Theme: Target for value (2014)

The story of the past ten years in tourism has been growth in visitor numbers but declining revenue in real terms. As our visitor mix continues to evolve, the Tourism 2025 framework prompts us to identify and pursue the opportunities that will deliver the greatest economic benefit.

Introduction

(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.)

The 2025 outcome

Individually and collectively, we are shifting our focus from volume to value. By thoughtfully selecting the opportunities we pursue, the value of our visitors is increasing at a faster rate than the number of visitors.

How we’re getting there

Business clusters with a common vested interest are organising themselves to seek out opportunities of value, gathering in relevant insight to confirm that potential, and then positioning themselves, individually or collectively, to chase down such opportunities.

 

Executive summary

There are and generally always will be a range of actual or potential opportunities offering significant economic growth value to New Zealand’s visitor economy.

‘Target for value’ is about clusters within the New Zealand tourism industry, big or small, continually organising themselves to be in the best position to:

  • identify potential growth opportunities in a timely manner
  • analyse these opportunities including for potential value, and
  • where they are deemed worth pursuing, harnessing the collective power of relevant industry resources to lay a strong platform which enables individual operators or clusters of operators to actively pursue those opportunities

The overarching objective should be to generate significant additional tourism expenditure within New Zealand and in the course of doing so create additional benefits in one or preferably more of the following areas:

  • supporting growth of sustainable air connectivity
  • increasing productivity (with a focus on profit) through improvements to seasonality and regional dispersal
  • driving additional value through the provision of outstanding visitor experience

 

 

Target for value framework structure

The intention is that target for value initiatives should be advanced within an agreed high-level industry framework which provides support and guidance rather than binding direction.

In many instances operators within this framework will be in direct competition with each other. While free market principles will prevail, the framework will create a collective platform which enhances the industry’s ability to derive optimal value from the targeted opportunity.

Governance of the framework can’t be predetermined. While organisations such as Tourism New Zealand and TIA may have roles to play, ultimately framework governance should rest in the hands of those organisations with the most interest in the particular opportunity being pursued.

Getting started

There will be many potential target for value opportunities identified during the life of Tourism 2025. Nothing prevents individual organisations or clusters pursuing those opportunities.

The three-step process suggested below is a guideline which may assist those organisations with an interest in a particular opportunity get some early momentum:

1. Initial insight-driven assessment process

Tourism 2025 places a high priority of the development of a New Zealand tourism environment, driven by strategic use of high quality insight.

Most potential opportunities will be identified as a result of initial, high level insight being created by or within the industry. The culture of the industry should be conducive to players continually looking for high value opportunities.

When such opportunities are identified and deemed by the industry to be worthy of further investigation, the industry needs to be organised to undertake prompt intensive investigation to generate relevant in- depth insight:

  • to better understand the opportunity and its associated challenges, and
  • to begin the process of being able to credibly establish the potential value of the opportunity

The industry can then determine whether the opportunity is of sufficient potential and magnitude to warrant continued collective industry focus. Opportunities shouldn’t be collectively advanced without investigation.

2. Strategic alignment

Opportunities being considered for industry adoption should be assessed according to the level of alignment between the potential opportunity and the target for value strategic objectives outlined above. There should be a significant level of alignment.

3. Interest party groupings

It should become apparent early on in the process who the key interested parties are in respect of any growth opportunity. Some initial form of grouping should be formed as early as possible. These organisations should form the initial governance body to strategically advance the opportunity. This group will be best placed to determine what process should be followed once the initiative reaches the point of industry endorsement.

Regular review

In a fast-changing global and domestic tourism environment, opportunities are likely to emerge and sometimes dissipate at regular intervals over the lifespan of Tourism 2025. It will therefore be necessary for the industry to undertake regular reviews between now and 2025 to ensure scarce resources are being targeted most effectively.

Underpinning forecast growth

The last decade has been tough for tourism with almost all key indicators showing little growth. In its 2013-2019 international visitor forecasts, NZIER predicts overall better industry performance and modest growth in arrivals and value. These are forecasts, not agreed industry targets.

Tourism 2025 sets aspirational growth targets for the industry. The strategic framework underlying these targets is designed to push the industry towards aspirational growth. In doing so it will also help mitigate and protect against the risk that the industry will ultimately fail to achieve even the modest NZIER growth forecasts.

