A bit of Background
During the 2014/15 financial year, in alignment with Tourism 2025 – NZ Tourism framework, HBT workshopped a regional strategy and funding case in close consultation with the Territorial Local Authorities and HBRC. We targeted tourism expenditure to grow from $550M in 2014 to $1b per annum by 2025. Hawke’s Bay Tourism’s plan aimed to step up strategic marketing activity to achieve an average 5% growth in expenditure per annum.
All councils supported this proposal and HBRC committed to a new three-year funding agreement as follows:
Year 2015/16 $ 1,220,000
Year 2016/17 $ 1,520,000
Year 2017/18 $ 1,820,000
Whose job is it to manage the Destination so visitors and locals work in tandem?
There is acceptance that NZ is going to see continued tourism growth and that as a country we have fallen behind on managing the facilities, infrastructure and visitor experience at key destinations, Destination Management includes Public Facilities/Infrastructure, Freedom Camping Management, i-SITEs, ensuring public services and tourism operators can cater to specific language and cultural needs of Asian and other emerging markets. RTOs can play a facilitation and leadership role in this area but it is mostly reliant on local and central government and the private sector.
Won’t visitors just keep coming to Hawke’s Bay?
There are long lead times when it comes to visitors thinking about a destination, to booking a holiday and actually arriving. We won’t see an immediate impact in visitor numbers declining but we will see a decline over time as our profile lessens and other regions gear up with their promotional efforts.
No other regional tourism organisation in New Zealand is facing a decline in funding. Many are increasing their funding while some are maintaining funding levels.
Should the industry and Councils make up the short-fall?
We believe the industry already contributes over and above what they should. While most pay a membership fee to HBT, there is also the contra they give us to host media and travel agents across the year. This figure alone is conservatively estimated at $500k.
As an operator – what do you spend to promote your business and Hawke’s Bay?
Councils spend millions each year on infrastructure, iSITES, and services that support visitors and the local community. Council funding is for activities that are district/city specific and therefore it is appropriate for the individual Council to fund them. The regional destination marketing and development led by HBT benefits the whole region and therefore the current HBRC funding channel is the simplest and fairest – everybody benefits from tourism so everybody should contribute.
Whose role is it to “Catch the Visitor” and whose role is it to “Satisfy them”?
Who “Catches” the Visitor before they arrive in Hawke’s Bay?
- Hawke’s Bay Tourism – through advertising, public relations and building relationships with travel agents and buyers overseas. This activity takes place outside Hawke’s Bay.
Who delivers when they get here?
- Councils provide the infrastructure to service visitors – museums, road, cycleways, aquariums, water parks, parks and stadiums
- i-SITES provide visitor information
- tourism operators provide experiences
- business associations develop the city and district offerings
- Private enterprise invests in new ventures from hotels, sports parks, hospitality business Inside Hawke’s Bay
What will happen if our funding levels change?
If we maintain our funding levels …
Hawke’s Bay is currently tracking at visitor spend growth of between 6-8% per annum and if we maintain this level of growth we will reach $1bn in visitor spend by 2024.
If we apply a forecast annual average visitor spending growth rate of 5.5% (the actual figure for the 2012-2017 period) for the next LTP 2018-2028 period, total regional visitor spending over the forecast period increases from the current $614 million to $1,106 million in year 2028. The total regional employment impact increases at the same time from the current 6,210 to 11,191 in year 2028. The annual increments in employment during the forecast period total 4,981.
If we reduce our funding…
Less funding will see results slow and the region not keep up with national growth levels or market share. With a lower forecast annual average visitor spending growth rate of 2.5%, the associated annual increments in employment total 1,938 during the forecast period. Hence, there is an overall employment loss due to the significantly lower forecast visitor spending growth, of 3,043 (over the next LTP period). If the region sees a slower forecast growth rate over time the loss to Hawke’s Bay would be substantial. Over $200m would be lost to the region over the next 3-5 years.
Who really benefits from visitor spend?
Many council tourism funding debates focus on making the “tourism industry” pay its own way with commercial accommodation operators the most obvious target. It is much more complex to pinpoint the flow of tourism spend and secondary effects on employment and household income.
Direct beneficiaries of tourism can be divided into two key groups:
• Tourism Characteristic (e.g. accommodation, attractions, tourism activity operators, transport)
• Tourism Related (e.g. retail of souvenirs, fuel, clothing and supermarkets).
