2016/17 Annual review of the New Zealand Tourism Board

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1 2016/17 Annual review of the New Zealand Tourism Board Report of the Economic Development, Science and Innovation Committee March 2018 Contents Recommendation... 2 Introduction... 2 Financial and performance information... 2 Managing the increasing number of tourists... 2 Growing tourism in the regions... 3 Rising costs for tourists... 3 Tourism influencers and ambassadors... 4 Māori culture... 4 The cruise industry... 4 Approved Destination Status... 5 Airport extensions... 5 Appendix... 6

2 New Zealand Tourism Board Recommendation The Economic Development, Science and Innovation Committee has conducted the annual review of the New Zealand Tourism Board for 2016/17, and recommends that the House take note of its report. Introduction The New Zealand Tourism Board (known as Tourism New Zealand) is a Crown entity established under the New Zealand Tourism Board Act Its primary purposes are to develop, implement, and promote strategies for tourism, and to advise the Government and the New Zealand tourism industry on related matters. Kerry Prendergast is the board s chair and Stephen England-Hall, appointed in April 2017, is its chief executive. Financial and performance information In the 2016/17 financial year, the board s income was $ million, compared with $ million the previous year. Most of the revenue ($ million) comes from the Crown. As at 30 June 2017, it had around 160 full-time staff members. It has 13 offices, of which two are in New Zealand, and it co-locates staff with other New Zealand agencies in Buenos Aires, Beijing, and New Delhi. A significant proportion of TNZ s annual expenditure is denominated in foreign currencies. It manages the risks through forward foreign exchange contracts. We note that the Auditor-General issued an unmodified audit opinion. The auditor graded the board s management control environment, its financial information systems and controls, and its performance information and associated systems and controls as very good. Managing the increasing number of tourists In the year under review, New Zealand experienced record arrivals reaching 3.6 million people, an increase of 10 percent on the previous financial year. Holiday arrivals were up 12 per cent to 1.9 million people. Tourism as a whole contributed $10.25 billion to the New Zealand economy. We asked whether tourism infrastructure in New Zealand could withstand the increasing number of visitors to the country. One particular example of a tourism pinch point is the Church of the Good Shepherd, which overlooks Lake Tekapo, and is experiencing increasing visitor numbers. Tourism New Zealand said it has two strategies to overcome the challenge of increasing numbers of tourists. The first is to spread the seasonal profile of arrivals by encouraging tourists to visit New Zealand during the shoulder and off-peak seasons. The second, as part of TNZ s destination strategy, encourages conversations about tourism growth between local 2

3 and central government. The aim is to help implement ways to manage the growth at both the local and national level. Growing tourism in the regions We note that one of TNZ s key objectives is to achieve regional benefits and growth through tourism. The board said it works with the Ministry of Business, Innovation and Employment (MBIE) to identify areas in New Zealand that could benefit economically through the tourism industry. It then assists regional economic development agencies and regional tourism organisations (RTOs) to help these areas. We heard that TNZ works with any RTO that has a tourism proposal, and it has staff dedicated to working with local authorities to explain the data about incoming tourists. However, it said that regional development through tourism is a complex process with many contributing factors. The help it can offer local authorities depends on the attractions and amenities the region offers, and access to the area, such as the suitability of roads for international visitors. TNZ also recognises the importance of building visitors awareness of different regions throughout New Zealand, besides the obvious tourist destinations. TNZ explained that, if general infrastructure is to be improved in the regions, local authorities first need to improve their tourism infrastructure in preparation for increasing visitor numbers. Communication between local and central government is key in this process. Involving New Zealanders in the tourism sector One of TNZ s aims is to increase New Zealanders understanding of the tourism industry and its objectives. TNZ said it communicates with local communities, RTOs, and councils to increase this knowledge. The chief executive is also part of a group of government department heads working to develop a cohesive response on this issue. TNZ commented that the benefits of tourism are often centralised but the costs are distributed. If the benefits were evenly distributed to the areas affected by tourism, local communities would be likely to become more involved in the tourism sector. Domestic connectivity We were concerned that places such as Wanaka do not receive as many tourists because Air New Zealand no longer flies there. We asked TNZ whether it has a role in working with Air New Zealand and other airlines to increase domestic connectivity by air. TNZ said it had never played such an advocacy role, but if it could show, by working with local government and marketing the region, that more tourists would visit then Air New Zealand would be interested in flying there. Rising costs for tourists We heard that the number of tourists from China had dropped considerably during the summer of 2016/17 because of the increasing cost of visiting New Zealand during the peak holiday season. At the time, package trips to New Zealand for Chinese tourists were 25 per cent more expensive than to Australia, and 50 per cent more expensive than to Europe. 3

