Upload
phamthu
View
215
Download
1
Embed Size (px)
Citation preview
Final Report
The Outlook for Tourism
in the Auckland Region
Prepared for
Auckland Regional Council
June 2008
Covec is an applied economics practice that provides independent analysis and advice to a
broad range of companies and government agencies. We specialise in solving problems
arising from policy, legal, strategic, regulatory, market and environmental issues. Our delivery
of high-quality, objective advice has provided confidence to some of the largest industrial
and governmental organisations in the Asia-Pacific region.
Authorship
This document was written by Shane Vuletich. For further information email
[email protected] or phone (09) 916-1961.
Disclaimer
Although every effort has been made to ensure the accuracy of the material and the integrity
of the analysis presented herein, Covec Ltd accepts no liability for any actions taken on the
basis of its contents.
© Copyright 2008 Covec Ltd. All rights reserved.
Covec Limited Level 11 Gen-i tower 66 Wyndham Street
PO Box 3224 Shortland Street Auckland New Zealand
t: (09) 916-1970 f: (09) 916-1971 w: www.covec.co.nz
Contents
Executive Summary ............................................................................................................... 1
1. Introduction .................................................................................................................... 6
1.1. Overview: Bringing the World to Auckland............................................................6
2. Drivers of Tourism Demand ......................................................................................... 13
2.1. General Drivers of Tourism Demand..................................................................... 13
2.2. Specific Drivers of Tourism Demand in Auckland .............................................. 23
3. Economic Contribution ............................................................................................... 29
3.1. Gross Expenditure..................................................................................................... 29
3.2. Contribution to GDP ................................................................................................ 31
4. Economic Projections.................................................................................................. 33
www.covec.co.nz 1
Executive Summary
This report focuses on understanding:
• The structure and significance of the visitor economy in Auckland
• Recent trends in tourism
• The key drivers of tourism – both general and local
• The main constraints and opportunities for tourism in the Auckland Region
It also considers the future prospects for tourism in Auckland, and develops projections
of visitor activity. The projections are presented in a supporting spreadsheet entitled
Tourism GDP Projection Model.
Bringing the World to Auckland
Bringing the World to Auckland -The Case for Investment in Auckland’s Visitor Economy is
essentially a visitor strategy for the Auckland region that was developed by
AucklandPlus in 2007. The extensive stakeholder consultation that underpinned the
research confirmed three main things about Auckland:
1. The CBD is the focus of most visitor activity but in Auckland’s case delivers the
lowest quality of visitor experience compared to the rest of the region.
2. Auckland’s main strength is its hinterland which contains exceptional natural
attractions and offers outstanding experiences. But this strength is almost
entirely negated by the lack of transport to these areas.
3. Auckland has a rich and interesting history that distinguishes it from other
destinations
Accordingly, the research identified the following key success factors for Auckland as a
visitor destination:
• Revitalise the CBD, with a focus on pedestrian access and visitor (and resident)
amenity.
• Connect visitors to Auckland’s outstanding hinterland i.e. make it easy for
visitors to get from the CBD to key hinterland precincts, and to travel between
precincts.
• Tell Auckland’s stories to extract additional value from visitors and differentiate
it from other destinations.
The economic analysis conducted for Bringing the World to Auckland estimated that an
additional $1.65b of public sector investment was required to realise Auckland’s visitor
aspiration, and that this level of investment would result in a cumulative increase in the
Auckland visitor economy of $7.21b. The research concluded that Auckland’s visitor
economy is a premium investment opportunity for Auckland, and that it represents a
low risk investment because making Auckland a more compelling destination will also
make Auckland a better place to live, work and play. Investing in the visitor economy
will therefore effectively subsidise Auckland’s transformation into a world class city-
region.
www.covec.co.nz 2
Drivers of Demand for Tourism in the Auckland Region
Consumer Demand
The short-term outlook for consumer demand is quite negative. The combination of
lower disposable income and higher airfares will most likely curb growth in tourism
demand in the next 12-18 months. The long-term outlook for consumer demand is more
optimistic, particularly since most of the factors that are currently having a negative
impact on consumer demand are cyclical in nature. Consumer demand is therefore
likely to rebound in the next 24-36 months as economic conditions improve and new
airline capacity is released. The key observations from the past 20 years, which could be
expected to apply to the next 20 years, are:
• Tourism is very resilient to economic shocks and changes in consumer demand
• Even large shocks such as September 11 and SARS had a relatively minor impact
on aggregate tourism activity
• Downswings in consumer demand are almost always followed by upswings,
and the gains in tourism during prosperous periods generally outweigh the
losses during the difficult periods; hence in the long-term tourism is expected to
continue growing even in the presence of regular downswings. This view is
supported by the World Tourism Organisation.
The Success of New Zealand as a Destination
Auckland’s success as an international visitor destination, at least with its current visitor
proposition, depends largely on New Zealand’s success as a destination. A key focus of
Bringing the World to Auckland is determining how Auckland can establish itself as a
more independent (mono) destination within New Zealand, but until the visitor
proposition is much more compelling international visitor activity in Auckland will
continue to depend on the strength and popularity of the New Zealand brand.
Auckland has experienced declining domestic visitation rates in recent years due to a
marked increase in outbound travel activity (which competes directly with domestic
tourism). The outlook for domestic tourism is relatively weak with the Ministry of
Tourism predicting average growth in domestic visitor nights of around 0.8% per
annum for New Zealand over the next 7 years, and just 0.6% for Auckland. The main
reason for the low expected growth rate is New Zealand’s slow rate of population
growth – less than 1% per annum. In addition, outbound travel is expected to continue
increasing, which will further suppress domestic demand.
www.covec.co.nz 3
The Cost of Travel
Around 95% of all domestic travel in New Zealand is conducted using private vehicles –
mainly cars; hence fuel is a direct and significant component of the cost of domestic
tourism. Practically all international tourism involves a flight to New Zealand, and the
airfare can be anything from 20-60% of the total cost of a trip to New Zealand; hence
fuel is a direct and significant component of the cost of international tourism.
The general consensus among tourism operators in New Zealand is that we are entering
a period of high fuel prices that could persist for some time, and that the tourism
industry will need to find ways to reduce its consumption of, and exposure to, fossil
fuels. Persistently high fuel prices will reduce New Zealand’s competitiveness in long-
haul markets due to the large airfare component of a trip to New Zealand, but domestic
tourism is likely to increase as overseas travel becomes relatively more expensive for
New Zealanders.
Climate Change
The perceived threat to the New Zealand tourism industry created by climate change is
clearly emphasised by the prevalence of climate and environmental themes in the
recently released New Zealand Tourism Strategy 2015. The general consensus within
the tourism industry is that the issue of climate change is not yet having a material
impact on travel or consumption behaviour, but that it definitely has the potential to do
so. According to key industry stakeholders the main risk to New Zealand, and therefore
to Auckland, seems to be the perception that a lot of carbon is generated in getting to
New Zealand. A further risk is the impact that emission trading schemes may have on
the price of getting to, and travelling within, New Zealand.
The general view within the industry is that travel has become an important and
essential part of modern life; hence it is unlikely that increasing awareness of climate
change will curb aggregate travel activity. However, it is widely acknowledged that
climate change has the potential to alter the pattern of tourism i.e. it is anticipated that
consumers will choose destinations that are perceived to be relatively more
environmentally friendly than others.
www.covec.co.nz 4
Aviation Capacity
Aviation capacity is currently constrained due to well documented wide-body aircraft
production delays in both the Boeing and Airbus plants. These delays are affecting
practically all major carriers, including Qantas and Air New Zealand. This has resulted
in higher load factors for airlines and, consequently, higher airfares for consumers.
Airlines will take delivery of pre-ordered A380s from late 2008 onwards, and pre-
ordered 787s from late 2009 onwards, assuming there are no further production delays.
