Tourism demand is returning: Is your business ready for a profitable peak season?
Tourism demand is returning: Is your business ready for a profitable peak season?
New Zealand's tourism sector continues to show positive signs of recovery, with international visitor arrivals and visitor spending both increasing over the past year. As the spring and summer season approaches, many tourism operators are looking ahead with cautious optimism. However, higher visitor numbers do not automatically translate into stronger business performance. For tourism businesses, the challenge is ensuring growth remains profitable, sustainable and manageable. Recent data suggests demand is returning, but cost pressures, staffing challenges and margin management remain key concerns.
The May 2026 BDO Business Performance Index points to a tourism sector that is regaining positivity but not yet operating with certainty. After falling to an historic low in BDO’s previous report, business performance optimism among tourism and hospitality leaders has rebounded, with just over half now feeling positive about their current business performance. Seasonal demand and improved travel conditions may have contributed to this lift. However, tourism leaders were less confident about business performance over the next six months, suggesting operators remain alert to cost pressures, margin risk and the need to convert visitor demand into sustainable returns. Read more tourism sector insights from our May 2026 report here.
The opportunity for the sector is no longer simply about recovery. The focus now is on turning improved demand into sustainable, profitable growth. In this article, BDO National Tourism Sector Leader, Richard Timpany, explores what’s happening in the sector and what tourism business leaders should consider as we head into spring.
At the same time, government initiatives such as the Regional Tourism Boost programme are encouraging international visitors to explore regional destinations and travel beyond peak periods. The current funding round specifically targets increased visitation during spring 2026 and early summer 2027.
Richard notes that the cruise market is a useful reminder that tourism recovery will not be even across every region or visitor segment:
For tourism businesses, this should create opportunities across accommodation, attractions, hospitality, transport and visitor experiences. However, it is important to recognise that more visitors will also increase competition. As operators expand capacity and compete for visitor spend, businesses will need to ensure they are attracting the right customers and delivering experiences that generate healthy returns.
Before demand increases further, it is worth reviewing whether pricing reflects the true cost of delivering an experience or service. More customers do not always mean higher profits if each booking generates less margin than it should.
Tourism businesses should also consider whether all products, packages and channels contribute equally to profitability. Understanding where margins are strongest can help focus sales and marketing efforts where they will have the greatest impact.
The more valuable question is whether current demand levels are enough to achieve profit targets and support future investment.
Understanding break-even points, average spend per customer and the profitability of different customer segments can help businesses make more informed decisions as bookings increase. In some cases, attracting higher-value visitors may be more beneficial than simply increasing visitor numbers.
Regular cash flow forecasting can help identify potential pressure points early and give business owners greater confidence when making investment decisions. Modelling both optimistic and conservative booking scenarios can also help prepare for uncertainty.
Spring is an ideal time to review workforce planning, staff training, supplier arrangements and operational readiness. Businesses should be confident they can maintain service quality at higher volumes without placing unnecessary strain on employees or customers.
Having contingency plans in place can provide valuable flexibility if conditions change quickly. Businesses that regularly review risks and test alternative scenarios are often better positioned to respond when challenges arise.
Businesses should ensure key information about their products and services is accurate, up to date and easily accessible online. Websites, booking platforms and business listings should clearly explain what is offered, who it is suitable for, where it is located and how potential visitors can make a booking.
As digital discovery becomes increasingly important, businesses that make it easy for customers to find and understand their offerings are likely to be better positioned to convert interest into revenue.
As the sector continues to grow, tourism businesses have an important role to play in ensuring visitors contribute positively to the communities they visit.
This may include encouraging responsible visitor behaviour, supporting local suppliers, collaborating with other operators and helping spread visitor activity throughout regions and seasons. Businesses that deliver value for both visitors and communities are likely to be more resilient and sustainable over the long term.
Increasing demand is positive, but the real opportunity lies in converting that demand into sustainable profit, strong cash flow and a customer experience that supports long-term growth.
