economy and it varies from year to year but tourism is right up there. Tourism directly and indirectly contributes 9.2% to New Zealand’s total GDP and I think one thing that wider public doesn’t realise is one in ten New Zealanders jobs are directly related to tourism. It really is a massive part of the economy.
As such it’s got real potential to become a future driver of the New Zealand economy

Your particular part of the tourism sector, the luxury and boutique accommodation sector is very important.  You are dealing with high paying clients who are coming from Northern Europe, North America I understand, hopefully Asia. Your part of the sector is important because those people have high levels of disposable income and we want them to be coming to NZ and spending that money. Of course that has a knock on effect through the whole of the economy but I think more importantly your part of the industry is a window on New Zealand for those visitors. You are very important in shaping their perception of the country.  The level of hospitality they receive, the level of service is going to really shape their impression of New Zealand so there is no doubt you have a fairly influential role to play in tourism.

But let’s face it there are some economic challenges country is facing and I know that your sector is probably suffering more than any other sector of tourism.

The economic situation

Over the last year, the global economic situation has worsened and is increasingly expected to result in a prolonged period of recession in many of our visitor source countries. We don’t know how long it will last. We’ve got to look to what we can do to mitigate.

The recession is causing consumers to reduce debt and consumption. This includes international travel. We are seeing tourism demand in New Zealand continue to soften, and particularly, experiencing weakness in long-haul travel (such as UK and USA) and the Asian markets.

International visitors were down 3.9% in the year ended March 2009.

Commercial guest nights in the year to February 2009 were down 2%. In the accommodation sector, uncertainty about the economic situation is leading to shorter booking lead times. We are also seeing visitors choosing to stay at cheaper accommodation (such as backpackers) rather than luxury accommodation. Annual growth of hosted accommodation was -9.6% for the year ending February 2009.

Now this is not the first time New Zealand has experienced adverse events affecting travel before. We have experienced recessions, the 1987 share market crash, the 1998 Asian financial crisis, September 11 and SARS.

What makes the current situation different is the fact that it is global. The economic downturn is affecting all our trading partners. Difficult to predict when will recover domestically. If you look at Japanese their exports are down 45% over the last 2 years. UK visitor numbers are down 10 %, US are down 12 % so its pretty serious stuff.

Important thing is that the tourism sector needs to get through this and then we are in good shape for the end of the recession when it does come. Its grim but we need to be realistic.

In the meantime New Zealand does have strengths in the short term. For example, the New Zealand dollar has depreciated against most of our major inbound markets, increasing our competitiveness. The latest International Visitor Survey statistics show that while visitor arrivals are down -2.5%, international expenditure for the year ended March 2009 is only down -0.1% on the previous year. This is a direct result of a more favourable exchange rate for our international visitors. As the New Zealand dollar falls in value, particularly against the US and Asian currencies, visitor spending power increases. Holiday expenditure was up 3.3% over the previous year to $3.4 billion (this is not including international airfares). This clearly shows that while New Zealand has experienced a decrease in holiday visitor arrivals, those that are coming are spending more while they are here.

In addition, strong competition on routes from the US, UK and Australia is resulting in some of the lowest air prices we have seen in decade, providing further incentive to take a New Zealand holiday.

We are still ranked seventh in the 2008 Country Brand world index, which ranks the desirability of a country as a travel destination. As a small country and industry, New Zealand is able to respond and adapt fairly quickly to adverse conditions.

So in the medium term, the government’s strategy is to play to New Zealand’s strengths.

The Government’s immediate priorities are to:

• Continue to promote the 100% Pure New Zealand Brand in our key markets. We know the value of this brand – it is competitive but we must continually develop innovative and original campaigns that accentuate our distinctive New Zealand culture, scenery and personality. Tourism New Zealand is constantly reviewing its marketing expenditure and focus.

• Scale up marketing activity in Australia. The Australian market is holding up well and visitation from Australia looks likely to remain steady in the medium-term.

In early April 2009, the Prime Minister announced an additional $2.5 million to Tourism New Zealand’s budget for marketing activity in Australia over the autumn and winter periods. Air New Zealand contributed $2.5 million to the promotion and with Tourism New Zealand will promote winter activity in New Zealand.