Both Qantas and Air New Zealand expect a large increase in wide-body capacity
internationally from 2010 onwards which should result in greater seat availability and
lower prices. The long-term outlook for aviation capacity is therefore very positive.
Exchange rates
The exchange rate affects inbound tourism by altering the price of a trip to New
Zealand. The exchange rate also affects domestic tourism by altering the price New
Zealanders pay for an international trip. The strength of the New Zealand dollar has
definitely played a part in the recent growth in outbound travel, and the corresponding
slowdown in international arrivals.
The New Zealand dollar is expected to weaken relative to major trading partners in 2008
and 2009 as economic growth slows and interest rates decline. A weak New Zealand
dollar is positive for tourism in New Zealand because it makes New Zealand a cheaper
destination for international travellers, and it makes outbound travel more expensive,
which induces more New Zealanders to travel domestically.
Major Events
Major events were identified as a key opportunity for Auckland in the Metro Project,
and subsequently in Bringing the World to Auckland. At present Auckland will be the
main host of two confirmed major events in the next decade – the Rugby World Cup in
2011 and the Cricket World Cup in 2015. In addition, there is a possibility that
Auckland will submit a bid for the Commonwealth Games in 2018. Auckland’s ability
to expand its major events portfolio beyond these events will depend on its ability to
invest in a dedicated regional major events office, develop the infrastructure required to
attract and deliver large scale major events, and present a united front when bidding for
major events.
Cruise Ship Industry
Recent analysis suggests that the development of a new fit-for-purpose cruise ship
terminal in Auckland has the potential to deliver major economic benefits to Auckland
and New Zealand. Consultation with Cruise New Zealand confirms that with a new
cruise ship terminal in Auckland, and with the existing facility at Princes Wharf used as
overflow capacity, it is likely that the major cruise lines would deploy more ships to this
region i.e. at present demand for cruises in New Zealand is constrained by Auckland’s
cruise infrastructure. This would have an immediate impact on the number of cruises
operating in New Zealand waters, and on the economic impact generated by the cruise
ship industry.
www.covec.co.nz 5
National Convention and Exhibition Centre
Local tourism industry stakeholders unanimously support the development of an
internationally competitive convention and exhibition centre in Auckland to attract high
yielding visitors. A research report commissioned by Auckland City Council concluded
that a convention centre of suitable scale would increase Auckland’s GDP by $67m per
annum at operational maturity, and New Zealand’s by $72m per annum.
Low Cost Air Travel
A study conducted by BERL in 2002 concluded that significant economic
benefits would be realised from greater low cost airline activity in Auckland,
driven mainly by greater visitor numbers out of Australia. This analysis was
based on the development of a new commercial airport at Whenuapai Airbase,
but could just as easily apply to greater low cost airline activity at Auckland
International Airport.
Economic Contribution
Total visitor expenditure in Auckland was estimated by the Ministry of Tourism at
$3.745b in 2006, including GST. International visitors accounted for $2.52b of this
expenditure, with domestic visitors accounting for the remaining $1.22b. In total, gross
visitor expenditure in 2006 was distributed across industry sectors in the Auckland
Region as follows:
• Retail trade - $687m (18%)
• Accommodation, restaurants and bars - $1.43b (37%)
• Road transport - $415m (11%)
• Water and rail transport - $58m (2%)
• Air transport, services to transport and storage - $599m (16%)
• Education - $170m (4%)
• Cultural and recreational services - $391m (10%)
In aggregate, the $3.745b of gross visitor expenditure in the Auckland region (including
GST) generated total regional GDP of $2.994b in 2006. This implies an average
expenditure/GDP multiplier of around 0.80 i.e. on average every $1.00 of gross visitor
expenditure in Auckland generates around $0.80 of regional GDP, including indirect
and induced effects.
Economic Projections
Projections of regional GDP attributable to tourism are presented in a supporting
spreadsheet entitled Tourism GDP Projection Model.
www.covec.co.nz 6
1. Introduction
The objective of the Economic Futures Project (EFP) is to estimate the possible
trajectories the Auckland regional economy might follow over the next twenty years.
The economic futures defined within the project will become a reference point for the
development of regional strategy and policy.
Three phases of work have been identified:
1. Information gathering
2. Development of scenarios and modelling
3. Identifying impacts and further work required
This report will contribute to Phase 1 of the EFP by providing a better understanding of
the contribution that tourism makes, and has the potential to make, to the Auckland
regional economy. It builds largely on the research, knowledge and relationships
created during the development of Bringing the World to Auckland -The Case for
Investment in Auckland’s Visitor Economy.1
In particular the research focuses on understanding:
• The structure and significance of the visitor economy in Auckland
• Recent trends in tourism
• The key drivers of tourism – both general and local
• The main constraints and opportunities for tourism in the Auckland Region
The research also considers the future prospects for tourism in Auckland, and develops
projections of visitor activity. These projections are presented in a supporting
spreadsheet entitled Tourism GDP Projection Model.
1.1. Overview: Bringing the World to Auckland
AucklandPlus completed what was essentially a visitor strategy for the Auckland region
in late 2007. An extensive amount of research and analysis was conducted to support
this work including interviews with key tourism stakeholders in Auckland, the
formulation of a comprehensive visitor aspiration for the Auckland region, the
development of a framework for action (including an investment platform) and detailed
economic analysis of the possible payoff from “getting it right”. The results of this work
are presented in Bringing the World to Auckland -The Case for Investment in Auckland’s
Visitor Economy. Bringing the World to Auckland focuses mainly on what the Auckland
region needs to do to establish itself as a legitimate world class visitor destination. It is
therefore concerned primarily with the supply-side of the visitor market i.e. the growth
and development of Auckland’s visitor proposition.
1 Go to http://www.covec.co.nz/pdf/Bringing_the_World_to_Auckland.pdf for the full version or
http://www.covec.co.nz/pdf/Bringing_the_World_to_Auckland_summary.pdf for the summary
document.
www.covec.co.nz 7
1.1.1. SWOT Analysis
Over 40 key regional and national stakeholders were interviewed during the research
process to identify Auckland’s current strengths and weaknesses as a visitor destination,
as well as the opportunities and threats that it faces. The results of these interviews are
summarised below.
Strengths and Weaknesses
The four key strengths of the Auckland region have been identified as:
• Landscape
• Coastal environment
• Safety and security
• Airport
These are all highly desirable qualities for a visitor destination to have; perhaps the most
desirable of all. Auckland has an enviable array of natural assets, a safe and secure
environment (by international standards) and is well connected both nationally and
internationally by a very good airport with no immediate capacity constraints.
The four key weaknesses of the Auckland region have been identified as:
• Public transport
• Road network
• Entertainment/nightlife
• Retail shopping
These are also highly desirable qualities for a visitor destination to have, and it is
arguably these qualities that attract visitors to an area and compel them to spend time
and money. Auckland is clearly lacking in these areas, and this failure to provide a
compelling visitor experience has contributed to Auckland’s wide recognition as a
gateway and staging area for the rest of New Zealand, rather than a visitor destination
in its own right.
www.covec.co.nz 8
Figure 1 Auckland’s Strengths and Weaknesses as a Visitor Destination
1 2 3 4 5 6 7 8 9 10
LandscapeCoastal EnvironmentSafety and SecurityAirportFood and BeverageVisitor InformationHotelsCleanlinessBusiness EnvironmentLevel of ServiceUrban EnvironmentAttractions andRetail ShoppingEntertainmentRoad NetworkPublic Transport
Very Poor World Class
Opportunities and Threats
The key opportunities that stakeholders identified for Auckland were:
• Conference and convention market
• Major events
• Maori and Pacific experiences
• Greater amenity underwritten by visitor spend
• More vibrant and exciting region
• A unified region
These results suggest that Auckland has a lot of work to do in order to become a world-
class visitor destination. However, Auckland is fortunate that its strengths are very
difficult, and in some cases impossible to replicate, while its weaknesses can be
overcome with the right mix of leadership, planning and investment. Auckland
therefore has the potential to become a world-class visitor destination.
