Local government & the visitor industry

 

Introduction

This paper studies the role of local government in the tourism sector. It sets out opportunities to maintain and strengthen local government investment in activities and infrastructure that stimulate tourism growth and enhance regional delivery in order to fulfil an important aspiration ofTourism 2025.

The relationships that exist on many levels between tourism and local government are best served when viewed as partnerships. Tourism and local government intersect across all themes within Tourism 2025. The partnership aspiration must be to effect the best possible economic and social outcomes for communities touched by tourism.

 

 

(This document was created for the launch of Tourism 2025 in March 2014. It is not updated. See Tourism 2025 - Two Years On for the latest information on the growth framework.)

Executive Summary

Regional tourism has a fundamental relationship with local government that reaches across a myriad of touch points, from regional marketing to infrastructure planning. Local government investment in the industry is vital to the health of tourism industry and its ongoing growth.

These complex inter-relationships are founded on an understanding of the economic and social benefits tourism can bring to local communities and mutual respect for the role each other plays in enabling economic growth in regional New Zealand.

This paper identifies the different roles local government plays in tourism and its contribution to the development of a dynamic and vibrant tourism industry.

 

 

Actionable initiatives

Review Regional Tourism Organisation capability and funding

Many Regional Tourism Organisations (RTOs) have inadequate budgets, resources and skills to mount significant marketing campaigns. This review should include funding levels, marketing skills and focus of activity and mechanisms for cooperation. It would include looking at inputs vs. outputs and give regional tourism funders some comfort as to the value of their investments. It would also signal to communities that tourism is a serious business and regional marketing is worthy of investment.

Event strategy

Clear and compelling event strategies under a national framework need to be part of every RTO’s marketing plan. Opportunities for cooperation on a national event strategy should be reviewed and considered.

Destination management plans

Destination management plans developed in council, industry and community partnerships provide a vision and direction for tourism. They identify how to achieve agreed targets through management, development and promotion of a region’s unique assets. While many regions are engaged in this process, more encouragement and support is required to embed destination management plans into every council’s tourism framework.

Engagement with local government

Providing a balance between the social and environmental needs of communities and the visitor industry is an on-going process, for example local alcohol policies, resource consents and freedom camping regulations, with inherent opportunities and challenges.

The industry also needs to work with councils to ensure they have the right information to make decisions on infrastructure that satisfy visitor demands and community values and expectations. This is best achieved working in partnership.

Regional marketing

Councils support more effective regional marketing which deliver stronger value propositions and improve regional brand awareness.

Regional funding

The visitor industry needs to play a part in investment decisions that impact it, particularly around funding collection mechanisms such as use of targeted rates and/or other rating options. These rates often provide the council with revenue to invest in development and promotion of the visitor industry.

RTOs are currently over-reliant on local government funding. They suffer from inadequate levels of funding for regional marketing, tourism infrastructure and product development. Regional funding deficiencies need to be addressed and new/complementary funding mechanisms explored.A working group of relevant public/private organisations to examine and address funding issues would be a good start.

An examination of current funding arrangements needs to be carried out on a nationwide basis so that potential productivity gains can be found and options can be analysed that consider:

  • Option 1 – Restructuring for greater efficiencies and better use of resources within current levels of investment
  • Option 2 – Increase funding levels through existing resourcing structures
  • Option 3 – Restructure the funding of regional marketing, destination management and visitor information delivery in order to increase resources and better deliver growth to the visitor sector and the economy at large

 

 

Regional perspectives on tourism

The role of local government in tourism

Local government is arguably the visitor industry’s most important partner and the largest visitor industry operator in the country.

Local councils play an important role in determining the level and quality of visitor services and infrastructure availability, the events that take place and the public money that is invested in destination promotion.

They also support local experiences which attract visitors, such as zoos, museums, art galleries, events and festivals. Such attractions benefit both local communities and visitors. Councils invest in infrastructure such as ports, airports, stadia, parks and gardens, as well as taking responsibility for much roading, provision of clean water, removal of sewerage and waste, signage and the creation of a safe environment for visitors to enjoy. Enhanced local amenities which help attract visitors also make the host community a great place to live. This investment also benefits industries other than tourism.

Local government is a primary investor in regional marketing activities often delivered through RTOs and i-SITE Visitor Centres. They also manage the regulatory environment which influences tourism development and investment under which tourism businesses operate.

Councils across New Zealand are responsible for making sound infrastructure investment decisions, administering fit-for-purpose local regulations and providing services that make communities attractive places to live, visit, study and invest. Annual investment across all regions in 2012 was $8.4 billion, maintaining a total asset value of $124.2 billion.