As spring and summer approach, now is the time to review pricing, assess capacity, strengthen cash flow planning and ensure your business is positioned to make the most of improving market conditions. The opportunity is certainly there. The challenge is ensuring that growth translates into stronger margins, sustainable cash flow and a business that remains resilient when conditions inevitably change.
"The improving visitor outlook is encouraging, but tourism business owners should focus on profitable growth rather than growth at any cost. Most operators don't have a demand problem right now. The bigger question is whether additional bookings are translating into cash flow and profit. That's where management attention should be focused heading into summer." – Richard Timpany, BDO National Tourism Sector Leader
The May 2026 BDO Business Performance Index points to a tourism sector that is regaining positivity but not yet operating with certainty. After falling to an historic low in BDO’s previous report, business performance optimism among tourism and hospitality leaders has rebounded, with just over half now feeling positive about their current business performance. Seasonal demand and improved travel conditions may have contributed to this lift. However, tourism leaders were less confident about business performance over the next six months, suggesting operators remain alert to cost pressures, margin risk and the need to convert visitor demand into sustainable returns. Read more tourism sector insights from our May 2026 report here.
The opportunity for the sector is no longer simply about recovery. The focus now is on turning improved demand into sustainable, profitable growth. In this article, BDO National Tourism Sector Leader, Richard Timpany, explores what’s happening in the sector and what tourism business leaders should consider as we head into spring.
Recovery is moving into its next phase
There is little doubt that tourism is regaining momentum. International visitor arrivals are continuing to trend upwards, while Tourism New Zealand recently reported international visitors spent $13.7 billion in the year to March 2026, including $5.7 billion during the January to March quarter alone.At the same time, government initiatives such as the Regional Tourism Boost programme are encouraging international visitors to explore regional destinations and travel beyond peak periods. The current funding round specifically targets increased visitation during spring 2026 and early summer 2027.
Richard notes that the cruise market is a useful reminder that tourism recovery will not be even across every region or visitor segment:
“Cruise visitors can create valuable concentrated demand for local operators, but national cruise activity remains subject to uncertainty as cruise lines continue to assess New Zealand itineraries, costs and deployment decisions. Businesses connected to cruise tourism should therefore plan around both opportunity and uncertainty; preparing for busy port-call days, reviewing margins on cruise-related products and avoiding fixed cost increases that rely on optimistic volume assumptions.”
For tourism businesses, this should create opportunities across accommodation, attractions, hospitality, transport and visitor experiences. However, it is important to recognise that more visitors will also increase competition. As operators expand capacity and compete for visitor spend, businesses will need to ensure they are attracting the right customers and delivering experiences that generate healthy returns.
Five questions every tourism business should ask before peak season
Spring provides an ideal opportunity for business owners to step back and assess whether they are genuinely prepared for increased demand. Richard has observed that the best-performing tourism businesses typically take time during this window to consider their responses to five key questions:1. Are our pricing and margins still fit for purpose?
Many tourism operators have experienced significant increases in wages, insurance premiums, fuel costs and supplier charges over recent years. While some businesses have adjusted pricing, others may still be operating with margins that have gradually eroded over time.Before demand increases further, it is worth reviewing whether pricing reflects the true cost of delivering an experience or service. More customers do not always mean higher profits if each booking generates less margin than it should.
Tourism businesses should also consider whether all products, packages and channels contribute equally to profitability. Understanding where margins are strongest can help focus sales and marketing efforts where they will have the greatest impact.
"For many tourism businesses, the next phase of recovery will be less about filling every available booking and more about understanding which bookings genuinely contribute to profit. Mid-market operators should be looking closely at product mix, channel costs, staffing requirements and yield, so growth decisions are based on margin as well as volume."
2. What level of demand do we actually need?
Tourism operators often focus on occupancy rates, visitor volumes or booking numbers. While these measures remain important, they do not always provide a complete picture of business performance.The more valuable question is whether current demand levels are enough to achieve profit targets and support future investment.