Practically all respondents felt that Auckland would benefit greatly from a convention
centre capable of attracting international conferences, conventions and exhibitions.
Major events were also seen as a key opportunity although respondents emphasised the
need to pursue events that were appropriate for Auckland. The Maori and Pacific
cultures were viewed by most respondents as major opportunities, particularly given
Auckland’s rich Maori history and current status as largest Pacific city in the world.
More generally, respondents felt that transforming Auckland into a world-class visitor
destination would underwrite or subsidise Auckland’s “renaissance”, and would lead to
a more vibrant, exciting, unified region.
www.covec.co.nz 9
The key threats that stakeholders identified for Auckland were:
• Competition from other cities, particularly Australian cities
• Loss of identity
• Environmental sustainability
• Auckland’s own lack of belief
• Weak and indecisive leadership
• Lack of unity across the region
The key threat mentioned by most respondents was competition from other
international cities. This is a very real threat to Auckland, with cities such as Melbourne
and Sydney investing substantial amounts of money in convention centres, major events
and destination marketing. Auckland is probably 10 years behind Melbourne in terms
of reinventing itself as a world-class visitor destination. There was also some concern
that the transformation process could lead to Auckland losing its identity, although
others felt that it could help Auckland to reveal its true identity. The environmental
impact of greater visitor numbers was also cited as a concern. A common threat
identified by respondents was Auckland’s fragmented governance, and its inability to
work together for the good of the region. Many felt that Auckland could not succeed
without strong, decisive leadership and strong self belief in its ability to change.
Words that Describe Auckland in 2007
Some of the words that were used to describe Auckland during the interview process
include:
• Gateway
• Large and fragmented
• Cosmopolitan
• Beautiful natural environment
• Lacks a heart
• Confusing
• Relaxed
• Bland, generic, not distinctive
• Boring
• Untapped potential
These comments are consistent with Auckland’s strengths and weaknesses and
emphasise the fact that Auckland has a spectacular natural environment but currently
lacks the vibrancy and personality of a world-class destination.
A separate survey of around 900 Tourism Auckland subscribers suggests that Auckland
is average on a variety of levels. In aggregate the respondents did not find Auckland to
be particularly vibrant, exciting or friendly. They also thought that Auckland was quite
a stressful place to be and relatively difficult to access. This feedback supports the
general view that Auckland does not currently have a compelling visitor proposition.
www.covec.co.nz 10
Figure 2 Auckland in 2007
1.1.2. The Aspiration
The following aspiration for Auckland was developed through input from regional and
national stakeholders:
“Auckland is an attractive, sophisticated and diverse region that is easy to
understand and move around in. It is exciting and vibrant with a distinctive
Maori and Pacific character and a pristine natural environment. Auckland is a
highly desirable place to live, work, visit and invest.”
The aspiration is underpinned by seven key themes:
• Vibrant CBD
• Amazing Hinterland
• Harbour City
• Cultural City
• Host City
• Easy to Understand
• Easy to Move Within
More detail on each of the key themes can be found in Bringing the World to Auckland.
SLEEPY VIBRANT
BORING EXCITING
UNFRIENDLY FRIENDLY
STRESSFUL RELAXING
SPRAWLING COMPACT
PROVINCIAL COSMOPOLITAN
BLAND DIVERSE
INACCESSIBLE ACCESSIBLE
DOWN-MARKET CLASSY
www.covec.co.nz 11
1.1.3. Key Success Factors
The stakeholder consultation confirmed three main things about Auckland:
4. The CBD is the focus of most visitor activity but in Auckland’s case delivers the
lowest quality of visitor experience compared to the rest of the region.
5. Auckland’s main strength is its hinterland which contains exceptional natural
attractions and offers outstanding experiences. But this strength is almost
entirely negated by the lack of transport to these areas.
6. Auckland has a rich and interesting history that distinguishes it from other
destinations
Accordingly, the key success factors for Auckland are to:
• Revitalise the CBD, with a focus on pedestrian access and visitor (and resident)
amenity.
• Connect visitors to Auckland’s outstanding hinterland i.e. make it easy for
visitors to get from the CBD to key hinterland precincts, and to travel between
precincts.
• Tell Auckland’s stories to extract additional value from visitors and differentiate
it from other destinations.
1.1.4. Framework for Action
It is widely acknowledged that Auckland is not currently in a position to maximise the
value of the visitor economy. The research concluded that the following steps are
required to transform Auckland into a world class visitor destination:
1. Get organised for success – an appropriately funded and mandated regional
visitor agency is required to manage Auckland’s transformation from a gateway
into a world-class visitor destination.
2. Establish a long-term public sector investment platform – the success of the
Auckland visitor economy depends critically on the establishment of a public
sector investment platform comprising long-term commitments from:
a. Local authorities and ARC
b. Central government
3. Getting Auckland’s “fabric” right – creating a social and cultural environment
that is highly attractive to both residents and visitors.
4. Developing key attractors – Auckland needs a portfolio of attractors that draw
people to the region, particularly during shoulder and off-peak periods. The
key opportunities for Auckland are:
a. Conferences and conventions
b. Major events
c. Hinterland precincts
d. Signature attractions and experiences
www.covec.co.nz 12
1.1.5. The Investment Proposition
The economic analysis conducted for Bringing the World to Auckland estimated that an
additional $1.65b of public sector investment was required to realise Auckland’s visitor
aspiration, and that this level of investment would result in the following outcomes over
the next 10 years:
• A cumulative increase in the Auckland visitor economy of $7.21b.
• A cumulative increase in central government income of $1.8b.
• An additional $2.79b of private sector investment, generating additional profit of
$279m per annum.
1.1.6. Conclusion
The broad conclusion is that Auckland’s visitor economy is a premium investment
opportunity for Auckland. It represents a low risk way of realising significant economic
growth while underwriting Auckland’s amenity. It is low risk because investments that
make Auckland a more compelling destination also make Auckland a better place to
live, work and play. An enhanced visitor economy would increase public sector income
and would also attract new commercial investment, effectively subsidising Auckland’s
transformation into a world class city-region.
www.covec.co.nz 13
2. Drivers of Tourism Demand
The previous section outlines the key actions and investments identified in Bringing the
World to Auckland – a roadmap for the transformation of Auckland into a world class
visitor destination. Bringing the World to Auckland is concerned mainly with the supply-
side of Auckland’s visitor economy i.e. the adequacy and development of Auckland’s
visitor offering or proposition.
This section identifies and discusses the relevant demand-side drivers that are likely to
have an impact on tourism in Auckland in the future. The demand–side drivers of
tourism fall into one of two broad categories - those that are general and therefore apply
to all destinations; and those that apply more specifically to Auckland.
2.1. General Drivers of Tourism Demand
The main general drivers of tourism demand are:
• Consumer demand
• The success of the wider destination – in this case New Zealand
• The cost of travel
• Attitudes to climate change, and the likely impact of climate change on the cost
of travel
• Aviation capacity
• Exchange rates
These are discussed in more detail below.
2.1.1. Consumer Demand
Consumer demand is the main driver of tourism demand. When consumers are feeling
financially secure and positive about their future prospects they tend to spend more
time and money travelling, and vice versa. Consumer demand is highly cyclical and
tends to be influenced by shifts in macroeconomic variables and political environments.
At present consumer demand is quite weak due to a variety of factors including:
• High energy prices
• Rising airfares
• High inflation (particularly among basic food items)
• High interest rates (particularly in New Zealand and Australia)
• The global credit squeeze
• Falling house prices
• Rising unemployment
Both domestic and international consumers are currently feeling the direct and indirect
effects of these factors on their disposable income. This negative “wealth effect” is
undoubtedly having an impact on both domestic and international travel behaviour.
www.covec.co.nz 14
According to the Domestic Travel Survey (DTS) domestic travel activity fell sharply in
the last quarter of 2007 – around the same time as house prices started falling, interest
rates continued to rise, finance companies started failing and fuel and food prices
soared. The slump in domestic tourism is expected to continue well into 2008 as
disposable incomes continue to be eroded by higher living costs.