Of course while successful marketing campaigns raise awareness of New Zealand as a destination and generate visitor arrivals, it is the tourism operators to deliver on our marketing promise. As providers of luxury accommodation, your challenge is to continually demonstrate what you are good at – providing world class experiences, at high quality and individual accommodation options. Today is an opportunity for you to share experiences with each other and encourage best practice.

• Our third priority is to produce and distribute world class research to support sector decision making. The Ministry of Tourism produces a wide range of tourism statistics, which are released on a monthly, quarterly or annual basis.

The Ministry of Tourism is convening regular sector leader meetings to consider the latest economic and tourism data, and to consider sector responses to the operating environment. As an outcome, the Ministry of Tourism produces a new monthly Tourism Industry Monitor (TIM), which analyses sector surveys. The TIM is showing us that New Zealand tourism businesses have been quick to adapt to the current economic crisis and have strategies in place to weather periods of softer demand. It shows that earlier predictions by businesses about the tourism environment are fairly accurate. This indicates businesses are in a relatively well informed position to decide how best to prepare, adapt or respond in the medium term.

Business strategies for responding to the economic situation will vary from business to business. Today is an opportunity to discuss strategies the luxury accommodations sector could use in response to economic conditions.

• Realise the potential of domestic tourism. The economic downturn is expected to stimulate domestic tourism, as more New Zealanders decide to holiday at home. For the year ending March 2009, domestic spend has increased by 6.2 %. This has been driven by significant movements in day trips and VFR travel, and stimulated by falling fuel prices over the latter part of 2008.

The challenge for tourism businesses is to respond to the domestic market. In this regard you are all well placed – as Qualmark endorsed businesses you represent quality. Now more than ever, word of mouth recommendation is important.

• Deliver specific initiatives that seek to support the sector during the period of economic downturn. For example, the Sustainable Tourism Advisors in Regions (STAR) programme, emphasising energy efficiency; the Maori Tourism Mentoring Programme, and the Tourism Essential Skills Programme, which is set to be delivered in October 2009.

Medium to Long term priorities for the government are to:

• Build on our key attributes and strengths as expressed in the New Zealand Tourism Strategy 2015. The strategy is a joint government and industry vision for a prosperous and sustainable tourism industry in New Zealand. Policy objectives are focused on ensuring that the tourism sector makes a major and growing contribution to New Zealand’s economic development.

• Improve sector coordination and cross-government linkages.

• Seek opportunities to significantly enhance tourism’s contribution to the economy by addressing identified tourism infrastructure asset gaps, both at the national and regional level. The Ministry is currently progressing work to explore the option of a national cruise terminal, and a large scale international convention facility.

• Enhance international air linkages, which is critical for New Zealand’s access to our key markets. We are seeking to better understand the drivers of airline strategy, and the risks and opportunities that developments in this environment pose for the New Zealand economy.

• Progress projects that address New Zealand’s natural environment as our key source of competitive advantage. As you will all be aware, Qualmark’s new environmental criterion assists New Zealand tourism operators to introduce sustainability practices and good environmental management with their organisations. I encourage you all to attain the best Enviro grading from Qualmark as you can.

The latest figures from Qualmark show that at 30 April 2009, 35 of New Zealand’s Qualmark accredited businesses have achieved Enviro-Bronze status; 81 businesses have achieved Enviro-Silver status, and 50 businesses have achieved Enviro-Gold status. This is proof that New Zealand tourism businesses continue to make long term investments, which will enhance New Zealand’s competitiveness as a destination. I commend you all on your efforts and forward-thinking.

• Improve New Zealand’s productivity. In the tourism sector, this means lifting business performance through ongoing capability, skill and workforce development.

• Manage and seek opportunities to reduce the seasonality of the tourism sector.

Close
I would like to be here today as the bearer of good news but the reality is that we are in difficult economic times. I think I’ve made it clear though that the Prime Minister is really engaged with the sector and is certainly open to ideas from the sector.
Thanks again for inviting me to speak today. I am very happy to take comments and questions.