 

 

Target for value opportunities - six examples

Valuable growth opportunities exist across our tourism spectrum, including these six examples.

  • High value Chinese
  • International students with their families and friends
  • Business events
  • Christchurch – destination and gateway
  • Cruise
  • Emerging markets

These examples don’t necessarily offer the highest potential value. They’ve been chosen to reflect the diversity of the tourism industry and the variety of opportunities which exist for those prepared to look. Many more such opportunities exist.

The challenge for organisations with an interest in any potential opportunity is to align and collaborate with others to establish a strong collective platform from which each can strive for individual success.

When choosing potential target for value opportunities, it makes sense for industry clusters to leverage off the existing strategic focus and resource already being contributed by large industry organisations and central and local government agencies such as Tourism New Zealand, and to provide leadership and/or support which enhances the likelihood of industry success.

Strong cross-alignment

As should be expected, there is strong cross-alignment between these six target for value opportunities and the five Tourism 2025 strategic themes:

Potential opportunities

Air connectivity

Target for value

Visitor experience

Productivity
(seasonality and
regional dispersal)

Insight

High value Chinese

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International students and VFR

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Business events

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Christchurch – destination and gateway

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Cruise

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Emerging markets

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High value Chinese visitors

Strategic commentary

China is the New Zealand tourism industry’s best current economic growth opportunity. In 2013 the Chinese became the world’s biggest-spending travellers. Over the past decade, long-haul and short-haul travel from China has nearly tripled to reach nearly 100 million international trips in 2013, up from 10 million in 2000.

Chinese visitor growth to New Zealand has been spectacular. However, a high percentage of such visitors are short stay and comparatively low value, often coming as an extension to a visit to Australia.

The industry is now fully committed to optimising the opportunities presented by this fast-growing market and there is widespread acceptance that better value can be derived by progressively increasing the proportion of independent/high value visitors.

New Zealand’s tourism industry has been actively pursuing China market growth for over a decade. It has been (and still is) a very difficult learning curve for Tourism New Zealand and our private sector, but has been seen as a challenge worth pursuing.

With strong strategic leadership from Tourism New Zealand and knowledge garnered from a decade of trial and error, initiatives have been introduced over the last three years which recent insight suggests are increasing overall value from this market, including positive developments in air connectivity, seasonality and regional dispersal. These initiatives may also position our industry to benefit over the long-term from a recent Chinese law change banning low cost shopping tours which is already influencing the Chinese outbound high value/Approved Destination Status (ADS) traveller mix. Tourism New Zealand’s Premier Kiwi Partnership (PKP) programme will be progressively up-scaled over the next three years. This incentive-based programme is aimed at developing, marketing and promoting longer stay and higher quality itineraries for Chinese tours to New Zealand.

Direct air connectivity is growing with both China Southern and Air New Zealand providing daily direct services. A second China Southern Airlines Dreamliner service operated for the summer period, from 4 December 2013 to 1 March 2014, taking the number of flights from seven to 10. There will continue to be a focus on growing direct services as well as connectivity through Hong Kong.

There remains significant concern, however, that New Zealand is not yet as well organised as it needs to be to enable our industry to exploit this growth opportunity. Such concerns resulted in the 2012-13 China Market Review (CMR) project led by the Ministry of Business, Innovation and Employment (MBIE). The CMR has led to a much wider and better industry understanding of the opportunities and challenges China presents. This project is now entering the implementation stage, including the recent launch of the China Toolkit.

Stimulated by the significant potential value to be gained, Tourism 2025’s target for value focus must be on assisting industry to accelerate the rate of recent progress with particular focus on growing the numbers and overall proportionality of high value Chinese visitors.

Valuable existing insight

  • NZIER’s six year forecast predicts continuation of strong growth in visitor arrivals from China through to 2019 (from 228,000 arrivals in 2013 to 448,000 arrivals in 2019) and spend (from $670 million in 2013  to $1.22 billion in 2019)
  • length of stay and spend per head considerably higher by high value visitors than tour group (ADS) visitors
  • even without intervention, NZIER’s forecasts show gradual seasonality adjustment occurring as Asian (predominantly Chinese) visitor arrivals numbers grow
  • evidence now emerging shows that market interventions led by Tourism New Zealand and supported by key private sector players are taking hold and growing the number of high value visitors
  • much greater regional dispersal/spread by high value Chinese visitors than ADS visitors (3.5 times larger footprint)
  • air seat capacity (China/New Zealand direct) has grown by 25% CAGR from 2009-2013 with further growth planned
  • early signs that the China law change (effective 1 October 2013) will significantly impact the numbers and mix of Chinese visitors to New Zealand, reducing overall numbers but increasing high value numbers and overall yield

golf at golf harbour auckland
Photo: Golf at Gulf Harbour/Auckland Tourism, Events & Economic Development