International visitor arrivals have also been affected by the economic downturn. Most
countries are experiencing similar conditions to New Zealand, particularly with respect
to higher energy prices, higher food prices and the global credit squeeze (triggered by
the sub-prime collapse). Data provided by Pacific Asia Travel Association (PATA)
suggests that people living in other countries are still travelling at least as often as they
used to, but there has undoubtedly been a substitution away from long-haul travel
(relatively more expensive due to the airfare component of the trip), and towards short-
haul travel (relatively less expensive due to the smaller airfare component and the
proliferation of low-cost airlines on short-haul routes). This shift has been clearly
evident in the visitor arrivals data for both New Zealand and Australia, with both
markets experiencing declines in visitor arrivals from traditionally strong long-haul
markets. For example, between 2003 and 2006 visitor arrivals to New Zealand from
short-haul markets (Australia and the Pacific Islands) increased by 8.5% per annum,
compared with an average 2.2% growth rate from long-haul markets. During the same
period short-haul arrivals to Australia increased by an average of 8.6% per annum,
compared with an average 4.5% growth rate from long-haul markets.
The current pattern of consumer demand is being driven by global factors that are
generally beyond New Zealand’s control. Many of these factors are cyclical in nature;
hence consumer demand will change constantly in response to different market
conditions. Current levels of consumer demand will therefore have relatively little
bearing on the long-term prospects for tourism in Auckland, but it is important to note
that at any given time the demand for tourism in Auckland will be strongly influenced
by the economic conditions affecting consumer demand both domestically and
internationally.
Outlook
The short-term outlook for consumer demand is quite negative. There is no indication
that energy prices or basic food prices are going to fall in the near future, and airfares
are gradually increasing in response to higher fuel prices. The high price of jet fuel
combined with limited airline capacity (due to new aircraft production delays) will
result in even higher airfares in the next 12-24 months. The combination of lower
disposable income and higher airfares will most likely curb growth in tourism demand
in the next 12-18 months.
All of these factors are considered to be relatively short-term in nature, although some
commentators believe that high energy prices will persist in the foreseeable future. The
long-term outlook for consumer demand is more optimistic, particularly since most of
the factors that are currently having a negative impact on consumer demand are cyclical
in nature. Consumer demand is therefore likely to rebound in the next 24-36 months as
economic conditions improve and new airline capacity is released.
www.covec.co.nz 15
Consumer demand will undoubtedly rise and fall several times over the next 20 years as
economic conditions change, in much the same way as it has over the past 20 years. The
key observations from the past 20 years, which could be expected to apply to the next 20
years, are:
• Tourism is very resilient to economic shocks and changes in consumer demand
• Even large shocks such as September 11 and SARS had a relatively minor impact
on aggregate tourism activity
• Downswings in consumer demand are always followed by upswings, and the
gains in tourism during prosperous periods generally outweigh the losses
during the difficult periods; hence in the long-term tourism is expected to
continue growing even in the presence of regular downswings. This view is
supported by the World Tourism Organisation, which is continuing to predict
strong growth in global tourism despite challenging economic conditions.
2.1.2. New Zealand’s Success as a Destination
International
Auckland’s success as an international visitor destination depends, to a large extent, on
New Zealand’s success as an international destination. This is mainly because over 75%
of international visitors enter and/or exit New Zealand through Auckland International
Airport i.e. Auckland is the main gateway to New Zealand. The following graph
demonstrates the high degree of correlation between international visitor nights spent in
New Zealand and international visitor nights spent in Auckland.
Figure 3 International Nights in New Zealand vs. International Nights in Auckland 1999-2006
25
30
35
40
45
50
8 9 10 11 12 13 14 15 16 17 18
Mill
ion
s
MillionsInternational Visitor Nights in Auckland
Inte
rna
tio
nal
Vis
ito
r N
igh
ts i
n N
ew
Zea
lan
d
Distorted by export education
www.covec.co.nz 16
Growth in visitor arrivals to New Zealand has slowed considerably in the last three
years after a period of unprecedented growth, averaging 1.7% per annum between 2004
and 2007 compared with 5.8% per annum between 1994 and 2004.
Figure 4 Growth in International Visitor Arrivals to New Zealand
0
500
1,000
1,500
2,000
2,500
3,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Th
ou
sa
nd
s
Vis
ito
r A
rriv
als
to
New
Ze
ala
nd
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Gro
wth
in
Vis
ito
r A
rriv
als
to
Ne
w Z
eala
nd
Growth in Visitor Arrivals to NZ
Visitor Arrivals to NZ
Part of the slowdown can be attributed simply to a much larger visitor base – a 5%
increase off today’s visitor base of 2.46m is equivalent to an 8.3% increase off the 1998
visitor base of 1.48m. However, the main issue is that New Zealand has lost market
share in the global tourism market in recent years, implying that New Zealand is not as
popular a destination as it was, say, five years ago. There are a number of reasons for
this. The first is that the period 1999-2004 was a golden period for New Zealand
tourism – the New Zealand dollar was relatively weak, airfares were falling, significant
international exposure was gained through Lord of the Rings, Whalerider and the
Americas Cup, the 100% Pure campaign was widely recognised as the best in the world
and the Australian tourism market was in a slump. Conditions could not have been
better for New Zealand during this period. Most of these advantages have dissipated in
recent years - the New Zealand dollar is very strong against the US and Japanese
currencies, the last major event was the Lions Series in 2005 (and the next one is the
Rugby World Cup in 2011), Tourism New Zealand is faced with growing concerns
about the carbon footprint of long-haul travel and Australia is investing a lot more in
international marketing.
In addition, a number of emerging destinations are competing for the same types of
tourists as New Zealand (Tourism New Zealand calls them “interactive travellers”) e.g.
South America, China, India, Africa and Norway. With a small marketing budget by
international standards, a general shift towards short-haul travel and significant
competition from destinations with much larger marketing budgets it could be argued
that New Zealand is actually doing quite well in the current environment.
www.covec.co.nz 17
The key conclusion is that Auckland’s success as an international visitor destination, at
least with its current visitor proposition, depends largely on New Zealand’s success as a
destination. A key focus of Bringing the World to Auckland is determining how Auckland
can establish itself as a more independent (mono) destination within New Zealand, but
until the visitor proposition is much more compelling international visitor activity in
Auckland will continue to depend on the strength and popularity of the New Zealand
brand.
Domestic
Auckland’s success as a domestic destination is greatly assisted by its scale relative to
the rest of New Zealand and the dominant role it plays in the New Zealand economy.
This is reflected in the fact that more than 70% of visitations to Auckland are largely
autonomous or non-discretionary in nature e.g. visiting friends and relatives,
conducting business and attending conferences and conventions. In 2006 less than 30%
of visitors to Auckland cited holiday or leisure as their primary reason for visiting. On
average, over 50% of visitations to other destination in New Zealand were for the
purpose of holiday or leisure.
A study commissioned by the Ministry of Tourism in 2006 entitled Domestic and
Outbound Travel Patterns2 confirmed that domestic tourism in New Zealand has declined
quite significantly over the past decade. The study found that:
• New Zealand residents spent a remarkably consistent number of nights away
from home each year – around 22 in total – and that these nights were divided
between domestic travel and outbound travel.
• The price of outbound travel has increased by 9% between 1990 and 2005 while
the price of domestic tourism has increased by 44%. This has created a marked
shift in the relative price of outbound travel in relation to domestic travel, making
outbound travel a more attractive and attainable option for New Zealanders.
• Declining rates of domestic tourism are a global trend, driven by higher
disposable incomes and greater competition in the international travel market.