Understanding break-even points, average spend per customer and the profitability of different customer segments can help businesses make more informed decisions as bookings increase. In some cases, attracting higher-value visitors may be more beneficial than simply increasing visitor numbers.
3. Can our cash flow support growth?
Growth often requires investment before the associated revenue arrives. Additional staff, inventory, maintenance, marketing activity and operational expenses can place pressure on cash flow during the lead-up to peak periods. Businesses experiencing strong demand may find themselves managing larger working capital requirements than expected.Regular cash flow forecasting can help identify potential pressure points early and give business owners greater confidence when making investment decisions. Modelling both optimistic and conservative booking scenarios can also help prepare for uncertainty.
4. Do we have the capacity to deliver an excellent customer experience?
For many tourism businesses, reputation remains one of the most valuable assets. A surge in bookings can quickly place pressure on staffing, operational systems and service delivery. Customers are unlikely to distinguish between a business experiencing rapid growth and one struggling to cope with demand.Spring is an ideal time to review workforce planning, staff training, supplier arrangements and operational readiness. Businesses should be confident they can maintain service quality at higher volumes without placing unnecessary strain on employees or customers.
5. Are we prepared for unexpected disruption?
While the tourism outlook is improving, uncertainty remains. Businesses continue to operate in an environment influenced by economic conditions, transportation costs, weather events and changing traveller behaviour. BDO's latest Business Performance Index also showed that tourism leaders remain cautious about future business performance, reinforcing the need for operators to plan for more than one demand and cost scenario.Having contingency plans in place can provide valuable flexibility if conditions change quickly. Businesses that regularly review risks and test alternative scenarios are often better positioned to respond when challenges arise.
Making it easier for visitors to find you
Traveller behaviour is also evolving. Increasingly, visitors are using digital tools and artificial intelligence to research destinations, compare experiences and plan itineraries. Recognising this shift, the Government has recently announced investment intended to improve the digital discoverability of New Zealand tourism products and experiences, including through emerging AI-enabled search and travel planning tools. This presents both an opportunity and a challenge for tourism operators.Businesses should ensure key information about their products and services is accurate, up to date and easily accessible online. Websites, booking platforms and business listings should clearly explain what is offered, who it is suitable for, where it is located and how potential visitors can make a booking.
As digital discovery becomes increasingly important, businesses that make it easy for customers to find and understand their offerings are likely to be better positioned to convert interest into revenue.
Sustainable growth depends on community support
Tourism's long-term success depends on more than visitor numbers alone. Recent tourism sentiment research found New Zealanders continue to strongly support tourism and recognise its economic contribution. However, many respondents also identified environmental and community pressures associated with visitor activity.As the sector continues to grow, tourism businesses have an important role to play in ensuring visitors contribute positively to the communities they visit.
This may include encouraging responsible visitor behaviour, supporting local suppliers, collaborating with other operators and helping spread visitor activity throughout regions and seasons. Businesses that deliver value for both visitors and communities are likely to be more resilient and sustainable over the long term.
"Tourism businesses are operating in a more positive environment, but the sector is still exposed to fast-moving cost, labour, weather and demand risks. The operators that are most likely to perform well will be those with the visibility to make quick decisions: clear cash flow forecasts, regular margin reporting, flexible staffing plans and a realistic view of what demand they can serve profitably."
Looking ahead
The outlook for New Zealand tourism is encouraging. Visitor arrivals are increasing, spending is recovering and industry confidence is improving. Yet the businesses that perform best over the coming seasons are unlikely to be those that simply chase higher visitor numbers.Increasing demand is positive, but the real opportunity lies in converting that demand into sustainable profit, strong cash flow and a customer experience that supports long-term growth.
As spring and summer approach, now is the time to review pricing, assess capacity, strengthen cash flow planning and ensure your business is positioned to make the most of improving market conditions. The opportunity is certainly there. The challenge is ensuring that growth translates into stronger margins, sustainable cash flow and a business that remains resilient when conditions inevitably change.