Auckland Council provides a good example of the scale of investment in essential infrastructure and services that directly support the tourism industry in that region:

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Councils resource tourism to varying degrees, commensurate with the importance of the industry at regional level.

Wanganui is an example of investment made by a smaller region, showing the relative importance the council places on its visitor economy.

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The value of the visitor economy to regional and local communities

Tourism is an intrinsic part of regional economic development. Spending by visitors in New Zealand each day equals $66 million, domestic expenditure $39m and international $27m.

Figure 3

TIA power chart 2014 the power of the visitor industry copy Small

 

 

The $66 million per day spend filters down to all parts of the community and is felt much wider than the tariff paid to an accommodation provider or the fare paid to a transport operator.

 

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The visitor industry has an impact on most communities in New Zealand and supports local services and employment. These include shops, supermarkets, cafes, bars, restaurants and service stations, as well as investment in public services such as hospitals and schools. The industry is also an important catalyst for new capital investment and infrastructure.

As an example, the growth of the visitor industry in Queenstown, a major New Zealand tourism resort, was an important factor in the decision to build a new hospital in the district, a benefit to visitors as well as the local community.

As enablers of tourism, councils have a partnership role with the tourism industry to ensure the economic sustainability of their communities.

 

 

Strong partnerships vital

Strong partnerships between local councils and regional tourism stakeholders are vital for economic success.

Councils and the tourism industry are interdependent. Strong and effective relationships between the tourism industry and councils are a vital element of a successful visitor economy. Mutually beneficial relationships help communities understand the benefits of tourism and assist councils to make decisions that are beneficial to the visitor economy.

Community-driven organisations

Councils are community driven organisations with a core function of providing community services.

Being responsive to the community means being sensitive to a broad range of views. When making decisions affecting the tourism industry, councils are required to consider wider community views. In some circumstances, the investments made by councils in visitor related activities have to be balanced against the concerns of ratepayers who may see that investment better made elsewhere.

Councils are also tasked with enabling their communities to be vibrant places with thriving economies and viable businesses. Visitors play an important role in enhancing a community’s vibrancy and economic prosperity through expenditure in both council owned experiences and private businesses. The social and economic benefit that visitors provide is felt much wider than direct tourism businesses.

mahinapua hotel

Mahinapua Hotel, West Coast, imagesnewzealand.com/photographer Julian Apse

Destination management planning

Destination management planning is an often overlooked function in regions. As the visitor industry becomes more sophisticated and complex, this is an aspect in regional planning that needs to be addressed.

Investment in the visitor economy requires a return on that investment. The best way this can occur is when all the elements of destination management come together seamlessly to form an effective structural and environmental framework.

This type of planning is best carried out when councils, communities and the visitor industry collaboratively decide on visitor priorities, the types of experiences the region wants, how these should be funded and how success should be measured.

 

 

Supporting businesses and growing the visitor economy 

The contribution visitors make to regional economies strengthens business viability and asset sustainability. It also provides wider social benefits that can come from interactions between community and visitors.

Through RTOs, councils contribute to the marketing efforts that attract visitors to their region, and through their policies signal their community’s support for visitors and the visitor industry.

Individual businesses also provide products and services that attract visitors, add to the appeal of a region and enhance its overall offering. They also supplement council marketing efforts with their own promotional investments.

Community organisations such as sporting clubs, event committees, performing arts organisations and garden societies also play a role in the visitor industry. While these organisations create and deliver activities that primarily focus on servicing their local communities, they also attract visitors who contribute to the overall success of the activity.

Councils and the visitor industry are interdependent, with all parties seeking to benefit from working together. These partnerships and collaborative efforts enable regions to present a coordinated voice to visitors. They also facilitate opportunities for greater investment in a highly complex and competitive tourism trading environment, therefore increasing the likelihood of achieving positive outcomes.

 

 

RTOs and destination marketing

Regional Tourism Organisations play a key role in destination marketing. They provide a critical role in connecting local government with the private sector and facilitate the opportunity for the tourism industry to partner with local government and assist in developing and growing regional economies through tourism.

RTOs also play an invaluable role in both the domestic and international marketing of their regions through a variety of mediums, such as trade marketing, digital marketing, promotional collateral and media hosting.  As lead organisations representing their regions, by working in partnership with tourism businesses, they are better able to achieve a single, collaborative voice and scale in the marketplace.

A breakdown of the marketing expenditure made by the collective 29 RTOs shows that of the total $15.06 million spent on marketing in 2012, 47% ($7.04 million) was spent on domestic marketing; 33% ($5 million) on Australian marketing, and 20% ($3 million) on marketing to countries beyond Australia.