The decline in domestic tourism in Auckland has been more marked than the decline
experienced elsewhere in New Zealand, with domestic visitor nights in Auckland
falling by an average of 4.1% per annum since 1999 compared with a decline of 2.8% for
all other destinations in New Zealand. The rapid increase in outbound travel over the
past decade has undoubtedly had the largest negative impact on domestic visitor
activity in Auckland.
2 http://tinyurl.com/57jvmg
www.covec.co.nz 18
Figure 5 Domestic Visitor Nights in Auckland
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1999 2000 2001 2002 2003 2004 2005 2006
Th
ou
san
ds
Do
me
sti
c V
isit
or
Nig
hts
in
Au
ck
lan
d
Outlook
The outlook for international tourism in New Zealand is relatively positive. The
Ministry of Tourism’s forecasting programme is predicting average growth in visitor
arrivals over the next 7 years of around 3.6% per annum, although lower growth rates
are expected in 2008 and 2009, mainly due to low consumer demand and higher airfares.
The growth rate beyond 2014 is difficult to predict, but the general consensus within the
industry is that an average growth rate of 3% per annum over the next 20 years is
realistic.
The outlook for domestic tourism is less optimistic with the Ministry of Tourism
predicting average growth in domestic visitor nights of around 0.8% per annum for
New Zealand over the next 7 years, and just 0.6% for Auckland. The main reason for
the low expected growth rate is New Zealand’s slow rate of population growth – less
than 1% per annum. In addition, outbound travel is expected to continue increasing,
which will further suppress domestic demand.
2.1.3. Cost of Travel
The cost of travel is a key driver of tourism demand. Around 95% of all domestic travel
in New Zealand is conducted using private vehicles – mainly cars; hence fuel is a direct
and significant component of the cost of domestic tourism. Practically all international
tourism involves a flight to New Zealand, and the airfare can be anything from 20-60%
of the total cost of a trip to New Zealand; hence fuel is a direct and significant
component of the cost of international tourism. The rapid increase in the cost of
domestic fuel and aviation fuel has been well documented, and the price of oil, currently
sitting at a record $US140 per barrel, is not expected to drop for some time.
www.covec.co.nz 19
Outlook
The general consensus among tourism operators in New Zealand is that we are entering
a period of high fuel prices that could persist for some time, and that the tourism
industry will need to find ways to reduce its consumption of, and exposure to, fossil
fuels. At least one of the major airlines operating in New Zealand is actively
reconfiguring its network to combat the higher fuel prices by shifting more capacity to
short-haul routes.
Persistently high fuel prices will reduce New Zealand’s competitiveness in long-haul
markets due to the large airfare component of a trip to New Zealand, but domestic
tourism is likely to increase as overseas travel becomes relatively more expensive for
New Zealanders.
2.1.4. Climate Change
Climate change has received a lot of publicity in recent years and most people are now
aware of the “carbon footprint” associated with travel. The perceived threat to the New
Zealand tourism industry is clearly emphasised by the prevalence of climate and
environmental themes in the recently released New Zealand Tourism Strategy 20153. In
particular the Tourism Strategy identifies the following as critical challenges to the New
Zealand tourism industry:
• The growing concern globally about the impact of travel on climate change
• The environmental sustainability of tourism in New Zealand
The general consensus within the tourism industry is that the issue of climate change is
not yet having a material impact on travel or consumption behaviour, but that it
definitely has the potential to do so. At present it seems that while awareness of climate
change has increased significantly, most consumers still put price and convenience
ahead of environmental factors, as evidenced by the very small percentage of air
passengers that volunteer to offset their carbon emissions.
According to key industry stakeholders the main risk to New Zealand, and therefore to
Auckland, seems to be the perception that a lot of carbon is generated in getting to New
Zealand. This has the potential to undermine or at least tarnish Tourism New Zealand’s
reputation as a “100% Pure” destination. To date at least one destination in the
Northern Hemisphere (Norway) has used climate change in its marketing campaign to
position itself as a more environmentally friendly alternative to New Zealand.
A further risk is the impact that emission trading schemes may have on the price of
getting to, and travelling within, New Zealand. Domestic travel within New Zealand
will face an increased fuel price when transport fuels are included in the proposed New
Zealand Emissions Trading Scheme (ETS); this is currently proposed to be in 2011. In
contrast, emissions from international air (or sea) travel are not included in national
emission targets under the Kyoto Protocol, nor are they under the New Zealand ETS.
3 http://www.nztourismstrategy.com/
www.covec.co.nz 20
However, the EU has proposed to include aviation in its ETS. This would only cover
domestic and international flights between EU airports initially (from 2011), but from
2012, it would be extended to cover emissions from all international flights that arrive
at, or depart from, an EU airport. This will have the largest effects on travel to distant
destinations, such as New Zealand.
Outlook
It is almost certain that climate change will play an increasing role in the decision-
making behaviour of consumers, particularly in relation to travel. In response, many
tourism operators are putting measures in place to better manage the impact of their
activities on the environment e.g. the use of bio-fuels by airlines4, the establishment of
offset schemes, changes in vehicle fleet technologies and compositions, the use of
alternative energy sources such as solar and wind.
The general view within the industry is that travel has become an important and
essential part of modern life; hence it is unlikely that increasing awareness of climate
change will curb aggregate travel activity. However, it is widely acknowledged that
climate change has the potential to alter the pattern of tourism i.e. it is anticipated that
consumers will choose destinations that are perceived to be relatively more
environmentally friendly than others.
In terms of international tourism the future success of Auckland will depend critically
on the perceived environmental friendliness of New Zealand as a destination relative to
other international destinations. The key challenge in this regard is the airfare
component of a trip to New Zealand. While New Zealand’s remoteness has arguably
been a positive attribute in the past, the growing awareness of climate change is rapidly
turning it into a negative attribute. This shift will be exacerbated if airfares to New
Zealand increase disproportionately relative to other countries as a result of emissions
trading schemes.
2.1.5. Aviation Capacity
Aviation capacity has a major impact on both international and domestic visitor flows.
More seats on a route obviously enables more demand to be satisfied, and, assuming
there is adequate competition from other carriers, will generally impose downward
pressure on airfares (as observed on trans-Tasman routes in 2004/05).
Aviation capacity is currently constrained due to well documented wide-body aircraft
production delays in both the Boeing and Airbus plants. These delays are affecting
practically all major carriers, including Qantas and Air New Zealand. This has resulted
in higher load factors for airlines and, consequently, higher airfares for consumers. The
main threat to New Zealand in the short-term is the reallocation of aircraft to more
profitable routes in Europe and Asia.
4 Air New Zealand says it expects to use at least one million barrels of environmentally sustainable fuel
annually by 2013. However, the anticipated impact of bio-fuels on basic food prices, particularly corn-
based products, could have an impact on the desirability and/or acceptability of bio-fuels.
www.covec.co.nz 21
Outlook
Airlines will take delivery of pre-ordered A380s from late 2008 onwards, and pre-
ordered 787s from late 2009 onwards, assuming there are no further production delays.
Both Qantas and Air New Zealand expect a large increase in wide-body capacity
internationally from 2010 onwards which should result in greater seat availability and
lower prices. The long-term outlook for aviation capacity is therefore very positive.
2.1.6. Exchange Rate
The exchange rate affects inbound tourism by altering the price of a trip to New
Zealand. As the graph below shows, the New Zealand dollar has increased in value in
the past two years relative to most of our major inbound markets, particularly in
relation to the US dollar and the Japanese Yen. This has increased the price of a trip to
New Zealand from these markets quite significantly, which has resulted in a reduction
in arrivals to New Zealand, and a corresponding reduction in visitations to Auckland.
