John Key, Jonathan Coleman

29 July, 2009
Victoria University Tourism Seminar Series

The importance of tourism in New Zealand

I would like to begin by passing on the Prime Minister's apologies for not being able to make it today. As the Associate Minister of Tourism, I work closely with the Prime Minister on this portfolio. I will be happy to pass on any feedback you may have following today's presentation.

I would like to acknowledge Vice Chancellor Pat Walsh and Dr Ian Yeoman. Thank you for inviting me - its great to be here.

The Prime Minister, Hon John Key, and I have spent the last couple of months getting to know this diverse industry. We have been amazed at its energy, enthusiasm and creativity.

All of you know how hugely important tourism is for New Zealand. The sector accounts for one in 10 jobs, 10% of GDP and over 18% of our total export earnings. New Zealand tourism is a $20 billion industry.

New Zealand is an aspirational destination for our visitors. International visitors come here to immerse themselves in our landscapes, indigenous culture and experiences. This is our competitive advantage and we need to work together to make the most of it. It goes without saying that the more I get to know this industry the more excited I am about it.

The economic downturn presents a challenging time for tourism

Unfortunately, the global economy is facing very challenging times right now. As you know, leisure travel relies on people having discretionary income, and with many of our key markets feeling the effects of the global recession, this has led to decreased visitor arrivals. Total arrivals were down by 2.8% in the year to June 2009.
On a more positive note, spend by our international visitors is holding firm at just over $6 billion per annum.

The current economic conditions are having an impact on local tourism operators. Operators have to make hard decisions about how to position their business to ride out the storm. But I have been amazed to see just how resilient tourism businesses are.

Recent advice I have received shows that many tourism businesses have made necessary adjustments to weather out these difficult times. The latest Tourism Industry Monitor released in June showed that the majority of businesses performed in line with or above expectations in the past three months, which shows that most businesses are adapting to the softened demand. While businesses are not as optimistic about the prospects for major long-haul markets, this is a naturally slow time of the year for international arrivals. Businesses are more optimistic about demand from domestic and Australian markets - this is being helped by a strong ski season and good deals on trans-Tasman flights.

We are also seeing that the economic downturn has stimulated domestic tourism, as New Zealanders decide to travel at home. In the year to December, domestic spend was up 6.2% to $8.1 billion. There have also been increases in day and overnight trips. This is an opportunity to encourage more New Zealanders to embrace the truly remarkable tourism products and travel experiences on offer here in their own backyard.
So this brings me to what I am here to discuss today - the importance of research to tourism - where would the industry be without it?

Importance of research to tourism
Solid research is critical to making the best possible decisions in one of our largest export sectors - tourism. Tourism research provides the sector with a solid foundation on which to base its decisions on.

There are a number of organisations that conduct tourism research in New Zealand. Each of these organisations has a different focus, whether it be short-term, tactical research, monitoring and evaluation, or long-term strategic research.

The Ministry of Tourism's research programme
The role of the Ministry of Tourism's research programme is to ensure that tourism is supported by a high quality body of statistics and research.

The Ministry spends $4 million on research each year. Its team of eight researchers manage the Core Tourism Dataset. This includes a number of key surveys that monitor international and domestic tourism, the economic contribution of tourism, forecasts, and regional data.

Statistics New Zealand does an excellent job providing the arrival and departure data, commercial accommodation statistics and the Tourism Satellite Account.

The Ministry's research programme is world-leading. It is unique to have all major tourism data managed from one point. In other countries these statistics are spread around a range of agencies making a coordinated ‘one-stop-shop' for tourism data near impossible to achieve.

We have this ‘one-stop-shop' in New Zealand, which is a significant advantage for our industry. We know more about our visitors and the sector than any other country.

The United Nations World Tourism Organisation (UNWTO) uses the Ministry's research programme as an exemplar for other countries.

Being an island nation, New Zealand also has the ability to account for every person who enters the country, unlike other countries that share borders.