Strategic alignment with Tourism 2025 themes

  • Target for Value: Accelerating the Chinese visitor mix change to increase the number and overall proportion of high value visitors is of significant value to the New Zealand visitor economy through increased length of stay and daily spend per head.
  • Insight: Although good insight has been emerging over the last three years, there are and will continue to be many important insight gaps. There is obvious value in the industry intensifying its insight focus on China.
  • Productivity (seasonality): Seasonality adjustment is already occurring naturally as Asian/Chinese visitor numbers grow. Seasonality adjustment will accelerate as high value visitor numbers grow.
  • Productivity (regional dispersal): As high value visitor numbers grow, and as is already happening, regional dispersal will accelerate.
  • Air connectivity: As high value numbers grow, airline economics should improve, increasing yield (from improved fare class mix) and reducing airline seasonality (greater off-peak demand in higher class fares).
  • Visitor experience: removing barriers (e.g. visas, drivers’ licences, access to funds) will help unlock and speed up additional growth.

International students and their families and friends

Strategic commentary

There is significant economic tourism growth potential sitting within the ‘international students and their families and friends’ sector. The OECD has estimated that in 2011 around 4.3 million tertiary students were being educated outside their home country. By 2025, it estimates that number will have increased to 8 million. Strong strategic focus on this opportunity, including creation of targeted insight, is warranted.

New Zealand overview

Around 92,000 international students were studying in New Zealand in 2013. The majority originate from China (26%), India (12%), South Korea (11%) and Japan (10%). Total current expenditure (tuition and living costs) is estimated at $2.5 billion annually.

International students’ contribution to NZ tourism

Total international expenditure attributed to ‘education services’ in the 2013 Tourism Satellite Accounts was $676 million (YE March 2013).

Recent Tourism New Zealand research of Chinese students studying here indicates that:

  • 71% had travelled domestically within New Zealand in the previous 12 months – many had undertaken multiple trips, mainly during semester breaks
  • only 5% travelled alone – 87% travelled as a couple or with friends
  • only 10% stayed with friends or relatives – the balance stayed in a combination of hotels (79%), motels (31%), hostels (17%)

river rafting
Photo: Students from the CCEL English language school enjoying river rafting

New Zealand government policy

The government, through its Building Export Markets strand of its Business Growth Agenda (BGA) policy, has targeted export education as a key area for export earnings growth and is investing accordingly. The BGA 2025 growth target for export education is $5 billion, double its 2011 earnings.

There is obvious synergy between export education and tourism. Education NZ indicates that approximately one-third of the BGA 2025 export education growth target of $5 billion will be tourism-related expenditure. It is targeting growth in key markets aligned with tourism’s key emerging target markets, e.g. China, Latin America and India. The BGA also identifies export education as one tool to assist with the Christchurch recovery.

Immigration as an enabler

Immigration NZ recognises that it is an important enabler within this initiative. Much of the growth being targeted by the BGA will likely come out of markets where both students and their holidaying families require visas for entry into New Zealand, such as China and Brazil.

Immigration NZ has indicated a willingness to adjust their processes to make the application processes as easy as reasonably possible. For example, it will use trusted partnership arrangements to give approved tertiary institutions the ability to process and approve international student visas. Immigration New Zealand is currently entering into such an arrangement with 25 providers.

Families and friends

Finding and unlocking effective communication channels students’ family and friends is challenging but worth pursuing.  The families of New Zealand’s international students spend, on average, $3600 per visitor on tourism – significantly more than the average international visitor.

