Tourists keep coming despite rising dollar

A report in the New Zealand Herald says that an economic report says that as the New Zealand dollar continues to hit new highs, tourism is largely shielded from its effects.

The report, by the Ministry of Tourism, shows the exchange rate has little impact on tourist arrivals.

The kiwi hit a post-float high of US78.40c this week, and has gained more than US10c in the past three months. This has cut the spending power of tourists in New Zealand.

But the Institute of Economic Research says a 1 per cent increase in the value of the New Zealand dollar has a barely perceptible negative effect on visitor numbers – about 0.02 per cent.

Inbound Tour Operators Council chief executive Paul Yeo said that for most people selecting a holiday destination was not a decision based on dollars.

“It’s really that emotive reason,” Yeo said. “If you’re going to go, you’re going to go.

“If the exchange rate goes up or down, it doesn’t necessarily deter people.”

Yeo said that other export industries might lose sales because of a rising exchange rate, but the tourism industry would still get visitors, even if their spending was reduced.

The report found that income in the tourists’ home countries was a more important long-term factor in tourism growth.

A 1 per cent rise in world income boosted tourism numbers 1.7 per cent.

Tourism Ministry research manager Bruce Bassett said the research showed international tourism was resilient but not unaffected by changes in the exchange rate.

“It shows that even with a high exchange rate, the numbers of visitors will hold up very well, driven by the income growth of our markets,” he said.

“Against this, expenditure is clearly more sensitive and we do see spending reductions that are masked by the underlying growth in arrivals.”

In the year to March, the number of people coming to New Zealand rose 2.8 per cent, but the amount they spent went up only 0.2 per cent, to $6.3 billion.

The new study found spending per visitor dropped by 0.8 per cent for each 1 per cent rise in the NZ dollar’s value.

The strength of the exchange rate relationship varied between countries. Germany, Japan, the United States and South Korea were more sensitive than the top two markets of Australia and Britain.

Tourism Minister Damien O’Connor said that even with a high exchange rate, visitor numbers, particularly from Australia and Britain, were good.

“While many of our export industries are feeling the heat from the rising dollar, this finding is heartening at least for one of our top income earners,” he said.

But the report says it can take 18 months to two years for an exchange rate shift to reach its peak effect on visitor numbers. There was no similar lag in expenditure as spending was affected at the time of the visit.

Tourism Holdings chief executive Trevor Hall said it was important to study each source market individually by length of stay and spending, followed by a demographic breakdown within that market.

“The backpackers may still come to New Zealand but whereas once they may have spent four weeks because they know that it’s cheaper in Asia or in South America they may reduce their New Zealand stay down by 10 days,” Hall said.

Tourism Holdings runs attractions including Kelly Tarlton’s and the Waitomo glow worm caves. “If we’ve got four attractions businesses and they tourists cut one to make their dollar go further, that hurts us.”

The exchange rate does have a significant effect on the number of New Zealanders travelling overseas for holidays.

Outbound holiday travel was boosted on average by 0.87 per cent in relation to a 1 per cent rise in the NZ dollar’s value.

The New Zealand dollar closed at US78.22c yesterday.

Cause and effect – If the NZ dollar strengthens by 1 per cent:

* Visitor numbers drop 0.02 per cent.

* Spending per visitor drops 0.8 per cent.

* Outbound holiday travel rises 0.87 per cent.

Report by The Mole and the NZ Herald