It is the Ministry's policy to make all tourism research accessible. All of its research is free and centralised on the website www.tourismresearch.govt.nz.

Here you can dig down for in-depth statistics or get the very latest tracking data, such as our weekly arrivals that monitor arrivals of up to two weeks ago.

Interestingly, the earliest tourism records date back to the 1880s, when the government of the time first started to track international arrivals.

Now, more than ever, there is demand for this quality and timely information. With tourism facing difficult times, this up-to-date research is critical in closely tracking how the sector is performing.

Ministry of Tourism research developments

Over the past two years the Ministry has made significant improvements to its research, by changing the management approach for the International Travel Survey and Domestic Travel Survey.

New, state-of-the-art survey tools and data treatment systems have been developed. This has led to major improvements of the data quality, and savings in operating the surveys.

New Zealand Tourism Forecasts

The Ministry's Tourism Forecasts to 2015 will be released on 4 August. The forecasts provide a seven year outlook to help New Zealand plan for expected tourism demand.

This year's forecasts reflect the challenging economic environment.

We know that global and New Zealand tourism will come out of the recession. However, at this stage it is difficult to know when, as consumers remain cautious with their discretionary spending.

We will update the forecasts again in December.

The forecasts inform business decisions. They help local councils plan their regional marketing efforts and infrastructure needs, and border agencies plan their resource requirements. Banks also use the forecasts to inform their lending decisions to tourism businesses.

Tourism Industry Monitor

As I mentioned previously, we have developed the Tourism Industry Monitor, or TIM, which is a new survey in response to the global economic downturn.

I just got back from Australia where I attended the Australian Standing Committee on Tourism. The Aussies are very interested in this new survey we have developed and particularly how quickly we have been able to get this up and running.

This monthly survey of tourism businesses allows us to monitor the mood of the sector. We can keep our finger on the pulse of business confidence.

The TIM also provides businesses with regular, up-to-date information about their performance, relative to the wider market.

It has shown us that the sector is adapting to the downturn, although demand and profitability are falling at similar rates (down 6-7%). This level of decline is expected to continue over the next three months (down 7-8%).
Additional Research Projects

The Ministry also participates in a number of additional research projects, which look at strategic issues for tourism. Upcoming projects include;

A project with the Foundation for Research, Science and Technology (FRST) to look at issues of strategic, long-term importance to tourism. We have allocated $2 million over three years to research strategic issues such as aviation supply and demand, and climate change impacts on tourism.

A Domestic Tourism project - to further identify and define different segments of our domestic tourist market. This information will help Regional Tourism Organisations and businesses to better target these travellers, who are an important but often neglected part of the tourism industry.

Other recent examples of tourism research in use include;

The Yield Research Programme.

We also have our weekly arrivals data which allows the industry to closely track the effect of recent events, such as Influenza A (H1N1). We have been able to quickly see that some markets, such as Japan, China and South Korea, have reacted more than others.

Most of you are probably aware of the New Zealand Cycleway Project. Our databases were used to get a picture of the type of tourist that the Cycleway will appeal to, how long cycle tourists stay, the places they visit, and the other activities they do while they are here.

Other Tourism Research

The Ministry of Tourism's research programme is one part of the wider tourism research environment in New Zealand. It is supported by the work of yourselves/academia, the industry and Tourism New Zealand.

University research plays an important role. It provides high-level, strategic and long-term thought to one of New Zealand's most important industries. Academia generates new knowledge and can also challenge our preconceptions and ideas.

New Zealand's universities also contribute to the next generation of the industry, by equipping graduates with the skills and knowledge required to lead our tourism sector into the future.

Tourism New Zealand Research

Research underpins almost every activity that Tourism New Zealand undertakes in marketing New Zealand as a holiday destination to the world.

Tourism New Zealand's 100% Pure brand just celebrated its 10th Anniversary. This hugely successful brand is underpinned by research into travellers' perceptions, behaviours, and preferences.