Australian research indicated that:

  • over 70% of international students expect two or more family and/or friends to visit them in Australia (with over half indicating that such visits had already occurred)
  • families and friends of students are high value visitors, spending more on average than other visitors
  • in 2009, expenditure by families and friends visiting students was valued at over A$300 million per annum

Tourism NZ research on Chinese students studying in New Zealand indicated that:

  • 30% had had family or friends from China visit them
  • 75% had friends or relatives ‘very interested’ (43%) or ‘somewhat interested’ (32%) interested in a future VFR visit to New Zealand
  • 80% of such VFR visits result in domestic travel
  • 59% of such VFR visitors tend to stay for two weeks or more – 24% for four weeks or more. The average stay for VFR visitors from China is 48 days (June 2012 IVS)

Regional dispersal

The support and assistance of Education NZ and tertiary institutions is needed to maximise the tourism potential from this sector. Many institutions, particularly those outside of Auckland, stand to benefit from an association with tourism as a way of increasing their competitiveness.

Regional dispersal is strategically attractive in both tourism and export education. About 61% of New Zealand’s international students are currently based within the Auckland region. Chinese authorities have expressed some concern that the concentration of Chinese students in Auckland is too strong with a risk of devaluing the quality of their overall New Zealand experience. In this context, effective promotion of regional dispersal should be regarded as prudent risk mitigation.

Australian opportunity

The Tourism 2025 team has uncovered significant Australian insight about the tourism-related economic opportunities associated with international students and their families.

There are approximately 500,000 international students currently studying in Australia. The Australian education and tourism industries have placed strong strategic focus on this sector and have benefited accordingly.

For example, in 2011-12 Chinese students studying in Australia spent A$1.8 billion on tourism, accounting for 56% of overall visitor nights and 49% of overall visitor spend by total Chinese visitors to Australia. This does not include spend by their families and friends.

Tourism Research Australia insight indicates that families of students are high value visitors, spending more on average than other visitors.

The 500,000+ international students studying each year in Australia present another opportunity for New Zealand’s tourism industry. Granting those students visa-free holiday access to New Zealand provided they hold a current visa for Australia could unlock growth potential from a previously untapped market.

Where to from here?

All of this fits with tourism’s future strategic aspirations, including those of Tourism New Zealand and Tourism 2025. There is an obvious incentive for four key government agencies (Education NZ, Tourism New Zealand, Immigration NZ and New Zealand Trade & Enterprise) to be closely aligning to gather in private sector support and to develop a ‘New Zealand Inc’ approach to this growth opportunity.

The initial focus of this Tourism 2025 Target for value initiative should be:

  1. Igniting and then securing the interest of the four government agencies in the development of a ‘New Zealand Inc’ strategic approach to this opportunity.
  2. Creating relationships and potentially partnerships with key education provider institutions.
  3. Securing more in-depth insight into the current, actual and the future potential value of this tourism opportunity.
  4. Supporting Immigration NZ’s endeavours to remove or reduce visa facilitation barriers for:
    1. international students
    2. their families
    3. international students studying in Australia considering holidaying in New Zealand

Strategic alignment with Tourism 2025 themes

  • Target for Value: Accelerating tourism growth from international students and their families who are high yielding visitors appears to be a valuable opportunity. There is a separate potentially valuable opportunity associated with international students studying in Australia.
  • Insight: In-depth insight is needed to help relevant stakeholders better understand the magnitude of the opportunity and the initial steps needed to be taken to create momentum.
  • Productivity (seasonality): International students come to New Zealand regardless of the season. Their visit timings seem generally to be governed by tertiary institution course dates. There is little insight available on timing of family visits.
  • Productivity (regional dispersal): The majority of international students currently study in Auckland. There is an opportunity to work with Auckland-based education providers to encourage Auckland-based international students to travel through New Zealand. There is also an opportunity, working with tertiary institutions based around New Zealand to create growth beyond Auckland and in doing so promote regional dispersal. There is little insight, but it is not an unreasonable assumption that many holidaying students and families also travel widely within New Zealand.
  • Air connectivity: There is a potential for growth to support airline economics, but more insight is needed.
  • Visitor experience: Removing visitor facilitation barriers would help unlock this market. Initiatives could include pre-qualifying students for Immigration NZ’s trusted partnership programme, and pre-qualifying Australian students to enter New Zealand for holidaying purposes using their current Australian visas. Easing the process for VFR visits would also assist.

Business events

Strategic commentary

Business events will increasingly contribute to growth in value outcomes being achieved for New Zealand tourism.

Business event visitors are high value – spending, on average, $318 per night compared to the average international visitor spend of $208 per night.

In a high-tech world, personal interactionis more important than ever. As an example, over 23,000 Association meetings are held globally every year and that figure has been growing at 10% a year since 1963. Association meetings are just one example of a business event.

