There was Tourism return ‘won’t mean immediate economic benefit’
* Overseas travel costs expected to soar as Covid-19 pandemic changes the game
“> widespread celebration within the tourism industry when New Zealand’s border opening dates were brought forward this week.
But, after no international tourists for more than 700 days, the sector is also realistic that the recovery will be gradual, and it could take years for pre-Covid passenger numbers return.
The Tourism Export Council is forecasting arrivals for the year to May 2023 to be about 56 per cent of pre-Covid arrivals.
It expects a return to 70 per cent of pre-Covid arrivals for the year to May 2024, and about 83 per cent the following year, before being back to pre-Covid levels of 3.9 million arrivals a year by May 2026.
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So what are some of the main barriers that will slow down the recovery of an inbound tourism market that in 2019 was worth $ 17 billion?
Rising fuel costs
Even before Russia’s invasion of Ukraine the price of oil had been rising, but the war has sent prices even higher.
Independent economist Benje Patterson says significant oil prices rises affect international tourism because airlines do not have as much scope to discount airfares.
“So undoubtedly what’s happening to the cost of oil and how it’s feeding into airfares is going to constrain growth,” Patterson says.
Airlines have not been hedging their fuel prices as much as they did pre-pandemic because, until now, the outlook for air travel has been so uncertain, he says.
That left airlines more exposed to oil price movements over the next six months, he says.
“They’re going to be particularly cautious with their pricing because they also don’t know where fuel prices are heading.”
An Air New Zealand spokeswoman says the rising cost of fuel and the added effects of higher inflation has increased international airfares by about 5 per cent.
Air New Zealand uses fuel hedging to mitigate some of the risk of volatility related to fuel price movements, she says.
“It provides the airline time to adjust to changing market conditions.”
Lack of competition
Before Covid-19 there were 29 airlines bringing passengers to New Zealand. Now there are 13.
Patterson says it will take time for the market to become competitive again.
Even when competition does return, airfares will remain high until the price of oil falls, he says.
“Until that price of oil comes back to any significant extent we’re not going to see airfares approach pre-pandemic levels, even if we have that competition.”
Travel Agents’ Association president Brent Thomas says pre-departure and post-arrival testing is not good for international tourism demand.
“That from an inbound point of view is still a barrier to entry,” Thomas says.
“Is it really adding an additional layer of security that the country really needs at this stage, or is it a Delta response to an Omicron situation?”
For the short-haul market, the cost of a test makes up a greater portion of the overall cost of a holiday compared to a long haul trip, he says.
In New Zealand a supervised rapid antigen test costs anything from $ 50 to nearly $ 100.
Thomas says the Government should remove testing requirements at the border, as other countries have done, such as the UK which removed pre-departure testing requirements for vaccinated travelers in January.
“That is really the next piece of the jigsaw puzzle that needs to be put in place from an inbound point of view.
Patterson, however, does not expect testing to put off people, especially now that supervised rapid tests were accepted because they were easier, faster and more affordable than PCR tests.
“I think it’s just going to be a fact of life.”
Late to the party
Thomas says New Zealand is one of the last cabs off the rank when it comes to border reopening, and it will take time for New Zealand to reestablish itself as an open and attractive destination for the next peak season which is the Northern Hemisphere’s winter towards the end of the year.
“We have to get our act together from a New Zealand tourism point of view to make sure we’re getting significant numbers for New Zealand’s summer.
“We have to move quickly now because people are already starting to book their holidays for it.”
New Zealand is well behind Australia which has been open to tourists for nearly a month.
“The Government has allowed Australia to get the jump on us.”
University of Otago department of tourism senior lecturer Julia Albrecht says New Zealand has also missed crucial dates for the cruise ship sector, where schedules are planned several years in advance.
“We’re essentially going to miss a large part of the upcoming season,” Albrecht says.
Climate change guilt
Albrecht says an increased awareness of carbon emissions generated from flying could weigh on travel demand.
“I think we will see a heightened awareness of carbon emissions in travel,” Albrecht says.
“We have seen a phenomenon of flight shaming in Europe for example.”
She says it will be interesting to see if it results in decreased demand or simply an increase in travelers choosing to take up carbon offsetting.
She says it may result in people taking longer overseas holidays, especially for long-haul destinations, rather than stopping traveling altogether.
“I don’t think people, if they can afford it, will stop traveling. It’s just not how people work. “
Business (not) as usual
Albrecht says business travel is another segment of the industry which may struggle to recover.
“The pandemic has shown us that we can actually move a lot of meetings online.”
The conventions sector may also be affected by an increased awareness of climate change, she says.
“Will people still be willing and able to travel vast distances for a two-day conference?”
In many ways New Zealand is not an ideal conference destination when considering the carbon footprint of large groups of people visiting for a short time, she says.
Thomas says many tourism businesses downsized during the pandemic, and finding adequate staff to fill vacancies when tourists return is going to be a challenge given the low unemployment rate.
“It’s certainly going to be an issue to welcome back tourists into New Zealand but have the staffing to handle it.”
Patterson says businesses will need to scale up again and have a workforce that is ready for tourists.
“It’s very difficult to know precisely what sort of capacity you’re going to need to be catering for.”
Initially businesses may be tentative with how much capacity they add to their business, he says.
“Even if we don’t see crazy volumes of visitors initially it might still feel like we’re a little bit capacity constrained.”