Exports

More visitors spending less

Sunday April 08, 2018 Mark Cox

There were 3,733,707 international visitors to NZ in 2017.  This was up from 3,499,939 in 2016; an increase of 6.7%.  Disappointingly, however, visitor spending increased by only 4.7%; from $10,086 million in 2016, to $10,563 million in 2017.

 

These figures imply that average spending per visitor fell from $2,882 in 2016, to $2,829 in 2017; a decrease of 1.9%.  This article explores some of the reasons why might have happened.

 

There are numerous, inter-related factors affecting the amount of money individual visitors spend in New Zealand, but four of the most important are:

  • The appeal of the country’s offering to visitors;
  • The visitors’ length of stay;
  • The visitors’ country of origin; and
  • The exchange rate.

 

The appeal of the country’s offering to visitors encompasses the activities and attractions that visitors can enjoy, but it also depends on the quality and availability of accommodation, especially hotels. 

 

 

Accommodation is an increasingly significant issue because, according to the Accommodation Survey, New Zealand hotels experienced their busiest ever year, with an average occupancy rate across 2017 of almost 70%. 

 

With this level of occupancy, it is likely that some visitors will find it difficult to book the standard of accommodation they want, when they want it; and they will respond by booking lower rated hotels and/or by staying for less time. Either way, though, they will spend less.

 

On average, visitors stayed for 8.9 days in 2016 and 8.8 days in 2017.  Allowing for rounding, the decrease might have been as much as 0.19 of a day, or as little as 0.01 of a day.  However, even if it was 0.19 of a day, this factor is likely to have had a relatively small impact on average spending per visitor.

 

By contrast, the visitors’ country of origin is likely to have had more of an effect.  Average spending by visitors from China decreased by 11.6% between 2016 and 2017.  This is significant in terms of total visitor spending, both because China is New Zealand’s second largest tourism market, and because visitors from China spend more than the average.  Average spending by visitors from New Zealand’s largest market (Australia) and fourth largest market (the United Kingdom) also decreased between 2016 and 2017, albeit by just one percent in each case. 

 

The final factor, the exchange rate, is important in determining total visitor spending because visitors tend to budget their spending in terms of their home currency, rather than the New Zealand dollar.  Thus, when the value of the New Zealand dollar increases, visitors find that their Australian dollar, Chinese yuan or United States dollar stretches less far.  In other words, they spend less overall in New Zealand dollar terms.   

     

The graph illustrates the relationship between the exchange rate and visitor spending.  The downward slope of the dotted trend line indicates that, as the value of the New Zealand dollar decreases (expressed in terms of the Trade Weighted Index), so average visitor spending increases.  The scatter points on the graph show that the value of the New Zealand dollar increased slightly between 2016 and 2017, while the average spend per visitor decreased slightly.

 

 

graph 09 04 01

 

 

It will also be noted that, while there seems to be a relationship between the TWI and average visitor spending, the points on the graph are fairly widely scattered.  This implies that the exchange rate provides only part of the answer, and it brings us back to the argument earlier that there are numerous, inter-related factors affecting the amount of money individual visitors spend in New Zealand.