Richie O'Meara
Advisory Partner, Managing Partner BDO Southern Lakes & Central Otago, National Tourism Sector Leader
$1.2bn Regional Infrastructure Fund to promote resilience and productivity in the regions
Tourism remains New Zealand’s second-largest export earner, despite the devastating impact of COVID-19 and the country’s closed borders in 2020-2022. And while the industry has been recovering from these events, it has yet to return to pre-pandemic levels. Our April 2024 BDO Business Wellbeing Index showed business performance sentiment was low amongst tourism leaders, with concerns around economic, political and climate issues all taking their toll.
According to Stats NZ, total tourism expenditure was $37.7bn in the year ending March 2023. While this is a 39.6% improvement from 2022, it’s still down from the $41.5bn seen in the year ending March 2020. As well as contributing significantly to GDP, tourism is a major employer, making it an essential component of Aotearoa’s economy.
During the 2023 election build-up, the National Party campaigned on several tourism promises, including creating a new Great Walk and broadening the working holiday visa. However, there was little in the way of tourism-specific announcements ahead of this year’s Budget. So what has the Government delivered?
Budget overview – policy highlights
The $1.2 billion Regional Infrastructure Fund, which will invest in new and existing ‘resilience’ and ‘enabling’ infrastructure projects, will be of interest to many of New Zealand’s regional tourism operators. The fund focuses on climate resilience work and projects that supports growth by ensuring regions are well-connected and productive. Tourism leaders in areas hit hard by last year's weather events will welcome the additional funding for the NZ Transport Agency and local councils to fund the recovery of roads after Cyclone Gabrielle and the Auckland floods. The proposed increase to the International Visitor Conservation and Tourism Levy (IVL) will also be watched closely by the industry, with IVL funds used to support tourism activities administered by MBIE and conservation activities administered by the Department of Conservation.
Confirmed new policy areas
- $1.2bn Regional Infrastructure Fund to grow regional economies
- More than $1bn for Cyclone relief, resilience, and emergency preparedness
- $48.7m over three years for national kapa haka festival Te Matatini (from 2025).
- Forecast revenue increase of $261.9m collected from the International Visitor Conservation and Tourism Levy (IVL) following public consultation, which is currently underway. As per Budget documents, “The increase in revenue has been incorporated in the Treasury’s fiscal forecasts based on the likelihood of the decision happening, therefore this increase in revenue forms part of the Budget 2024 operating package.”
- As reported by Tourism Industry Aotearoa, the appropriation for Tourism New Zealand has been reduced by 5% - less than the Government’s overall 6.5-7.5% public sector budget reductions.
“As a key contributor to New Zealand’s economy, tourism is an essential component of the country’s economic success, now and into the future. After an extremely challenging COVID period, the sector has recently seen positive signs of recovery, and it’s important that all corners of the industry feel this. The regions are integral to the country’s tourism network so it’s positive to see the Government’s investment in the Regional Infrastructure Fund, which should help our regional tourism businesses not only stay connected, but also respond to future weather events. This will be bolstered by the announcement of funds to further support communities affected by Cyclone Gabrielle and the Auckland floods. There are also positives to take from the adjustment to the tax brackets, which may filter through to increasing discretionary spending from domestic tourists who make up the bulk of New Zealand’s tourism spending. A key focus for the sector at the moment is promoting New Zealand as a year-round destination for international visitors – and to do this we need to ensure we’re ready for those visitors, with the appropriate levels of quality staff, accommodation, and infrastructure in place. Tourism leaders will be looking for more direction on these factors beyond this Budget announcement.” Richie O'Meara, National Tourism Sector Leader |
Quick tips
- Analyse your business numbers and what’s driving your performance. Consider what you can improve and what you can cut to help improve your margins.
- Plan beyond the here and now. Tourism demand can come in peaks and troughs, and you need to think beyond the current setting to grow sustainability.
- If your business is highly seasonal, manage your business plan accordingly. Are you doing enough to capitalise on that short-term boom to keep you going through leaner times? Are there ways you can attract visitors out of season?
For more business tips see our BDO Business Wellbeing Index here.
More information and help available
You can read more details on Budget 2024 at the Government Budget website here.
As cost of living pressures continue to influence domestic spending, tourism sector leaders should focus on the measures they can control to best support their businesses. Our BDO tourism advisory team is here to help.
To talk about how any of today’s Budget announcements will affect your tourism business and for help with cash flow, forecasting, and scenario planning, or to simply talk about your business, get in touch with your local BDO office today.
For more on how New Zealand’s tourism sector is faring currently, view the tourism sector focus from our April BDO Business Wellbeing Index here.
Key contact
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