Direct spend goes beyond these businesses as illustrated by a survey of holiday park visitors showed a diverse range of items they purchased directly;
Pharmacy items, doctor visits, medicine, tattoo, waterproofing kit, hose, clothes, shoes (jandals, sandals, golf shoes) batteries, air pump, gypsy fair rides and stalls, kayak, lights, jewellery, fishing equipment, charity donations, cosmetics, cell phone, children’s toys, motorcycle gear, leather jacket, car WOF, books, magazines, horse races, golf course fees, speedway, swimming pool fee, wine tasting, tent, blanket, dry cleaning, photo processing, x box game.
This shows that even if secondary spend by tourism characteristic businesses is excluded, direct visitor spend goes well beyond accommodation providers to reach suppliers that would tend not to consider themselves as “tourism” beneficiaries.
Beyond direct tourism transactions many of the businesses supplying goods and services to tourism providers are benefiting. This includes construction and trades such (e.g. architects, DIY wholesale and retail, builders, plumbers, electricians) as well as professional services such as banking, marketing, legal, insurance, health and safety and accounting.
Consideration also needs to be given to profitability or yield to determine who makes the most net gain from tourism. A study by Lincoln University showed that that those businesses considered characteristic of tourism (accommodation, transport and recreation) have modest yield while those businesses that are related to tourism (e.g. service stations, retail of souvenirs, clothing and supermarkets) have much stronger yields. The overall effect is that average tourism yield figures are propped up by the yield of “tourism related” businesses. Depending on the location, even though a supermarket may have a relatively low percentage of turnover from visitors, it is likely to be making a much higher yield from visitors than many small tourism characteristic businesses.
The impact on the community, particularly in relation to employment
The phenomenal growth in tourism has created more than 110,000 jobs directly related to tourism in New Zealand – that’s over 6% of the workforce. Both domestic and international visitors spend around $34 billion a year.
Key results for Hawke’s Bay:
• Total direct visitor spending in the region of $630 million, for the year ended December 2017.
• Taking multiplier/flow-on impacts into account – equates to a total GDP impact within Hawke’s Bay of $540 million, equivalent to 8% of total regional GDP.
• A total direct and indirect employment impact in the region from the visitor spending, of approximately 6,210 full and part-time employees/persons engaged.
• A total Net Household Income impact in the region of approximately $220 million.
Using the same multiplier values as for the 2017 spending analysis the regional economic impacts of the visitor spending generated in Hawkes Bay in the previous two years, are as follows:
• Total visitor spend $527 million.
• Total regional GDP impact $464 million.
• Total employment impact 5,330.
• Total Net Household Income Impact $189 million.
• Total visitor spend $570 million.
• Total regional GDP impact $501 million.
• Total employment impact 5,765.
• Total Net Household Income Impact $204 million.
The total employment impact for the 2016/17 year comprises a direct impact of 4,282 and an indirect/multiplied impact of 1,927. Statistics NZ information indicates that total employment in the visitor accommodation sector in Hawkes Bay, in March this year, was recorded at 1,050, which represents 25% of the total direct tourism employment impact in 2016/17.
Over the past two years, the total tourism employment impact in the region has increased by some 880 or approximately 17%. At the same time, SNZ information indicates that total visitor accommodation sector direct employment has increased by almost 12%. Total employment in the region’s food and beverage services sector, which also services the needs of visitors to the area (in addition to Hawkes Bay residents), has risen by almost 14% during the past two years.
Current HBRC rating policy
HBRC began rating for regional tourism promotion back in 2009. As the one entity representing all households, HBRC took the burden from Napier City Council and Hastings District Council. It was deemed the fairest and most efficient way to represent all parts of the region.
The current HBRC rating policy for Economic and Tourism Development has two types of a targeted rate:
• Commercial/Industrial Rating Units based on the Capital Value with examples ranging from $29 for a $350,000 Hastings Shop up to $1,044 for a $5.6M property in Lyndon Road, Hastings. Estimated total rates revenue for 2017-18 is $796,830.
• Residential and rural Rating Units based on a location differential. A fixed or uniform targeted rate (UTR) on urban residential and rural rateable properties of $29.06 across the whole region except for Wairoa District at $23.64. Estimated total rates revenue for 2017-18 is $1,859,269.
Approximately 70% of the total Economic Development funding raised is allocated to Hawke’s Bay Tourism.
Information provided in this document has come from the following sources:
- Statistics New Zealand (SNZ)
- Destination Planning Ltd Rob MacIntyre
- ESL – Economic Solutions Limited – Sean Bevin and Dr Warren Hughes
- Territorial Authorities and HBRC