Figure 6 Index of Value of New Zealand Dollar Relative to Currencies of Major Inbound Markets
50
70
90
110
130
150
170
190
210
230
Ja
n 9
4
Ju
n 9
4
Nov 9
4
Ap
r 9
5
Se
p 9
5
Fe
b 9
6
Jul 9
6
De
c 9
6
May 9
7
Oct
97
Mar
98
Aug
98
Ja
n 9
9
Ju
n 9
9
Nov 9
9
Ap
r 0
0
Se
p 0
0
Fe
b 0
1
Jul 0
1
De
c 0
1
May 0
2
Oct
02
Mar
03
Aug
03
Ja
n 0
4
Ju
n 0
4
Nov 0
4
Ap
r 0
5
Se
p 0
5
Fe
b 0
6
Jul 0
6
De
c 0
6
May 0
7
Oct
07
Mar
08
Valu
e o
f N
ew
Zeala
nd
Do
llar
(Index =
100 in J
anuary
2004)
Australia USA Japan South Korea China UK Germany
The exchange rate also affects domestic tourism by altering the price New Zealanders
pay for an international trip. The strength of the New Zealand dollar has definitely
played a part in the recent growth in outbound travel, although the combination of
growth in disposable income and cheap airfares has undoubtedly been the primary
driver.
The current strength of the New Zealand dollar can be attributed to the strength of the
New Zealand economy and high domestic interest rates, both of which make New
Zealand an attractive place for foreigners to invest. The Reserve Bank has recently
announced lower than expected economic growth projections, and an intention to
reduce the official cash rate (OCR), both of which resulted in an immediate sell-down of
New Zealand currency.
www.covec.co.nz 22
Outlook
Exchange rates are highly volatile and notoriously difficult to predict. The New
Zealand dollar is expected to weaken relative to major trading partners in 2008 and 2009
as economic growth slows and interest rates decline. A weak New Zealand dollar is
positive for tourism in New Zealand because it makes New Zealand a cheaper
destination for international travellers, and it makes outbound travel more expensive,
which induces more New Zealanders to travel domestically. It is likely that the New
Zealand dollar will revert back to a more sustainable long-term average in the next year
or two, which many economists believe is around US$0.60.
www.covec.co.nz 23
2.2. Specific Drivers of Tourism Demand in Auckland
The factors that are expected to influence the demand for tourism in Auckland
specifically are:
• Major events
• The cruise ship industry
• A national convention and exhibition centre
• Low cost air travel
These are discussed in more detail below.
2.2.1. Major Events
Major events were identified as a key opportunity for Auckland in the Metro Project,
and subsequently in Bringing the World to Auckland under the strategic theme:
Host City – (Within 10 years) Auckland has the infrastructure, reputation and unity
to secure and host large scale conferences, conventions and major events.
The main body of work on major events was published in Positioning Auckland as a Major
Events Destination5, which is considered to be an appendix to Bringing the World to
Auckland.
According to the research Auckland could realise the following benefits by establishing
itself as a major events destination:
• Attract more visitors, particularly in the shoulder seasons
• Maximise the economic benefits arising from hosting major events
• Enhance Auckland’s international profile and reputation
• Bring certainty and coordination at the regional level in the competition for
major events
• Offer opportunity to cluster support events around a major event
• Maintain programming consistency (regularly scheduled dates/times of major
events each year)
• Centralise knowledge and expertise on securing, promoting and delivering
events
• Ensure infrastructure requirements are taken into account
• Create the critical mass to retain the skills and knowledge acquired from the
city-region’s investment in major events
5 http://tinyurl.com/4w685d
www.covec.co.nz 24
The following aspiration for major events was developed through consultation with key
industry stakeholders:
"Auckland has a portfolio of major events that showcase its unique landscape,
culture and lifestyle on the world stage. It has a strong international profile and
a proven track record in delivering large scale events. Major events add
significant value to the regional economy and enrich the lives of Aucklanders."
The aspiration is underpinned by six strategic themes:
• Regional Approach
• Exciting Place
• Quality Infrastructure
• Outstanding People
• Well Supported Events
• Sustainable
More detail on each of the key themes can be found in Positioning Auckland as a Major
Events Destination.
Example of a Successful Major Event
The Lions Series is estimated to have attracted an additional 20,000 international visitors
to Auckland in June and July of 2005 - traditionally the two slowest months for the
visitor economy. A formal economic assessment6 concluded that:
“The Lions Series generated an additional $53.0m of revenue in the Auckland
region which flowed through the Auckland economy and generated a total
regional GDP impact of $43.2m. This GDP would not have existed in the
absence of the Lions Series.”
The impacts of the event were widespread, with visitor demand increasing significantly
during a traditionally slow period for Auckland, and New Zealand. The impact was
well reflected in the monthly New Zealand Hotel Council statistics which showed that
revenue per available room – the standard yield measure in the hotel sector - increased
from $85 in July 2004 to $111 in July 2005 (the Lions effect), before returning to $84 in
July 2006. This had a marked impact on hotel earnings in 2005, and on the earnings of
many other businesses in Auckland and throughout New Zealand.
Outlook
Auckland has signalled a commitment to developing a sustainable and financially
viable portfolio of major events that attracts visitors, tourism spend and investment
from elsewhere in New Zealand and internationally.
6 “The Economic Impact of the 2005 DHL Lions Series on New Zealand”, October 2005.
www.covec.co.nz 25
At present Auckland will be the main host of two confirmed major events in the next
decade – the Rugby World Cup in 2011 and the Cricket World Cup in 2015 (to be jointly
hosted by New Zealand and Australia). In addition, there is a possibility that Auckland
will submit a bid for the Commonwealth Games in 2018.
Auckland’s ability to expand its major events portfolio beyond these events will depend
on its ability to invest in a dedicated regional major events office, develop the
infrastructure required to attract and deliver large scale major events, and present a
united front when bidding for major events.
Note on Feature Films
An iconic feature film can have a marked impact on tourism. Feature films tend to sit
somewhere between a destination marketing campaign and a major event in terms of
their effect, but can be very effective in showcasing a destination and enticing people to
visit. The obvious example for New Zealand is “Lord of the Rings”, which anecdotally
had a major impact on tourism. Australia had similar success in the 1980s with
“Crocodile Dundee” and is reportedly trying to replicate this success with a soon-to-be-
produced feature film entitled “Australia: The Movie”.
2.2.2. Cruise Ship Industry
Recent analysis conducted by Covec suggests that the development of a new fit-for-
purpose cruise ship terminal in Auckland has the potential to deliver major economic
benefits to Auckland and New Zealand.
As a transfer port (i.e. a port at which passengers start or conclude their cruise ship
voyages), it is critical that Auckland has the ability to handle two large cruise ships at
the same time. Consultation with Cruise New Zealand confirms that with a new cruise
ship terminal in Auckland, and with the existing facility at Princes Wharf used as
overflow capacity, it is likely that the major cruise lines would deploy more ships to this
region i.e. at present demand for cruises in New Zealand is constrained by Auckland’s
cruise infrastructure.7 This would have an immediate impact on the number of cruises
operating in New Zealand waters, and on the economic impact generated by the cruise
ship industry. According to a recent study of the cruise ship industry in New Zealand,
each cruise ship passenger currently contributes around $1,700 to New Zealand’s GDP
through their own expenditure while in port and the expenditure of cruise ship
operators in New Zealand. It is estimated that a new fit-for-purpose cruise ship
terminal in Auckland would result in 45 additional cruises each season by 2014/15
carrying 70,000 additional passengers. An increase in cruise ship activity of this
magnitude would contribute an additional $120m in national GDP and $26m to
government income each year. Approximately half of the economic benefit of a new
cruise ship terminal would accrue to Auckland, with the remainder distributed widely
across the remainder of New Zealand.
7 This assumes that the cruise ship infrastructure in Sydney, which is the main Australian node of the
trans-Tasman swing, is capable of handling the additional activity.
www.covec.co.nz 26
The results of the research conducted by Covec suggest that there is a clear and
immediate business case for developing a new cruise ship terminal in Auckland. The
case for a new purpose-built cruise ship terminal in Auckland is very compelling. The
value creation opportunity is significant, as is the risk to the existing flow of value from
cruise ships if Auckland were to lose its status as a transfer/hub port.
