Stories of NZ enterprise success
This is the final article in major eight-part NZ Management series: Stories of NZ enterprise success. Senior business journalists Nick Grant and Vicki Jayne have been drawing on insights from the Deloitte/Management magazine Top 200 Awards and associated lists of the country’s leading companies to conduct sector-by-sector review of the underlying drivers of success in key parts of New Zealand’s economy.
Search www.management.co.nz/archives for the full series of articles.
New Zealand’s tourism sector is traditionally touted as an important part of the economy with exciting growth potential. Yet for several years it’s been mired in malaise that earlier this year prompted some stern words from departing Air New Zealand chief executive Rob Fyfe. In July the high-flying CEO told parliamentary select committee that NZ Inc needs to urgently review its approach to tourism. Air NZ chairman John Palmer added that he didn’t think progress in tourism has been anywhere near what it needs to be.
There are number of indicators that all is not well. The depredations of the global financial crisis have seen the decline of visitors from some of our traditional tourist source countries. The decrease in arrivals from the UK has been particularly precipitous.
Tourism New Zealand head Kevin Bowler says if we take our current rolling full year, which includes the Rugby World Cup, we’re only just above 200,000 UK tourists. “Three to four years ago we were up around 250,000. So that’s very significant reduction in numbers and, with the European economies as they are, we’re anticipating further reductions.”
To be fair, overall international visitor numbers had grown in 2010 and 2011. But that was in large part thanks to an uptick in tourists from economies such as China and Australia that have only just begun to be adversely affected by the GFC.
A 2.1 percent upswing in total tourist expenditure in the year ended March 2011 was the second-lowest increase in more than decade, largely due to the ascendant Kiwi currency.
“In the past three years we’ve got 20-30 percent appreciation against some of our main markets, particularly the US dollar, the euro and the UK pound,” says Bowler, “which is making prices within NZ much more expensive. The analysis we’ve done on that indicates that during the past three years visitors have actually been spending more in their own currency, but it’s still resulting in fewer NZ dollars.”
Looming threats to our share of the international visitor market include increased competition in our traditional markets from short-haul European destinations. Meanwhile, other countries, including the US and Korea, are simplifying their visa requirements to attract more visitors from China, which is currently one of our few growing markets.
There’s also the issue of air connectivity. “NZ isn’t served by large number of airlines, and if the airlines aren’t making money, they aren’t going to be investing in additional capacity,” says Bowler. These airlines are striving to maintain supply just below demand to improve yields, he notes, “which makes it really hard to grow your inbound market”.
Add several recent headline-grabbing, tourism-related accidents stoking sector fears New Zealand will be seen as some kind of picturesque deathtrap, and it’s small wonder the NZ tourism industry – while certainly not in crisis – has exuded the sense of sector spinning its wheels in rut.
Cometh the hour: cometh the man?
When Martin Snedden was appointed CEO of the Tourism Industry Association (TIA) in June, he was hailed as canny choice to lead the Association. TIA’s 1500-plus members collectively account for approximately 80-85 percent of the revenue generated by NZ tourism operators. Fresh from presiding over Rugby World Cup Tournament 2011 – widely seen as national triumph both on and off the field – he has high profile, is well regarded and, one suspects, has political capital to burn.
Like any shrewd newly appointed CEO entering volatile environment, Snedden’s taken the opportunity to do lot of empathetic listening and nodding over the past few months.
“It’s honeymoon period, no doubt, and I’ve been using that to try and ignite something that might help,” he says. “It’s been pretty tough time in the tourism industry – as well as lot of other industries, obviously. In such circumstances it’s not unusual for people to sort of freeze and not quite be able to get into, firstly, state of acceptance and, secondly, state of starting to actively sort out what some of the solutions might be.”
Snedden admits he used the change in leadership to generate change in mindset. “That’s no criticism of anything that’s gone before me but the reality is it’s always an opportunity when new guy comes in to provide leadership.”
Snedden characterises his relative lack of knowledge about tourism when coming into the job as both an advantage and disadvantage. It’s required him to hit the road to gain an on-the-ground appreciation of various tourism operations, where they fit in the sector and what their issues are.
“It’s also given me licence to ask some pretty simple questions,” he says. It’s also provided operators with the chance to offload old and recurring grievances on him.
This three-month fact-finding phase was capped off with one-day TIA Summit in early October. With theme of ‘Think Different’, the event served as both an industry barometer and rev-up.
To Snedden’s mind, the conference has cemented in place high level of acceptance of the fact that times are tough. “But there isn’t an obsession with trying to unpick why and place blame. Almost all the energy was directed at what things we can do to generate an improvement.”
One of these is what Snedden calls an urgent requirement for the commercial operators who are the industry’s engine “to develop lot more collective self-confidence and self-esteem” and ensure they’ve got place at the policymaking table.
“Central and local government are vital partners of tourism,” Snedden is at pains to point out. “Any stance I’m taking is not looking to undermine that. It’s about strengthening the outcomes that the support we’re getting from those agencies actually produces for the investment they make.”
That said, “as an absolute start point, the private sector industry has to stand up, claim ownership of its territory and display togetherness that significantly improves its chances of success”. Part of that includes “taking ownership of our story” (see box story “Whose story is it anyway?”)
Westpac chief economist Dominick Stephens spoke at the summit, where he noted “passion and enthusiasm to drive things differently. The world is changing and I detect within tourism willingness to confront those changes.”
One of Stephens’ main messages to attendees was that there’s little to be gained from the Government intervening to devalue the historically high Kiwi, the underlying cause of which is the new structure of the global economy. Instead, he suggests the prospects for our tourism exports could be improved by such policies as pursuing more open skies agreements to increase airline capacity.
He points to an Australian tourist boom in Queenstown in recent years as an example of the fruits of such government negotiations – and tax reform (see box story “Taxing issue”).
Other opportunities discussed at the summit included how the wider NZ tourism industry can connect better with the growing cruise industry (which brought 174,000 visitors to NZ last year), the need to specifically cater to the forecast increase in outbound traffic from Asia over the next decade, and the way in which, as Bowler puts it, “the growing babyboomer market is very orientated towards the sorts of experiences NZ can deliver”.
Creating momentum
Tourism Holdings (THL) CEO Grant Webster heartily agrees the NZ tourism sector ne
