Muddy Waters

4 May 2020

Rotorua’s much-hoped for COVID-19 recovery may prove more difficult to implement than predicted.

The Rotorua Lakes Council last week backed a plan produced by staff that included a series of projects, many with a tourism thrust.  The plan will go to the government, which is committed to ensure councils throughout the country receive the funds needed to boost local economies.

However, research by The Mud has found shifting Rotorua’s tourism earnings from international to domestic dollars a much more difficult proposition than may be envisaged.

 

The council’s plan has at its heart virtually replacing the international tourism dollars that usually flow into Rotorua with a great spend by domestic visitors.

The government has made clear that to be successful the projects should be “shovel ready”. 

In other words, the councils must have done all the necessary work in planning and funding to ensure the project can go immediately funding is approved.

The hoped-for recovery in tourism is largely hinged on domestic visitors which are estimated to bring in $499 million of the total of $845 million in visitor earnings in Rotorua each year.  Two-thirds of this amount came from the Auckland, Waikato, and Bay of Plenty regions.

Leading economic analysis and forecasting company Infometrics regularly assesses tourism in regional New Zealand. 

Infometrics Senior Economist Brad Olsen highlighted the challenges ahead for Rotorua, as follows:

 

  • There’s going to be intense competition for domestic tourism spending (leaving aside the Australia spending as the timing of that seems more uncertain). Each area across New Zealand will be competing for:

               1. Their existing pre-COVID-19 domestic spending

               2. The spending that Kiwis previously spent overseas

  • So, it’s first a case of trying to keep the spending Rotorua previously had, when every part of New Zealand is going to be vying for spending. But it’s also important to recognise that the amount of money that Kiwis spent overseas in previous years (and which the domestic market is hoping to capture this year, at least), is lower than the international spend in New Zealand.  So, the amount of tourism activity will fall simply because the possible replacement spending simply isn’t as large as the spending lost from international tourists.

  • But even then, with large numbers of people losing jobs or on lower hours/wages (Infometrics is picking unemployment of nearly 10 per cent over the next year), domestic travellers are going to be reigning in their spending, which will further decrease spending totals

  • Domestic tourists also spend in a different manner than international tourists, so local tourist offerings will likely need to adjust towards this different spend profile.

 

Earlier work by Infometrics showed that South Island centres such as Queenstown, the MacKenzie District, Kaikōura Christchurch had increases of exposure to the tourist economy in 2013-2015.  However, Rotorua remained in neutral – although among those centres with higher exposure to tourism than average, its position did to not shift from 2013 to 2015.

This “suggested” that Rotorua’s relative position in tourism may have experienced less change than other areas, relatively speaking, Brad Olsen said.

 

An indication of the difficulties facing Rotorua came when Pukeroa Owhata Trust confirmed to The Mud that its major spa project adjacent to the Lakefront area had been put on hold. 

General Manager Peter Faulkner said the spa project had been deferred for now.

“We’ve got to take this one step at a time. What we need to do is to effectively get through the process of the lockdown, get the economy trading again, and start looking at some strategic decisions,” he said.

 

Tough times ahead for hoped-for COVID-19 recovery

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