2.2.3. National Convention and Exhibition Centre
Local tourism industry stakeholders unanimously support the development of an
internationally competitive convention and exhibition centre in Auckland to attract high
yielding visitors. The favoured site at present is the land bordered by Albert St and
Mayoral Drive, which is owned by Auckland City Council. A report entitled New
Zealand Convention Centre – Business Case and Facility Recommendations was
commissioned by Auckland City Council in 2005 to investigate the commercial viability
of a national convention centre located in Auckland. The report concluded that a
convention centre of suitable scale would cost around $200m to develop (excluding
land, which would be gifted by Auckland City Council), although $300m is now
considered to be a more realistic estimate. It is estimated that such a facility would
increase Auckland’s GDP by $67m per annum at operational maturity, and New
Zealand’s by $72m per annum. The estimates of economic impact were independently
reviewed by Covec on behalf of Auckland City Council in May 2008, and were found to
be reasonable.
A national convention and exhibition centre located in Auckland’s CBD would benefit
Auckland, and New Zealand, in a number of ways:
• Financially – on average conference and convention delegates spend 3-4 times
more money per night than typical visitors.
• Conferences and conventions are generally held during off-peak periods; hence
a convention and exhibition centre in Auckland would help to reduce
seasonality both locally and nationally (since a reasonable percentage of
delegates will travel more widely within New Zealand before and/or after their
event).
• By allowing New Zealand to promote and showcase its industries to the world,
as well as bringing some of the world’s most influential business and industrial
leaders to New Zealand.
www.covec.co.nz 27
2.2.4. Low Cost Air Travel
A low-cost airline is an airline that offers generally low fares in exchange for eliminating
many traditional passenger services. The concept originated in the United States before
spreading to Europe in the early 1990s and subsequently to much of the rest of the
world.
Typical low-cost carrier business model practices often (but not always) include:
• A single passenger class
• A single type of aeroplane (commonly the Airbus A320 or Boeing 737), reducing
training and servicing costs
• A minimum set of optional equipment on the aeroplane
• A simple fare scheme, such as charging one-way tickets half that of round-trips
• Unreserved seating
• Flying to cheaper, less congested secondary airports and flying early in the
morning or late in the evening to avoid air traffic delays and take advantage of
lower landing fees
• Fast turnaround times
• Simplified routes, emphasizing point-to-point transit instead of transfers at hubs
• Encourage the use of direct flights. Luggage is not automatically transferred
from one flight to another, even if both flights are with the same company.
• Generation of ancillary revenue from a variety of activities, such as a la carte
features and commission-based products
• Emphasis on direct sales of tickets, especially over the Internet
• Employees working in multiple roles, for instance flight attendants also cleaning
the aircraft or working as gate agents
• A disinclination to handle Special Service passengers, for instance by placing a
higher age limit on unaccompanied minors than full service carriers
• Aggressive fuel hedging programs
The main low cost airlines operating to and within New Zealand at present are:
• Jetstar, which is a subsidiary of Qantas that flies from various Australian ports
to Christchurch (generally via Brisbane).
• Pacific Blue, which is a subsidiary of Virgin that flies from various Australian
ports (generally via Brisbane) to Auckland, Wellington and Christchurch.
Pacific Blue also flies domestically in New Zealand, offering flights between
Auckland, Wellington, Christchurch and Dunedin.
www.covec.co.nz 28
A study conducted by BERL in 20028 concluded that significant economic benefits
would be realised from greater low cost airline activity in Auckland, driven mainly by
greater visitor numbers out of Australia. The BERL study concluded that:
“Even a moderate market response to [a low cost] airline would bring visitors
to stimulate the regional and local tourism industry and generate increased
employment in tourism of 1,000 FTEs in the region, and 2,500 FTEs
nationally. This would be additional regional GDP of $50m per annum and
national GDP of about $100m per annum. In 10 years time, the expected
expansion of tourist markets would increase these impacts by 50% to 100%.”
This analysis was based on the development of a new commercial airport at Whenuapai
Airbase, but could just as easily apply to greater low cost airline activity at Auckland
International Airport. A study published by Auckland International Airport in March
2006 entitled Auckland Airport Masterplan: 2025 and Beyond9 confirms that airport
capacity is not a major constraint on airline activity at Auckland International Airport.
This implies that greater low cost airline activity could be accommodated at Auckland
International Airport, particularly outside peak time-slots.
8 A Rejuvenated Whenuapai Airport – A Focus for North/West Auckland’s Balanced Growth and Economic
Development (http://www.waitakere.govt.nz/abtcit/whenuapai/pdf/rejuvenatedairport.pdf)
9 http://www.auckland-airport.co.nz/MasterPlan/summary.php
www.covec.co.nz 29
3. Economic Contribution
3.1. Gross Expenditure
Total visitor expenditure in Auckland was estimated by the Ministry of Tourism at
$3.745b in 2006, including GST.10 International visitors accounted for $2.52b of this
expenditure, with domestic visitors accounting for the remaining $1.22b. In total, gross
visitor expenditure in 2006 was distributed across industry sectors in the Auckland
Region as follows:
• Retail trade - $687m (18%)
• Accommodation, restaurants and bars - $1.43b (37%)
• Road transport - $415m (11%)
• Water and rail transport - $58m (2%)
• Air transport, services to transport and storage - $599m (16%)
• Education - $170m (4%)
• Cultural and recreational services - $391m (10%)
Figure 7 Gross Visitor Expenditure x Industry Sector in Auckland in 2006
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Gro
ss
To
uri
sm
Exp
en
dit
ure
in
Au
ckla
nd
($N
Zm
in
clu
din
g G
ST
)
Domestic $333 $445 $108 $15 $204 $8 $109
International $354 $980 $307 $43 $395 $163 $282
Retail tradeAccommodation,
restaurants and barsRoad transport
Water and rail
transport
Air transport,
services to transport
and storage
EducationCultural and
recreational services
Source: Ministry of Tourism and Covec Limited
Holiday travellers spent the largest amount of money in the Auckland region at $1.44b,
followed by travellers visiting friends and relatives (VFR) at $964m and visitors
engaging in educational activities ($350m). Visitors travelling for other reasons
(including business) accounted for the remaining $992m of expenditure.
10 Refer http://www.covec.co.nz/pdf/ForecastsBooklet2007.pdf, page 27.
www.covec.co.nz 30
Figure 8 Gross Visitor Expenditure x Purpose of Travel in Auckland in 2006
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600G
ros
s T
ou
rism
Exp
en
dit
ure
in
Au
ckla
nd
($N
Zm
in
clu
din
g G
ST
)
Domestic $398 $360 $17 $446
International $1,008 $612 $334 $570
Holiday VFR Education Other
Source: Ministry of Tourism and Covec Limited
Table 1 Visitor Expenditure x Purpose of Travel x Sector in Auckland in 2006 ($NZm including GST)
Holiday VFR Education Other TOTALInternational Visitors
Retail trade $111 $112 $27 $105 $354
Accommodation, restaurants and bars $386 $220 $83 $291 $980
Road transport $177 $74 $16 $40 $307
Water and rail transport $22 $10 $3 $8 $43
Air transport, services to transport and storage $187 $118 $10 $81 $395
Education $0 $0 $163 $0 $163
Cultural and recreational services $125 $78 $33 $46 $282
TOTAL $1,008 $612 $334 $570 $2,524
Domestic Visitors
Retail trade $125 $111 $4 $93 $333
Accommodation, restaurants and bars $151 $114 $5 $176 $445
Road transport $37 $28 $1 $43 $108
Water and rail transport $5 $4 $0 $6 $15
Air transport, services to transport and storage $69 $52 $2 $80 $204
Education $2 $2 $3 $2 $8
Cultural and recreational services $43 $41 $1 $23 $109
TOTAL $398 $360 $17 $446 $1,221
All Visitors
Retail trade $235 $224 $31 $198 $687
Accommodation, restaurants and bars $536 $334 $88 $466 $1,425
Road transport $213 $102 $17 $83 $415
Water and rail transport $28 $14 $3 $13 $58
Air transport, services to transport and storage $256 $170 $12 $161 $599
Education $2 $2 $165 $2 $170
Cultural and recreational services $168 $119 $35 $69 $391
TOTAL $1,439 $964 $350 $992 $3,745 Source: Ministry of Tourism and Covec Limited
www.covec.co.nz 31
3.2. Contribution to GDP
In aggregate, the $3.745b of gross visitor expenditure in the Auckland region (including
GST) generated total regional GDP of $2.994b in 2006. This implies an average
expenditure/GDP multiplier of around 0.80 i.e. on average every $1.00 of gross visitor
expenditure in Auckland generates around $0.80 of regional GDP, including indirect
and induced effects.
