Tourism demonstrates resilience to high dollar

Media Statement

Tourism demonstrates resilience to high valued dollar

EMBARGOED until Thursday 5 July 2007 - 3:00am

A report released by the Ministry of Tourism today gives insight into the relationships between movements in the value of the New Zealand dollar and the performance of the tourism sector.

The research was undertaken for the Ministry by the New Zealand Institute of Economic Research (NZIER).

In the long term, the exchange rate is not a determinant of tourism growth.

Rather, income growth in our origin markets is key. The research finds that a 1% growth in world incomes typically drives growth in tourism numbers by 1.7%. This characteristic has driven the strong tourism sector performance of recent decades.

In the short term, however, the exchange rate has an impact on tourism sector performance, although this varies considerably depending on the performance measures (eg arrivals or spend), purpose of visit and origin market.

Key findings from the research are:

* Arrivals overall are only slightly influenced by exchange rate movements, with a 1% increase in the value of the New Zealand dollar estimated to reduce visitor numbers by 0.02% - a very small relationship.

* Expenditure by these visitors is considerably more sensitive. For every 1% increase in the value of the New Zealand dollar, expenditure per visitor goes down by 0.8%.

* Outbound travel by New Zealanders was found to be highly sensitive to movements in exchange rates. On average, a 1% strengthening in the New Zealand dollar will increase outbound holiday travel by 0.87%.

“The research shows that international tourism sector is resilient to, but not unaffected by, exchange rate movements,” said Bruce Bassett, Tourism Ministry Research Manager.

“It shows that even in a high exchange rate environment the numbers of visitors will hold up very well – driven by the income growth of our markets. Against this, expenditure is clearly more sensitive and we do see reductions of spend that are masked by the underlying growth in arrivals over time.

ENDS

See... Exchange Rates and Tourism Relationships in NZ - Executive Summary (PDF)

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