The construction of the New Zealand International Convention Centre in Auckland (due for completion in late 2017), able to seat 3500 delegates, plus exhibition space, will open up larger convention centre business opportunities previously out-of-range to New Zealand tourism through lack of quality, large-scale infrastructure. Construction of smaller convention centres in Christchurch and, possibly Queenstown and Wellington, will further help our industry to grow our market share of this lucrative visitor sector.

trenz 2013
Photo: TRENZ 2013/Photographer Murray Lloyd

Insight

  • In 2010, the economic contribution of Convention and Incentive visitors to New Zealand was estimated at $207 million
  • 8% of conference visitors in 2010 visited between March and November (i.e. shoulder/off-peak)
  • New Zealand, with 45 Association meetings in 2012, is 51st in world rankings (numbers of meetings per country). Australia, with 253 meetings in 2012, ranks 13th
  • New Zealand’s share of the number of meetings held in Asia Pacific/Middle East dropped from an estimated 2.5% in 2000, to 1.7% in 2009

Strategic alignment with Tourism 2025 themes

  • Target for Value: The opportunity is to grow market share on the back of new, world-class infrastructure.
  • Insight: Business event visitors spend, on average, $110 per night more than the overall average spends by international visitors.
  • Productivity (seasonality and regional dispersal): Because many conferences are held in the shoulder and low seasons, they create demand for accommodation and other services at a quieter time of the year.
  • Air connectivity: Business event visitors will help boost demand for air connectivity during shoulder and low seasons.
  • Visitor experience: The best opportunity is for the industry to create, for these visitors, a strong link between business and pleasure, facilitating them into taking the opportunity to bring family to New Zealand and to explore New Zealand.

Christchurch – destination and vital gateway to the South  

Strategic commentary

Prior to the 2011 earthquakes, Christchurch and Canterbury played key roles in the success of New Zealand’s tourism industry, both as a destination and as a vital gateway to the South Island.

The industry has suffered significant loss of value as a result of the earthquakes. For the benefit of Christchurch, the South Island and New Zealand tourism, it is imperative our industry acts together to recover lost value and use emerging opportunities to generate new growth.

Christchurch as a destination- lost value

The earthquakes have had a dramatic detrimental impact on Christchurch’s tourism performance as a destination and as a gateway to the South Island.

A comparison of 2010 and 2013 years shows:

  • total tourism expenditure declined by $233 million, from $1.475 billion to $1.242 billion
  • international visitor expenditure declined by $216m  from $723m to $507m. Domestic visitor expenditure decreased by only $17 million
  • the three sectors most affected were accommodation (down $44 million), retail (down $74 million) and food and beverages (down $67 million)
  • international visitor arrivals into Christchurch decreased 26%
  • the Australian holiday market into Christchurch decreased 46%, a loss of $174 million a year to South Island tourism
  • between January 2010 and July 2012, international guest (accommodation) nights decreased 43%. There was a 43% reduction in commercial accommodation capacity in Christchurch (7809 rooms down to 4621 rooms), including a 64% reduction in hotel room capacity
  • between 2010 and 2012, Trans-Tasman air capacity reduced 20%, although this started to recover during 2013

International tourism, particularly from the Australian holiday market, has suffered a greater lasting impact than domestic tourism. This has impacted on performance during Canterbury’s high season (January to March) and exacerbated seasonality issues during the shoulder and low seasons as Australia provided a significant proportion of international visitors during these periods.

The widespread infrastructural damage, the slower-than-hoped for rebuild process and uncertainty in some sectors that Christchurch is open for business have combined to make it extremely difficult for that region’s tourism industry to halt the decline (particularly in the Australian holiday market) and begin to recover lost value.

Some of the value lost by Christchurch will have been captured by Queenstown and North Island destinations but the vast majority will have been lost completely by New Zealand’s visitor economy.

Flow-on impact on South Island tourism

A scan of the economic performance of South Island tourism destinations reliant on the Christchurch gateway indicates loss of value caused by the impact of the earthquakes.

Prior to the 2011 earthquakes the South Island accounted for 54% of all international guest nights in New Zealand. South Island international beds nights are now 18% behind their 2010 levels.

It is imperative that the industry, when supporting the Christchurch recovery process, simultaneously ensures its efforts also support a South Island tourism recovery.