RTOs are focussed on attracting more visitors, increasing their length of stay and spend which will deliver greater economic returns to their region. They support all types of operator activity, particularly small to medium enterprises that make up so much of New Zealand’s tourism industry and which depend on affordable and effective regional marketing activities.

For many micro and smaller operators, marketing activities undertaken by their RTO may be the only vehicle through which they can take their product to the marketplace.

In recent years there has been greater levels of inter-regional cooperation with the development of International Marketing Alliances (IMAs) where regions collaborate in offshore markets with Tourism New Zealand to achieve greater impact and make more effective use of limited resources.

Regions also compete strongly to attract domestic visitors, so the development of domestic strategies that identify travel determinants, demands, market mix and segments is important.  Councils support regional events and festivals which enhance communities and RTOs are often the support marketing organisation for both council and event organisers. This beneficial relationship is in many cases vital for success.

Infrastructure investment by councils in large tourism related projects such as stadia, convention centres and public amenities are also areas in which RTOs and councils play an important partner role. RTOs can provide background feasibility and visitor projection input, connect councils with key support agencies and suppliers, as well leverage off the marketing opportunities.

puke ariki

Photo: Puke Ariki, New Plymouth/Venture Taranaki/photographer Rob Tucker

 

 

Investment in RTOs

There are currently 29 Regional Tourism Organisations (RTOs) spread across New Zealand. Each RTO is structured differently, reflective of their own community’s view of tourism, its promotion and ongoing development.

While there are variations in RTO scale and structure, nearly all RTOs are defined by a common key goal:

To sustain and grow the visitor industry to support the economic sustainability of their communities.

In 2012-13 local government funded regional tourism promotion, usually through RTOs, to the value of $34.086 million (source: RTONZ benchmarking 2012). Funding mechanisms vary, with some regions placing tourism marketing and RTOs within Economic Development Agency (EDA) structures while others provide direct support.

EDAs usually consider tourism in a wider context whereby tourism marketing and development is an integrated part of developing a region’s economic potential.

Whether an RTO function is delivered independently or within an EDA, the tourism marketing functions it carries out provide the ‘shop window’ through which people from other places learn about a place, its characteristics and things that make it an interesting place to visit. These characteristics define whether a place is attractive as a place to live, work, study and do business.

Councils see their investment in regional marketing as a partnership with industry and RTOs as the key interfacing organisation that supports local tourism operators and provides a vehicle to take their products and services to market.

RTOs are also an important support for Tourism New Zealand’s activities at a regional level as the government agency does not have a direct regional presence. RTOs provide the coordination for Tourism NZ’s international media programme (IMP) and trade marketing programmes across the country.

The relationship with councils who invest in RTOs goes much deeper than just regional marketing and development. In many instances councils also look to RTOs to assist them through input into roading/signage, economic development, structural plans and destination management.

Many RTOs are aligned to council processes and requirements and are governed by Statements of Intent, Service Level Agreements, etc. in order to receive operational funds.

The reporting regimes to council are generally robust, often monthly through designated sub-committees where RTO programme success is constantly evaluated through agreed measures such as visitor arrivals, spend and accommodation supplier occupancy.  The multiplicity of tasks required of RTOs are often so demanding that available resource and funding is inadequate to meet the outcomes expected of the organisation.

Specialist skills required to work in a complex and dynamic tourism trading environment may not be present, or financial limitations may restrict the ability of the RTO to fully capitalise on fast moving opportunities.

Tourism marketing, particularly for smaller regions, can be challenging due to budget constraints which hamper their ability to mount any significant travel promotion campaigns.

 

 

Investment in i-SITEs

i-SITE Visitor Centres are the front door to New Zealand’s unique offerings and experiences and provide an important interface between the region and visitors, helping ensure they know what to see and do and where to stay.

i-SITEs are key influencers in visitors’ decision making while they travel around New Zealand. They encourage visitors to spend time in a region, with skilful sales and advice often leading to longer stays and greater expenditure.

In addition, i-SITEs offer a mechanism for local operators and service providers to promote and sell their products and for communities and regions to promote local events and public amenities. Many also offer ancillary support and advisory services to locals, such as Citizen’s Advice, undertaking council regulatory functions and co-located library or arts services.

christchurch i site

Assisting visitors at Christchurch i-SITE

i-SITEs fulfil a key role for the visitor industry, create positive social benefits to communities and make an important economic contribution to the regional economy. The i-SITE network is estimated to have received 7.8 million in-person visitors during the 2012-2013 year, an average of just over 100,000 per i-SITE. Commissionable bookings (i.e. from travel, accommodation and activities) remained steady at 629,000 and were worth around $67 million (source: i-SITE Survey 2013 – not publicly available).