4 One of the goals for TNZ is to improve tourism infrastructure in different parts of New Zealand to take the pressure off areas popular with tourists, such as Auckland and Queenstown. TNZ said that more accommodation in these tourist centres would ease the rates charged to visitors, but this is dependent on the private sector building the accommodation. Tourism influencers and ambassadors As part of its strategy, TNZ uses famous personalities from overseas to advertise New Zealand to markets around the world. The board used the example of American actress Bryce Dallas Howard, from the film Pete s Dragon, who was a great success in promoting New Zealand in partnership with National Geographic. We heard that this promotion has seen a phenomenal return in the North American market. The promotion exceeded the return the New Zealand tourism industry gained from the Hobbit movies by 60 per cent. TNZ said it did not see any concerns on the part of New Zealanders about its use of stars from overseas to promote this country. We heard that, to manage the costs of using famous people for promotions, TNZ is looking for innovative ways to find an influencer. It is important for TNZ to get the right person for the right audience when using well known figures to promote New Zealand. Māori culture We are interested in how well Māori culture is represented in the tourism industry considering its uniqueness to New Zealand. TNZ said it wants to increase the emphasis on Māori culture as this has received less coverage than New Zealand s landscape or wilderness, particularly in the 100% Pure New Zealand campaign. We heard that the board is making a concerted effort to emphasise the uniqueness and authenticity of Māori culture. To promote this country s unique culture, the board has been engaging with local iwi and Māori tourism groups and working with advisers to tell the story about the history of New Zealand from a cultural perspective. It hopes to expand this marketing effort throughout New Zealand. The cruise industry We heard that about 160,000 cruise ship passengers arrive each year, and make a significant contribution to the New Zealand economy, particularly those arriving in Tauranga who visit places like Hobbiton and Rotorua. TNZ told us that there are some deficiencies in the infrastructure for visitors arriving by cruise ship. The biggest difference between a successful and an unsuccessful port is product development; that is, things for visitors to do. To solve this issue, TNZ has been working with the cruise industry, regional tourism organisations, and regional economic development agencies to invest in product development at a regional level. 4

5 Approved Destination Status The Approved Destination Status (ADS) is an arrangement between the Chinese Government and other countries that lets Chinese holiday travellers visit a country in a tour group. We asked TNZ why income from ADS applications had reduced by 25 per cent since last year. TNZ said it had shifted its target market towards free independent travellers and away from those groups, who tend to spend less. This shift in marketing and trade engagement has seen massive growth in independent visitors from China, and the visitor mix has improved for New Zealand. Airport extensions TNZ said that it plays a minimal part in discussions about potential airport extensions, such as in Auckland, Wellington, or the Chatham Islands. However, it can provide airports with market insights to help their planning. It also engages with airlines and airports around developing new routes. We heard that if New Zealand can increase access for airports, then new ports in places such as South America, the United States, and Japan would be opened up with the airports being the direct beneficiaries. 5

6 Appendix Committee procedure We met on 1 February and 22 March 2018 to consider the annual review of the New Zealand Tourism Board. We heard evidence from the New Zealand Tourism Board and received advice from the Office of the Auditor-General. Committee members Jonathan Young (Chairperson) Tamati Coffey Hon Jacqui Dean (until 21 March 2018) Paul Eagle Andrew Falloon (from 21 March 2018) Hon Christopher Finlayson (until 21 March 2018) Hon Paul Goldsmith (from 21 March 2018) Gareth Hughes Melissa Lee Clayton Mitchell Dr Parmjeet Parmar Hon Aupito William Sio Advice and evidence received We received the following documents as advice and evidence for this annual review. They are available on the Parliament website, Office of the Auditor-General, Briefing on the New Zealand Tourism Board, 1 February Office of the Clerk, 2016/17 Annual review briefing paper, 1 February New Zealand Tourism Board, Response to committee questions 1-106, 28 January New Zealand Tourism Board, Response to committee questions , 23 February

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