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 shane@covec.co.nz 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.

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Contents
Executive Summary ............................................................................................................... 1
1.

Introduction .................................................................................................................... 6
1.1.

2.

Overview: Bringing the World to Auckland............................................................6

Drivers of Tourism Demand ......................................................................................... 13
2.1.
2.2.

3.

General Drivers of Tourism Demand..................................................................... 13
Specific Drivers of Tourism Demand in Auckland .............................................. 23

Economic Contribution ............................................................................................... 29
3.1.
3.2.

4.

Gross Expenditure..................................................................................................... 29
Contribution to GDP ................................................................................................ 31

Economic Projections.................................................................................................. 33

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 cityregion. www.covec.co.nz 1

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.

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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 longhaul 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.

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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 preordered 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.

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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.

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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

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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.

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Figure 1 Auckland’s Strengths and Weaknesses as a Visitor Destination
Very Poor
1

2

World Class
3

4

5

6

7

8

9

10
Landscape
Coastal Environment
Safety and Security
Airport
Food and Beverage
Visitor Information
Hotels
Cleanliness
Business Environment
Level of Service
Urban Environment
Attractions and
Retail Shopping
Entertainment
Road Network
Public Transport

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 worldclass 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.

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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.

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Figure 2 Auckland in 2007

SLEEPY

VIBRANT

BORING

EXCITING

UNFRIENDLY

FRIENDLY

STRESSFUL

RELAXING

SPRAWLING

COMPACT

PROVINCIAL

COSMOPOLITAN

BLAND
INACCESSIBLE
DOWN-MARKET

DIVERSE
ACCESSIBLE
CLASSY

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.

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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

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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.

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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 supplyside 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.

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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 shorthaul 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 14

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.

Millions

International Visitor Nights in New Zealand

Figure 3 International Nights in New Zealand vs. International Nights in Auckland 1999-2006
50

45

40
Distorted by export education
35

30

25
8

9

10

11

12

13

14

International Visitor Nights in Auckland

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16

17

18
Millions

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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.

3,000

40%
Growth in Visitor Arrivals to NZ
Visitor Arrivals to NZ

35%

2,500
30%
2,000

25%
20%

1,500
15%
1,000

10%
5%

500

Growth in Visitor Arrivals to New Zealand

Visitor Arrivals to New Zealand

Thousands

Figure 4 Growth in International Visitor Arrivals to New Zealand

0%
0

-5%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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.

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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

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17

Thousands

Domestic Visitor Nights in Auckland

Figure 5 Domestic Visitor Nights in Auckland
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1999

2000

2001

2002

2003

2004

2005

2006

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.

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18

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/

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19

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 decisionmaking 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 cornbased products, could have an impact on the desirability and/or acceptability of bio-fuels. www.covec.co.nz 20

Outlook
Airlines will take delivery of pre-ordered A380s from late 2008 onwards, and preordered 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
230
Australia

USA

Japan

South Korea

China

UK

Germany

Value of New Zealand Dollar
(Index = 100 in January 2004)

210
190
170
150
130
110
90
70

Oct 07

Mar 08

May 07

Jul 06

Dec 06

Feb 06

Apr 05

Sep 05

Jun 04

Nov 04

Jan 04

Aug 03

Oct 02

Mar 03

May 02

Jul 01

Dec 01

Feb 01

Apr 00

Sep 00

Jun 99

Nov 99

Jan 99

Aug 98

Oct 97

Mar 98

May 97

Jul 96

Dec 96

Feb 96

Apr 95

Sep 95

Jun 94

Nov 94

Jan 94

50

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.

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21

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.

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22

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:
•
•
•
•
•
•
•
•
•

5

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

http://tinyurl.com/4w685d

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23

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.

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24

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-beproduced 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-forpurpose 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 25

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

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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.

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27

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

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28

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
Gross Tourism Expenditure in Auckland
($NZm including GST)

$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Retail trade

Accommodation, restaurants and bars

Road transport

Water and rail transport Air transport, services to transport and storage

Domestic

$333

$445

$108

$15

International

$354

$980

$307

$43

Education

Cultural and recreational services

$204

$8

$109

$395

$163

$282

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

29

Figure 8 Gross Visitor Expenditure x Purpose of Travel in Auckland in 2006

Gross Tourism Expenditure in Auckland
($NZm including GST)

$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Domestic
International

Holiday

VFR

Education

Other

$398

$360

$17

$446

$1,008

$612

$334

$570

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

TOTAL

International Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$111
$386
$177
$22
$187
$0
$125
$1,008

$112
$220
$74
$10
$118
$0
$78
$612

$27
$83
$16
$3
$10
$163
$33
$334

$105
$291
$40
$8
$81
$0
$46
$570

$354
$980
$307
$43
$395
$163
$282
$2,524

Domestic Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$125
$151
$37
$5
$69
$2
$43
$398

$111
$114
$28
$4
$52
$2
$41
$360

$4
$5
$1
$0
$2
$3
$1
$17

$93
$176
$43
$6
$80
$2
$23
$446

$333
$445
$108
$15
$204
$8
$109
$1,221

All Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$235
$536
$213
$28
$256
$2
$168
$1,439

$224
$334
$102
$14
$170
$2
$119
$964

$31
$88
$17
$3
$12
$165
$35
$350

$198
$466
$83
$13
$161
$2
$69
$992

$687
$1,425
$415
$58
$599
$170
$391
$3,745

Source: Ministry of Tourism and Covec Limited

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30

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 $0.80 of regional GDP, including indirect and induced effects.
Figure 9 GDP x Industry Sector in Auckland
Gross Tourism Expenditure in Auckland
($NZm including GST)