Recovery Process

The recovery of Christchurch, including the rebuilding of vital lost infrastructure, is a major priority both for the government and for the Christchurch City Council. Significant resource will continue to be injected into the city and Canterbury region. Such focus and investment presents an excellent opportunity for tourism.

The recovery of Christchurch as an attractive destination and as an important South Island tourism gateway must be a strategic priority for Tourism 2025. The Christchurch Central Recovery Plan of July 2012 acknowledged that tourism was central to the city’s redevelopment.

At the same time, the recovery of value lost to the whole of the South Island is just as vital. In supporting a Christchurch recovery process it is imperative the industry simultaneously ensures it is supporting a South Island tourism recovery process. South Island Regional Tourism Organisations and operators in particular have a direct interest in supporting this initiative.

The major catalyst for the recovery process will most likely be the rebuilding of lost tourism infrastructure. This will enable the city to provide the quality of experience demanded by visitors, regardless of whether they see Christchurch as a destination or as a gateway to other South Island destinations.

Recapturing and then growing sustainable air connectivity is emerging as another key tool in the overall recovery process. Within Tourism 2025 there are a number of initiatives which, if successfully implemented, will provide an improving platform for attracting sustainable air capacity growth into Christchurch. It is in the industry’s interests that Christchurch’s air connectivity growth programme succeeds, with the priority sustainable growth.

In 2011 the Canterbury Tourism Partnership (MBIE, Christchurch International Airport Ltd (CIAL) and the Christchurch City Council) was established. The focus of this partnership has been on the development of a Visitor Sector Recovery Plan and consumer focused marketing campaigns to speed up the recovery process.

The ‘South’ project led by CIAL and various South Island Regional Tourism Organisations was established in 2012. This strategic initiative is promoting and driving a tourism recovery process beyond Christchurch.

The opportunity now is to create industry-wide strategic alignment on supporting that tourism recovery process to gather further momentum with a simultaneous focus on the South Island tourism recovery.

re start mall
Photo: Re:START Mall, Christchurch/christchurchnz.com

Strategic alignment with Tourism 2025 themes

  • Target for Value: Theopportunity to assist the Christchurch and South Island visitor economies recover hundreds of millions of dollars being lost each year since the 2011 earthquakes and from there to move into growth over and above 2010 levels.
  • Insight: Good high level insights currently exist. More in-depth insight is needed on the impact of the earthquake on the value of South Island tourism beyond Christchurch. There is an excellent opportunity to continually develop valuable insights as the recovery process gets underway.
  • Productivity (seasonality): Seasonality issues have been exacerbated by the impact of the earthquakes on the Canterbury region’s visitor economy. A recovery process will help improve seasonality issues. The Christchurch Central City Recovery Plan identifies 17 anchor projects, several of which have the potential to smooth seasonality. These include a new convention centre, a news sports complex, a new concert/rugby stadium and a cultural performance precinct with a new cultural centre.
  • Productivity (regional dispersal): The recovery process will inevitably generate improved regional dispersal of visitors and value.
  • Air connectivity: As the recovery process gets underway, the likelihood of Christchurch recovering lost air connectivity, and in some instances growing new connectivity, should improve. The new Air New Zealand Perth to Christchurch service started in December 2013, additional peak season services on the Singapore to Christchurch route, numerous summer charter flights from Japan, and increased capacity with some regional North Island cities are examples of emerging air connectivity growth opportunities.
  • Visitor experience: The biggest challenges facing Christchurch are the rebuilding of lost infrastructure (albeit with a future-facing focus) and dispelling the perception that the city is destroyed, that there is no accommodation and nothing to do. Rebuilding tourism infrastructure is vital. As the rebuild progresses, promoting the fact that Christchurch is back in business with accommodation, activities and attractions coming back on line is also a priority and one for which the industry can provide strong support.

Cruise

Strategic commentary

The cruise sector is a rapidly growing segment within New Zealand’s holiday market. During the 2012-13 season, more than 211,000 passengers and 82,000 crew visited New Zealand on 129 separate cruises, making around 750 port calls. Over the eight years to 2012-13, cruise voyages have grown at 13% a year and passengers at 23% a year. Market Economics estimated that cruise created $310 million in economic value in 2012-2013.

With the cruise season running from early October to late April/early May, and with an average of five to six port calls each voyage, cruise represents an excellent ‘productivity for profit’ opportunity, positively impacting on both seasonality and regional dispersal.

