Tourism & services exports: more underperformance

Somewhere the other day I noticed a job advert (no, I wasn’t looking) for a role in tourism policy at MBIE.  I guess one has to do a bit of a hard sell to get good policy analysts to work in such a minor area of government, but the rather over the top claims (‘high profile portfolio’, ‘make a difference to New Zealand’s economy’)  irked me a bit, so I dug out a bit of data.

The World Bank has collated data on international tourist arrivals for a huge range of countries and territories.   For these purposes, “tourist” includes most business visitors (anyone not visiting for a purpose directly remunerated from within the country visited).  The World Bank data comes with quite a few health warnings –  countries collect data in different ways, some only capture those staying in hotels for example, and I presume in the Schengen area there is no real way of capturing day trippers.   Being an island, and with our good international arrivals cards, New Zealand’s data are pretty comprehensive, with little risk of undercounting.  On the other hand, no one comes to New Zealand for an afternoon’s shopping.

In 2014, France had around 83 million visitors.  New Zealand was the 66th most visited country in the world with 2.8 million visitors, wedged between Qatar and Uruguay (I’ve noted previously that the beaches looked nice in Uruguay).  Remarkably, although I know almost nothing about the country, the Kyrgyz Republic comes in just ahead of Qatar.

What about the number of visitors per capita?  I only bothered looking at the places with at least one million visitors a year.  Even so, some tiny places top the list – Andorra, reportedly has 32 visitors per capita each year, and Macao (less surprisingly with all those casinos) 25.    Here is a chart (lopping off the tiny places at the top).

international visitor arrivals

We do considerably better than Australia, of course, but we are still a long way down the chart.    And that isn’t really that surprising.  After all, we are long way from almost anywhere, which means it is really expensive (time and money) to get here.    The upside is that the median visitor here probably spends more than they do in most of the other places –  having spent so much to get here, you tend to stay a bit longer –  but it doesn’t have the feel of an industry with massive growth potential (and that is setting aside the point various other commentators make, that tourism is neither a high productivity sector, nor one with huge apparent productivity growth opportunities.  Which is not to decry tourism.  Most of us like holidays.

I also dug out the data for OECD countries on exports of services.  International tourism is classified as a services export, and for New Zealand it is a very large component of our services exports.  But that isn’t so everywhere.

Here is the share of services exports in GDP last year.

services exports oecdLarge countries don’t tend to do as much international trade as small countries –  they don’t need to, there are plenty of opportunities and markets at home.  I’ve highlighted the large countries (more than 40m people) in green, and the small countries (under 11m, where there is a natural break) in red.  New Zealand has the lowest services export share of any of the small countries (and, by the look of it, the lowest real dollar value of services exports as well) .  Of course, we are much more remote than the other small countries, but it just highlights the difficulty of generating really high incomes for lots of people in a place so distant.

(I don’t purport to understand the Irish numbers, although I assume much of it has to do with tax.)

And it isn’t as if the picture has been getting better.  Here is the change in the services exports share of GDP (in percentage points) over the last decade.

services X change since 2005

If one looks at a 20 year history rather than just 10 years there are fewer countries to compare with, and New Zealand’s relative performance isn’t quite so bad.  Over that period we were only 4th worst.

 

 

 

 

 

11 thoughts on “Tourism & services exports: more underperformance

  1. The number of tourists in NZ has risen to 3.2 million, an increase of 400k from 2014. Singapore is an island nation and they pitch for the tourism dollar with 15.2 million visitors. I like comparing with Singapore because this is an island nation with no natural beauty or any natural resources.

    When Singapore decided it needed a casino to help boost its tourism industry, it required the top casinos to pitch a development plan.

    In December 2004, the government of Singapore called for a request-for-concept (RFC), inviting industry players to submit concept proposals for the integrated resorts. A total of 19 bids were submitted during the RFC. Las Vegas Sands had committed the highest development investment of S$3.85 billion. With the land price and associated capital cost, its total investment will exceed S$5 billion. It would also be one of the most expensive casinos in the world. The design by Moshe Safdie consists of three large shells containing conference halls and other business venues, three large hotel towers linked on their top floors by a sweeping sky garden, and a centerpiece museum which juts out onto the bay.

    https://en.wikipedia.org/wiki/Integrated_resort

    Now if you compare our John Key pitch for a $500 million spend for a SkyCity convention centre, we sold ourselves rather short. We did not open it up for competition tender. Singapore pitched $5 billion and we pitch only $500 million. Instead of just extending Sky City’s gambling licence we should have opened up a tender process for new entrants.

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  2. “Lobby group Urban Auckland is taking legal action claiming Auckland Council acted unlawfully in giving the port resource consents to do the work.

    After a huge public outcry and pressure from its council owners, Ports of Auckland agreed in April to drop one planned 100 metre extension on the west side of the Bledisloe container wharf until a year-long study of the port’s operations can be completed.”

    http://www.stuff.co.nz/business/industries/68929504/Court-action-against-Ports-of-Auckland-wharf-expansion-begins

    The reality we need to face is that there is a very wealthy minority that do not want more tourists and do not want more commercial activity and are using every expensive means possible to block progress and to block development.