$1,200
$1,000
$800
$600
$400
$200
$0
Road transport

Water and rail transport Air transport, services to transport and storage

$332

$98

$12

$136

$8

$86

$732

$278

$35

$264

$173

$223

Retail trade

Accommodation, restaurants and bars

Domestic

$299

International

$318

Education

Cultural and recreational services

Figure 10 GDP x Purpose of Travel in Auckland

Gross Tourism Expenditure in Auckland
($NZm including GST)

$1,200

$1,000

$800

$600

$400

$200

$0

Holiday

VFR

Education

Other

Domestic

$344

$282

$14

$331

International

$790

$481

$309

$444

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31

Table 2 GDP x Purpose of Travel x Industry Sector in Auckland ($NZm including GST)
Holiday

VFR

Education

Other

TOTAL

International Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$99
$288
$160
$18
$125
$0
$99
$790

$101
$165
$67
$8
$79
$0
$61
$481

$24
$62
$14
$2
$6
$173
$26
$309

$94
$217
$36
$6
$54
$0
$36
$444

$318
$732
$278
$35
$264
$173
$223
$2,023

Domestic Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$112
$112
$33
$4
$46
$2
$34
$344

$100
$85
$25
$3
$35
$2
$33
$282

$4
$4
$1
$0
$1
$3
$1
$14

$83
$131
$39
$5
$54
$2
$18
$331

$299
$332
$98
$12
$136
$8
$86
$971

All Visitors
Retail trade
Accommodation, restaurants and bars
Road transport
Water and rail transport
Air transport, services to transport and storage
Education
Cultural and recreational services
TOTAL

$211
$401
$194
$23
$170
$2
$133
$1,133

$201
$249
$93
$11
$113
$2
$94
$763

$28
$65
$15
$3
$8
$176
$27
$323

$178
$348
$75
$11
$108
$2
$54
$776

$617
$1,064
$377
$47
$399
$182
$309
$2,994

www.covec.co.nz

32

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

Year

Baseline
Tourism

Convention
Centre

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031

2,994
3,095
3,200
3,309
3,423
3,542
3,666
3,794
3,929
4,069
4,215
4,367
4,525
4,691
4,863
5,043
5,230
5,426
5,630
5,842
6,064
6,296
6,537
6,789
7,052
7,326

0
0
0
0
0
0
0
28
41
55
55
55
55
55
55
55
55
55
55
55
55
55
55
55
55
55

www.covec.co.nz

Cruise Ship Low Cost Air
Major Events
Terminal
Travel
0
0
0
0
0
8
16
23
29
29
29
29
29
29
29
29
29
29
29
29
29
29
29
29
29
29

0
0
0
0
0
0
0
0
0
31
49
62
62
62
62
62
62
62
62
62
62
62
62
62
62
62

0
0
0
0
0
150
0
0
0
75
0
0
150
0
0
0
0
0
0
0
0
0
0
0
0
0

TOTAL
2,994
3,095
3,200
3,309
3,423
3,700
3,682
3,845
3,999
4,258
4,347
4,512
4,821
4,836
5,009
5,189
5,376
5,572
5,775
5,988
6,210
6,441
6,683
6,935
7,197
7,471

Annual
Growth Rate

3.4%
3.4%
3.4%
3.4%
8.1%
-0.5%
4.4%
4.0%
6.5%
2.1%
3.8%
6.8%
0.3%
3.6%
3.6%
3.6%
3.6%
3.7%
3.7%
3.7%
3.7%
3.7%
3.8%
3.8%
3.8%

33

Figure 12 Projected GDP Derived from Tourism in the Auckland Region by Sector 2006 - 2031
Year

Retail Trade

Accomm.
Restaurants
& Bars

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031

617
638
660
682
706
763
759
792
824
878
896
930
994
997
1,032
1,069
1,108
1,148
1,190
1,234
1,280
1,328
1,377
1,429
1,483
1,540

1,064
1,099
1,137
1,176
1,216
1,314
1,308
1,366
1,420
1,513
1,544
1,603
1,713
1,718
1,779
1,843
1,910
1,979
2,052
2,127
2,206
2,288
2,374
2,463
2,557
2,654

www.covec.co.nz

Road Water & Rail
Transport
Transport
377
389
402
416
430
465
463
483
503
535
547
567
606
608
630
652
676
701
726
753
781
810
840
872
905
939

47
49
51
52
54
59
58
61
63
67
69
71
76
76
79
82
85
88
91
95
98
102
106
110
114
118

Air Transp.
Services to
Transp. &
Storage
399
413
427
441
456
493
491
513
533
568
580
602
643
645
668
692
717
743
770
798
828
859
891
925
960
996

Cultural &
Education Recreational
Services
182
188
194
201
208
224
223
233
242
258
264
274
292
293
304
315
326
338
350
363
376
390
405
420
436
453

309
319
330
341
353
382
380
397
413
439
449
466
497
499
517
535
555
575
596
618
641
665
690
716
743
771

TOTAL
2,994
3,095
3,200
3,309
3,423
3,700
3,682
3,845
3,999
4,258
4,347
4,512
4,821
4,836
5,009
5,189
5,376
5,572
5,775
5,988
6,210
6,441
6,683
6,935
7,197
7,471

34