There has been significant industry resistance to cruise on the basis of low spend per visitor in comparison to land-based visitors and perceived detrimental (displacement) impact on land-based operations. This ignores the fact that growth in cruise is a worldwide trend, offering significant seasonality and regional dispersal benefits and continued growth potential.

Neither does such resistance take into account the comparative net expenditure value to New Zealand’s visitor economy – the industry is not required to fund visitor marketing and sales costs for the cruise sector or provide transport and accommodation infrastructure. The only, relatively modest, on-ground cost relates to the provision of port infrastructure.

Such resistance is reflected in the fact that cruise arrivals and sector value are not yet officially captured by the Ministry of Business, Innovation and Employment or Statistics New Zealand, an omission that needs urgent rectification.

There appears to be significant regional variance to the quality and effectiveness of Regional Tourism Organisations and local on-shore operators attracting disembarking passengers into revenue-generating activities.

Securing and/or retaining strong support from New Zealand host port companies is vital if we are to realise the cruise sector’s growth potential. There are signs that such ports are increasingly recognising the value of cruise within their respective business operations. As cruise ships increase in size and length there will be a need for port berthing and passenger processing facilities to keep pace with demand.

cruising the bay of islands
Photo: Cruising the Bay of Islands/Northland Inc

Looking forward, five strategic growth opportunities for New Zealand tourism present themselves:

  1. Improving on-shore cohesion to better facilitate uncommitted disembarking passengers into revenue-generating activities.
  2. Return visits by cruise passengers (nearly 40% of cruise passengers say they have returned to a destination they first visited by cruise).
  3. Encouraging exchange ports. There is a 40%+ value premium on exchange passengers compared to transit passengers. With Sydney facing significant capacity restraints, Auckland is well positioned to become a more frequently used exchange port, opening up air transport and on-shore growth opportunities, increasing visitor activity and spend over and above normal spend by transit passengers.
  4. The 2015 introduction of a third, much larger Panama Canal ship-lane will open nearly 50% of the world’s cruise ship fleet to the Southern Hemisphere, increasing passenger volumes within Oceania.
  5. The growth of an Asian cruise circuit will grow the number of Asian cruise visitors (particularly Chinese) and open up the likelihood of Asian cruise ships operating in Oceania during their off-season.

There already exists a reasonable level of strategic cohesion within the cruise sector but much greater cohesion and cooperation will be needed to unlock the true potential of the growth opportunities. Securing the sustained buy-in and support of New Zealand’s host ports is essential.

The Tourism 2025 opportunity is to ignite greater industry cohesion to ensure that New Zealand is well placed to take advantage of these long-term growth opportunities.    

Valuable existing insight

  • Excellent insight already exists, obtained or generated by Cruise New Zealand, Covec, Market Economics (regional economic impact), the International Cruise Council, cruise ship operators, e.g. Princess Cruises, Royal Caribbean, and tertiary institution research, e.g. a Lincoln University study of the benefits of cruising for the township of Akaroa.
  • There are important insight gaps, including failure to recognise net passenger/crew arrivals within official visitor statistics, as well as the absence of credible analysis of the value of cruise to businesses of New Zealand host ports.

Strategic alignment with Tourism 2025 themes

  • Target for Value: There are significant long-term strategic growth opportunities within this sector.
  • Insight: As above (Valuable existing insight).      
  • Productivity (seasonality): An extended season, early October to late April/early May, helps seasonality.    
  • Productivity (regional dispersal): Cruise has developed into an excellent promoter of regional dispersal of visitors.
  • Air connectivity: Growth in cruise offers increasing fly/cruise opportunities. Growth of Auckland as an exchange hub significantly increases that opportunity. Cruise New Zealand estimates that 68,000 of the 211,000 2012-13 cruise passengers flew in or out of New Zealand. Such passengers have a value premium of 40%+ – $782 average value transit and $1128 fly/cruise.      
  • Visitor experience: Cruise companies robustly and frequently survey for passenger satisfaction and results are shared with the industry. Satisfaction with New Zealand as a destination is comparatively high but valuable improvements can be made to port facilities and passenger processing (particularly if Auckland is to grow as an exchange port – where visitors start of finish a cruise) as well as on-shore facilitation of passengers into revenue-generating activities.

Emerging markets (e.g. Indonesia, Latin America)

Strategic commentary

The high-level insight gathered by the Tourism 2025 project team reinforces the validity of earlier industry insight regarding the future value opportunities for New Zealand tourism steadily emerging from within the Pacific Rim and Latin America and India. This is primarily on the back of economic growth of the Asian and Latin American middle classes and their increasing willingness to travel.