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    • 29 May 2014, $240 million Fiordland monorail rejected. Riverstone Holdings wanted to develop a tourist trip using a catamaran from Queenstown to Mt Nicholas Station, an all-terrain vehicle drive to Kiwi Burn near the Mavora Lakes, and then the monorail ride to Te Anau Downs.

      “The Fiordland Link Experience would have provided a significant boost to the economy, provided 1000 jobs and future-proofed our tourism industry with no more than a minor ecological impact as confirmed by the Department of Conservation and the hearing commissioner,”

      http://www.stuff.co.nz/national/politics/10099108/240-million-Fiordland-monorail-rejected

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    • 05 June 2013, Dunedin $100 million waterfront hotel rejected. The Dunedin City Council had refused to give resource consent to Betterways Advisory’s proposal to build a 27-storey hotel on industrial land on the city’s waterfront.

      In a decision just released, a council hearings committee said it was not satisfied that the adverse effects of the project were minor.

      The proposed $100 million, 27-storey hotel would have been the city’s tallest building.

      http://www.stuff.co.nz/the-press/business/8758163/Dunedin-waterfront-hotel-rejected

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    • 17 July 2013 Milford tunnel proposal rejected. Milford Dart Limited had applied for permission to build a $170 million, 11.3km, five-metre diameter, single-lane bus tunnel that would have slashed the nine-hour journey time between the tourist hotspots. The route would have gone through the Fiordland and Mt Aspiring national parks. Parts of the affected area are in the United Nations’ Te Wahipounamu World Heritage Area.

      http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10899346

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  3. I have a lot of sympathy with many of these comments. We often shoot ourselves in the foot.

    Re Singapore, recall that it is a major airline hub (plenty stop for a day or a few hours there, many regional mtgs are there), and it is very close to places with much larger populations.

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  4. Hi Michael,

    interesting comments on NZ tourist industry. I am a keen tourist industry watcher because I have a long standing connection with Central Otago and currently own a holdiay house there. I attended a lecture by Paul Callaghan some years ago where he commented that NZ should be careful about the extent to which we encouraged growth in this sector. His theory was that tourism created low paying jobs which were a benefit to the extent they provided jobs for the low skilled (driving buses,making beds,waiting tables), but if the sector became too dominant then it would start to impact the quality of life enjoyed by the rest of the citizens of our country. And that eventually sheer numbers would detract from the tourist product offerring. We would kill the golden goose.

    My observation is that in Central Otago at least, we have reached that point already. We have large numbers of people (many recent immigrants and tourists themselves) employed at very low rates of pay. And the sheer numbers of camper vans on our roads and people wandering around in our once pristine environment is irritating to say the least. On a recent early morning fly fishing trip up one of our back country rivers I was asked by a young man with a thick German accent if I was aware of the etiquette on the river. He had camped overnight so he could have first use of the upstream water.

    As with our immigration policy, it appears no real debate, emperical study or long term thinking has occured prior to the immplementation of current policy around tourism.

    I would be interested in thoughts.

    Charlie Roberts.

    Liked by 1 person

    • I’m not sure to what extent tourism numbers are really a matter of policy at all: at the margins changes in visa requirements matters, and I suppose the myriad new working holiday schemes (“give us a Security Council vote and we’ll give you one”), but presumably it is mostly a matter of (in the long run) rising incomes and falling travel costs (despite rising security inconveniences). I’m also not sure what the appropriate policy response is, if any. I have some sympathy for, eg, pricing tourist access to the more crowded of the national parks. But isn’t there something in the argument that if Central Otago is too crowded, locals can take the financial spinoff, sell and move elsewhere. After all, tastes and relative prices do change over time. Oysters, back in Dickens’ time, were cheap poor people’s food, and now they are an expensive luxury – but we don’t differentially price to ensure that the poor can still consume the oysters they used to.

      I supposed I genuinely don’t see much risk that our 3m visitors will go to 10m (at least not in my lifetime), and we still have fewer visitors per capita (and certainly per sq km) than places like France.

      Ill-formed thoughts only I’m afraid. The problem doesn’t much arise on the chilly south coast of Wellington – despite all the Wgtn airport boosters!

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    • Tourists contribute $11 billion to our GDP but we need to create massive parks that tourists can spend their money on rather than have them running around freely in NZ costing the NZ taxpayer and no where to spend any money. We need the likes of the massive themed entertainment parks that we see on the Goldcoast eg MovieWorld, Seaworld, Waterworld etc, cleverly designed to extract maximum tourist spending..

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  5. 05 June 2013, Dunedin $100 million waterfront hotel rejected. The Dunedin City Council had refused to give resource consent to Betterways Advisory’s proposal to build a 27-storey hotel on industrial land on the city’s waterfront.

    In a decision just released, a council hearings committee said it was not satisfied that the adverse effects of the project were minor.

    The proposed $100 million, 27-storey hotel would have been the city’s tallest building.

    http://www.stuff.co.nz/the-press/business/8758163/Dunedin-waterfront-hotel-rejected

    Like

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