It runs right through to Tourism New Zealand's work with the industry, where they use it to help tourism operators and travel sellers overseas to develop tourism activities, products, travel brochures and itineraries, which keep the country fresh and interesting.

As well as its own research, Tourism New Zealand uses Ministry of Tourism and Statistics New Zealand datasets to develop a comprehensive picture of our multi-billion dollar international visitor market.

Overall, the International Visitor Arrivals database helps us to gauge how many visitors are coming from different markets, and how we can expect those markets to develop and evolve over time.

Other research is undertaken before people even get here, which helps us to work out how to influence visitors to come to New Zealand, travel more widely and hopefully, spend more.

Research is done once visitors are here, so we know where people are going, what they are doing and what they enjoy.

And in case we didn't know enough, research is done after people return home so we understand what aspects of their visit were most satisfying. This helps us work out where we need to work harder and improve, and to gain insight into what experiences visitors most want to rave about to their friends.

In short, Tourism New Zealand and the tourism industry rely on a solid and in-depth understanding of international markets and visitors to ensure we get the best out of our tourism budget.

Research helps us deliver the right message and the right product at the right time in the right way to our potential visitors.

The more we can understand about today, the more confident we can be to plan for tomorrow.

Short term - the current global economy

Research helps Government plan how to respond to challenges like the current economic downturn.

In the short term we are faced with an economic situation affecting all of our major markets simultaneously. The global nature of the problem means that predicting a recovery for the tourism sector, which has been resilient to past shocks, is harder.

However in the short term New Zealand tourism has strengths:

The New Zealand dollar has softened, increasing competitiveness and supporting greater spend

Our research indicates businesses are stimulating travel activity, offering competitive airfares, strong marketing, adding value to products, and focused discounting

In the short-term we need strategies that will stimulate results quickly. I believe the most effective strategy in the short to medium term will be to ‘play to our strengths'. This includes:

Targeting markets that are large, resilient, and where we know we can get results, such as Australia. Visitation from Australia rose 4.2% to the year ending June 2009. This growth was in part due to the recent ‘What's On?' and ‘Our Shout' campaigns, which was a partnership between Air New Zealand and Tourism New Zealand.

Continuing to promote New Zealand's 100% Pure brand and values

Ensuring that when the upturn comes we are prepared to take advantage, so we need to invest in quality product and staff as much as possible through this period.

And, of course, continue to produce research and forecasts to support good decision making.

The medium term - projects with short and longer term benefits

The sector of course needs to look further than the immediate challenges.
The Government aims to support projects that provide a balance between short-term benefits for the economy, and also leave long-term assets and skills for the tourism sector.

The following are examples of current initiatives the Government is supporting that seek to achieve that aim.

New Zealand Cycleway Project The Government allocated $50 million over three years to develop the New Zealand Cycleway project.
The Ministry has been busy working with local government on identifying possible tracks. The intended result is a series of ‘Great Rides' linked by co-ordinated development and branding. The Prime Minister announced the first 7 potential ‘Quick Start' tracks on Monday.
This is only the start - the Ministry will be releasing information about how other regions can participate by the end of September.

The project will create jobs in the short-term, and in the longer term provide a high-quality asset that will support regional businesses, and encourage domestic and international visitors to explore our beautiful country.

National Convention Centre A large convention centre that is able to cater for conferences of up to 4000 people would enable Auckland to compete in this lucrative international market. That is why Government has contributed funding to Auckland City Council to undertake a feasibility study and develop a business case. Auckland Waterfront A well developed Auckland waterfront would be an asset for Auckland tourism, and help position Auckland as a world-class city. The Rugby World Cup in 2011 presents an opportunity to transform the Auckland waterfront - and Government is determined to make the most of it. Queens Wharf is regarded as the keystone asset in the waterfront development. This was the rationale behind a joint purchase between government and ARC - Each have contributed $20 million. Its now up to the Auckland region to agree how best to develop the site to maximise the opportunities it presents.