Such opportunities have been targeted by Tourism New Zealand in its three year (2014-16) strategy and also by Air New Zealand’s Go Beyond and Auckland Airport’s Ambition 2020 strategies. But the process of developing markets in these regions is still very early in the strategy development phases of Tourism New Zealand and relevant private sector organisations.

Tourism New Zealand is currently gearing up its on-the-ground operational capability, opening new offices in Indonesia and Brazil and boosting its presence in India. Air New Zealand and Auckland Airport are beginning to explore air connectivity strategy options. There are air connectivity challenges surrounding India and Brazil in particular, neither being one-sector journeys. Other private sector players are showing interest in these markets but are a long way from full commitment.

The imperative (and the challenge) for New Zealand’s tourism industry is to collaborate in the early market development stages to lay a strong platform for growth. This platform can then be relied on by industry players looking to capitalise on the opportunities offered by these emerging markets.

Tourism New Zealand has initial foundation insight on actual and potential target segments in these emerging markets as may a small number of private sector organisations. However, overall, current insight on specific emerging target markets appears very limited.

The Ministry of Business, Innovation and Employment (MBIE)/NZIER tourism forecasts to 2019 have produced expenditure estimates for New Zealand’s top eight markets, but these do not include the new Asian, Pacific Rim and Latin American markets.

Lessons learned during the decade spent opening up the China market gives the industry the opportunity to avoid mistakes made during that process, and to fast-track establishment and projects targeted at high value growth in these emerging markets.

Recognising that the free market will dictate how each private sector player will strategically approach these emerging market opportunities, the initial Tourism 2025 collective focus areas should include the following:

  • Tourism NZ
    • increasing its strategic focus on and investment in specific emerging markets, including (as it is now doing in Indonesia and Brazil) establishing a visible on-ground presence and beginning the process of building demand for quality mono-New Zealand travel
  • Target market insight
    • developing an in-depth view of specific target markets including an understanding of the visitor needs and preferences
    • initial assessment then regular re-examination of how our competitors are approaching development of target markets
    • understanding seasonality and regional dispersal opportunities offered by target markets
    • consideration of how certain niche opportunities could help fast-track growth from target markets, e.g. India – Cricket World Cup; Indonesia and Brazil – international students and families
    • understanding relevant air connectivity challenges and opportunities
    • maintaining a watching brief on other potential target markets
    • including target market forecasts within the annual MBIE six year forecasts
  • High-level industry SWOT analysis
    • following initial insight work, developing a high-level industry SWOT analysis of the target market
  • Application of China learning
    • formally capturing learning from New Zealand’s entry into and development of the China market, then cross-referencing these against emerging market challenges and opportunities
  • Visitor experience
    • identifying potential facilitation barriers and then working with relevant organisations to create solutions to mitigate issues (e.g. Immigration New Zealand and visa processing)
    • developing target market briefings and toolkits to help tourism operators understand  visitor needs and expectations
  • Industry communication
    • establishing a reliable industry platform for communicating the above

couple on docks
Photo: images.newzealand.com/photographer Fraser Clements

Strategic alignment with Tourism 2025 themes

  • Target for Value: Establishing and then accelerating mono-New Zealand travel growth from emerging target markets will be vital to optimising potential value.
  • Insight: Insight is currently very limited. The industry needs to prioritise the creation of significantly more insight as proposed above.
  • Productivity (seasonality): There is currently insufficient in-depth insight available to judge the potential for emerging markets to positively impact on seasonality, although early signs from some markets are promising, e.g. India.
  • Productivity (regional dispersal): There is currently insufficient in-depth insight available to judge the potential for emerging target markets to positively impact on regional dispersal although learning from China suggests excellent possibilities.  
  • Air connectivity: Growth from emerging target markets will be subject to air connectivity expansion. This is likely to be a mix of direct and indirect options depending in part on the target market’s geographical location.
  • Visitor experience: Learning from China indicates that early removal or significant reduction of visitor facilitation barriers (e.g. visas, language) will speed up the process of unlocking growth in emerging target markets. Likewise, ensuring the industry is well equipped at an early stage of the growth process to meet the needs of visitors from these markets will improve New Zealand’s attractiveness as a destination.