Most of the 79 i-SITE Visitor Centres in New Zealand receive council support, directly or through their RTO or another governing entity. Almost all rely on some form of local council grant or contract.

Over the past few years the industry has faced a number of challenges which have impacted the i-SITE network. These include a drop off in visitor numbers and revenue due to a changing market mix and the increase in travellers using mobile devices to access information and make bookings. The changing needs of domestic visitors has also seen i-SITEs adopt newer information delivery and communication technologies. In some cases they have co-located with Department of Conservation information centres to offer a wider range of activities and outdoor information under one roof.

The opportunities presented by technology advances may also bring into question the future viability of physical information centres and the appropriateness of investment relative to alternative opportunities in an ever changing market place.

 

 

Council funding pressures

Over the past two years, changes have been made to the Local Government Act which have primarily been driven by increases in local government debt. This has seen councils focus on reducing debt and control rate increases. As a result, local government funding for i-SITEs and RTOs has come under pressure. In some instances, funding has been questioned, decreased, or in some places ceased completely.

To ensure i-SITES fulfil their visitor and (where relevant) community functions, local government should keep a focus on business generation as a top priority while still providing a quality information service.

It is important that stakeholders and funders understand the differing roles of i-SITEs and RTOs. While many RTOs are i-SITE owners, as mandated by their funders, the RTOs’ core function is visitor attraction through marketing channels, while the i-SITEs’ main function is to encourage visitors to spend in a region in order to maximise expenditure and economic benefits.

 

 

Regional event support

Festivals and events

Developing events and festivals are two of the most frequently utilised ways of stimulating tourism growth, particularly in domestic markets. They are a means of revitalising local economies and reducing the effects of seasonality.

The fixed length of events and festivals encourages visitors to overnight and often attract new visitors who would otherwise not travel to a particular region. These new visitors inject new money into the local economy and spread the benefits beyond traditional tourism operators.

Due to the fixed nature of events and festivals they require a different approach to organisation and funding compared to traditional visitor activities and attractions. This includes the need for economic impact assessments in order to justify scheduling of events that will attract sponsors and local council funding. It is important that councils investing in events consider not just the economic returns on their investment but the community and social returns as well, and that when measuring the success of an event all these factors are taken into account.

Events can range from a one or two day sporting event to a month-long festival. The types of visitors events attract can vary greatly, as does their spending behaviour. The economic impact can therefore differ due to the type of event and the market it attracts.

Events and festivals are receiving more local government support as councils recognise the economic benefit these activities bring to their regions as well as the local community vitality they generate.

Case study – Kaikoura Seafest

Held in October each year, the Kaikoura Seafest is an example of an event where there are significant benefits for the local community, clubs, schools and organisations such as the local Fire Brigade, Kaikoura Coastguard and St Johns. These bodies are contracted by Seafest to help facilitate the day, e.g. the local Lions Club operates the beverage outlets while schools man the gate and clean up.

From this collaborative effort approximately $20,000 flows back into the Kaikoura community each year. Over 20 years, $400,000 has flowed back into the community as a result of this event, not including money spent on tours, accommodation, bars, meals, etc.

Other benefits include Seafest supplying picnic tables to the local community (approximately 30 to date) and paying for the laying of cables to supply power to Takahanga Domain for use by community and sports clubs. This money has also been used to refurbish local rugby clubrooms facilities and re-turf three local rugby club grounds. Donations have also been provided to Ronald McDonald House and have assisted with the refurbishment of the local i-SITE building.

Kaikoura Seafest compressed

 

Councils often find themselves as lead agencies for the delivery of events, particularly major international events such as Rugby World Cup 2011, the 2015 ICC Cricket World Cup and the 2015 FIFA U-20 World Cup. Given the number of significant events that have taken place across New Zealand and the benefits and learnings derived from staging these events, consideration needs to be given to the development of a comprehensive national events framework. This would enable New Zealand to continue to stage successful events and maximise the return on investment for local government and host communities.

Some regions have comprehensive, focused events strategies, as events are recognised as key drivers and contributors to their economies.

 

 

Domestic business events

Most medium to large sized communities in New Zealand have some type of conference centre infrastructure that is utilised by locals and also seeks to bring a commercial return by attracting business events.

Councils are often the owners of these facilities and their investment into the development and marketing of these complexes is crucial for sustainability and growth in the Meetings, Incentives, Conventions and Events (MICE) sector of the visitor economy.

 

 

Conclusion

There are a myriad of opportunities for regions to further develop and diversify their visitor economies, which could potentially increase the economic and social returns to their communities.

While opportunities for regional tourism growth exist, it must be recognised that local government resources are finite, creating real pressures in meeting all community needs. A balance needs to be struck between the cost of providing core services and funding regional marketing.