Figure 9 GDP x Industry Sector in Auckland
$0
$200
$400
$600
$800
$1,000
$1,200
Gro
ss
To
uri
sm
Exp
en
dit
ure
in
Au
ckla
nd
($N
Zm
in
clu
din
g G
ST
)
Domestic $299 $332 $98 $12 $136 $8 $86
International $318 $732 $278 $35 $264 $173 $223
Retail tradeAccommodation,
restaurants and barsRoad transport
Water and rail
transport
Air transport,
services to transport
and storage
EducationCultural and
recreational services
Figure 10 GDP x Purpose of Travel in Auckland
$0
$200
$400
$600
$800
$1,000
$1,200
Gro
ss T
ou
rism
Exp
en
dit
ure
in
Au
ckla
nd
($N
Zm
in
clu
din
g G
ST
)
Domestic $344 $282 $14 $331
International $790 $481 $309 $444
Holiday VFR Education Other
www.covec.co.nz 32
Table 2 GDP x Purpose of Travel x Industry Sector in Auckland ($NZm including GST)
Holiday VFR Education Other TOTALInternational Visitors
Retail trade $99 $101 $24 $94 $318
Accommodation, restaurants and bars $288 $165 $62 $217 $732
Road transport $160 $67 $14 $36 $278
Water and rail transport $18 $8 $2 $6 $35
Air transport, services to transport and storage $125 $79 $6 $54 $264
Education $0 $0 $173 $0 $173
Cultural and recreational services $99 $61 $26 $36 $223
TOTAL $790 $481 $309 $444 $2,023
Domestic Visitors
Retail trade $112 $100 $4 $83 $299
Accommodation, restaurants and bars $112 $85 $4 $131 $332
Road transport $33 $25 $1 $39 $98
Water and rail transport $4 $3 $0 $5 $12
Air transport, services to transport and storage $46 $35 $1 $54 $136
Education $2 $2 $3 $2 $8
Cultural and recreational services $34 $33 $1 $18 $86
TOTAL $344 $282 $14 $331 $971
All Visitors
Retail trade $211 $201 $28 $178 $617
Accommodation, restaurants and bars $401 $249 $65 $348 $1,064
Road transport $194 $93 $15 $75 $377
Water and rail transport $23 $11 $3 $11 $47
Air transport, services to transport and storage $170 $113 $8 $108 $399
Education $2 $2 $176 $2 $182
Cultural and recreational services $133 $94 $27 $54 $309
TOTAL $1,133 $763 $323 $776 $2,994
www.covec.co.nz 33
4. Economic Projections
See ‘Tourism GDP Projection Model.xls’ for more detail. Examples of the outputs
generated by the model are shown below. The default assumptions that drive these
projections are:
• Annual average growth in international visitor spend of 4.5% per annum
• Annual average growth in domestic visitor spend of 1.0% per annum
• A national convention centre built and fully operational in the CBD by 2013
• A new purpose built cruise ship terminal built and fully operational by 2011
• A significant increase in low cost airline activity in the Auckland region from
2015 onwards
• Auckland hosting the Rugby World Cup in 2011, the Cricket World Cup in 2015
and the Commonwealth games in 2018.
The assumptions driving the GDP projections can be altered in ‘Tourism GDP Projection
Model.xls’.
Figure 11 Projected GDP Derived from Tourism in the Auckland Region 2006 - 2031
YearBaseline Tourism
Convention Centre
Cruise Ship Terminal
Low Cost Air Travel
Major Events TOTALAnnual
Growth Rate
2006 2,994 0 0 0 0 2,994
2007 3,095 0 0 0 0 3,095 3.4%2008 3,200 0 0 0 0 3,200 3.4%
2009 3,309 0 0 0 0 3,309 3.4%2010 3,423 0 0 0 0 3,423 3.4%
2011 3,542 0 8 0 150 3,700 8.1%2012 3,666 0 16 0 0 3,682 -0.5%
2013 3,794 28 23 0 0 3,845 4.4%2014 3,929 41 29 0 0 3,999 4.0%
2015 4,069 55 29 31 75 4,258 6.5%2016 4,215 55 29 49 0 4,347 2.1%
2017 4,367 55 29 62 0 4,512 3.8%2018 4,525 55 29 62 150 4,821 6.8%
2019 4,691 55 29 62 0 4,836 0.3%2020 4,863 55 29 62 0 5,009 3.6%
2021 5,043 55 29 62 0 5,189 3.6%2022 5,230 55 29 62 0 5,376 3.6%
2023 5,426 55 29 62 0 5,572 3.6%2024 5,630 55 29 62 0 5,775 3.7%2025 5,842 55 29 62 0 5,988 3.7%
2026 6,064 55 29 62 0 6,210 3.7%2027 6,296 55 29 62 0 6,441 3.7%
2028 6,537 55 29 62 0 6,683 3.7%2029 6,789 55 29 62 0 6,935 3.8%
2030 7,052 55 29 62 0 7,197 3.8%2031 7,326 55 29 62 0 7,471 3.8%
www.covec.co.nz 34
Figure 12 Projected GDP Derived from Tourism in the Auckland Region by Sector 2006 - 2031
Year Retail TradeAccomm.
Restaurants
& Bars
Road Transport
Water & Rail Transport
Air Transp.
Services to Transp. &
Storage
EducationCultural &
Recreational
Services
TOTAL
2006 617 1,064 377 47 399 182 309 2,9942007 638 1,099 389 49 413 188 319 3,095
2008 660 1,137 402 51 427 194 330 3,200
2009 682 1,176 416 52 441 201 341 3,3092010 706 1,216 430 54 456 208 353 3,423
2011 763 1,314 465 59 493 224 382 3,7002012 759 1,308 463 58 491 223 380 3,682
2013 792 1,366 483 61 513 233 397 3,8452014 824 1,420 503 63 533 242 413 3,999
2015 878 1,513 535 67 568 258 439 4,258
2016 896 1,544 547 69 580 264 449 4,3472017 930 1,603 567 71 602 274 466 4,512
2018 994 1,713 606 76 643 292 497 4,8212019 997 1,718 608 76 645 293 499 4,836
2020 1,032 1,779 630 79 668 304 517 5,0092021 1,069 1,843 652 82 692 315 535 5,189
2022 1,108 1,910 676 85 717 326 555 5,376
2023 1,148 1,979 701 88 743 338 575 5,5722024 1,190 2,052 726 91 770 350 596 5,775
2025 1,234 2,127 753 95 798 363 618 5,9882026 1,280 2,206 781 98 828 376 641 6,210
2027 1,328 2,288 810 102 859 390 665 6,4412028 1,377 2,374 840 106 891 405 690 6,683
2029 1,429 2,463 872 110 925 420 716 6,935
2030 1,483 2,557 905 114 960 436 743 7,1972031 1,540 2,654 939 118 996 453 771 7,471