Over the next decade, Government intends to develop the remaining waterfront in a careful and sensitive way as an iconic piece of Auckland infrastructure. We know that well developed waterfronts act as attractors for tourism, investment and skilled talent.

Strategic International Marketing
We need to invest strategically in growing markets where we are likely to see growth in the long term.

China is one of those markets. The Prime Minister visited China recently and signed a Memorandum of Understanding with the China National Tourism Administration.

This gives a foundation on which to build our future relationship in this potentially huge market. We must take opportunities to showcase and leverage New Zealand as a destination, such as the upcoming Shanghai World Expo 2010.

Government is also interested in further joint public/private international marketing campaigns similar to the recent ‘Our Shout' and ‘What's On?' Tourism New Zealand / Air New Zealand campaign in Australia.
Developing skill and capability in the sector

There are opportunities to increase productivity through up-skilling and retaining our tourism sector work force, and supporting capability development in the sector.

Government has approved funding for the Tourism Essential Skills Training programme. The timing of this programme will help the industry prepare for the Rugby World Cup. It aims to be the recognised and trusted standard for entry-level qualifications in the tourism and hospitality industries. Maori tourism is a key point of difference for New Zealand in a competitive global market. An important initiative in 2009/10 is the Maori Tourism Mentoring Programme. The programme will assist Maori cultural tourism businesses to achieve Qualmark accreditation, access international marketing, provide strategies to manage in the current economy and prepare for an upturn. Natural Environment New Zealand's environment and landscapes are our main drawcard. International visitors are becoming increasingly informed about the environmental impact of their travel. Our 100% Pure brand creates expectations in our visitors' minds of the way we care for and manage New Zealand's environment. Steps we are taking to protect the environment include: The Ministry has developed a set of environmental indicators to monitor the impacts of tourism on our environment, and how changes in our environment may impact on tourism. In 2008 Qualmark introduced environmental criteria into its assessment. All license holders must meet requirements in sustainable practices and environmental performance. The Ministry of Tourism works closely with the Department of Conservation on a range of projects, such as a commercial framework that encourage investment without compromising conservation values. The New Zealand Tourism Strategy 2015

In these challenging times, the New Zealand Tourism Strategy plays an important role in setting the direction for tourism. I believe we must continue to build on our key attributes and strengths as outlined in the Strategy. These include: Promoting and living up to our 100% Pure brand.

Caring for our environment.

Increasing the uptake of Qualmark, to increase quality experience and encourage visitor satisfaction.

Create welcoming and distinctive regions and communities.

Lifting business performance through ongoing capability, skill and workforce development.

And strengthen domestic tourism.

Long term future of the New Zealand tourism sector

While we cannot predict what the long-term future will bring, we are looking into what it may bring. The Ministry is in the process of commissioning research on long-term influences on tourism. This research will inform our long-term thinking. It will help us identify where we want New Zealand tourism to be in 50 years and inform the path we take to get there. What we do know is that tourism is a pillar of the New Zealand economy. This Government recognised this by giving tourism political support at the highest level. We also have long-term faith in the tourism sector and believe it will become ever more important in the future. Tourism will play a key role in growing New Zealand's economy into one that is increasingly productive and high value. To do this, New Zealand's tourism sector needs to prosper further. We need to invest in infrastructure, improve yield and remain competitive and attractive as a destination. I believe the future of New Zealand tourism is looking bright because we have the key ingredients in place. We have breathtaking landscape, friendly people, and authentic culture. These ingredients will become increasingly desired by international consumers. Our strong 100% Pure brand continues to be hugely successful in marketing New Zealand as a desirable destination. And we have innovative and passionate businesses that strive to deliver a world-class experience. To stay on the right path, we need to ensure that the mix of these ingredients is right. But with the right information and response we can ensure that tourism leads the New Zealand economy into a bright future.

ENDS

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