With the Covid-19 pandemic closing our borders for two years, there has been no shortage of opinions about the pros and cons of international tourism. Hotel Council Aotearoa strategic director James Doolan describes how tourists subsidise date night.
You looked fabulous. You were witty, attentive and amusing. But the resounding success of your last date night was not all down to you. Next time you come to the end of a special night out in a high-end restaurant, give thanks to the tourism industry. Without it, date nights in New Zealand would be a lot less fun. “Why tourists?” you ask, between mouthfuls of eye fillet and gulps of cheeky Pinot.
Let’s start with a quick recap of what tourism looked like before Covid border closures in March 2020. In normal times, Aotearoa hosted around 3.8 million international visitors each year including leisure tourists, business travellers and foreign students. Kiwis also travel domestically for work and leisure.
Spending by people who “don’t live around here” is critical to many businesses, and it’s easy to guess what some of those are. Unsurprisingly, tourists account for 99 per cent of air passenger transport spending and 95 per cent of overnight accommodation spending.
But the next one will be a surprise to most. Pre-Covid, 42 per cent of total spending in Kiwi restaurants and bars came from tourists. That’s more than $4.9 billion in revenue each year. International tourists alone were responsible for a gigantic one-quarter of total spending at our F&B outlets.
Why are tourists, especially international tourists, out-spending the rest of us at F&B venues and why are they so important to the overall health of the hospitality sector?
International tourists are wealthy – yes, even the young backpackers and the families on coach tours. Anyone who can stump up for airfares and accommodation, plus take the time away from work, has decent baseline spending power. Unfortunately for many New Zealanders, a sit-down restaurant meal or $15 cocktail is simply incompatible with the typical budget constraints of day-to-day living.
Tourists eat out three times a day, seven days a week, not just on birthdays or when they’ve been able to organise a babysitter. Tourists are often on the trip-of-a-lifetime and far from home. Leisure tourists don’t have work tomorrow morning, or kids to get to school. If this is the only time they’ll be here, then of course tourists are more likely to splash out on the best, take the whole bottle and find space for dessert. In short, tourists are both wealthy and primed by circumstances to spend heavily on the experience of travel. Travel creates the perfect patron.
Need more proof? If we do a little maths, the importance of tourism to our F&B sector becomes glaringly obvious. Those 3.8 million international visitors are here for 10 nights on average, meaning 38 million visitor nights each year. By comparison, New Zealand’s resident population of 5 million multiplied by 365 days per year equates to 1.8 billion nights annually, ignoring the minor impact of outbound travel. When analysed this way, international tourists are just two per cent of the market, but they’re doing 25 per cent of the spending.
Running a bar or restaurant is a high-cost, tight-margins business. Proprietors are constantly balancing a range of expenses including rent, utilities, labour and food costs, all of which are under pressure and rising in today’s high-inflation environment. When overall profit margins are 10 to 20 per cent of gross revenue, the spending power of free-spending tourists can easily be the difference between profit and loss, survival or bankruptcy.
Reflecting on restaurants that have sadly failed during the past two years of closed international borders, it’s almost certain they were heavily reliant on tourist spending. The loss of all international tourists, plus lockdowns and domestic COVID settings that suppressed demand, have tipped those venues over the edge. It might once have been your favourite spot, but now it’s gone.
It’s become fashionable in recent times to highlight some challenges of tourism such as icon site overcrowding, while ignoring almost all the benefits of a vibrant visitor economy. Make no mistake, the range and quality of bars and restaurants in Aotearoa simply would not be the same without the growth and success of our tourism industry in the years leading up to March 2020.
Tourist spending on Monday, Tuesday and Wednesday keeps the restaurant in business for your date night dinner on Friday. Tourists prop up the new, innovative and international-standard restaurants that we Kiwis think about only on special occasions. Without tourists, our F&B sector is smaller, less vibrant and duller than it should be. We’ve witnessed that for ourselves since international borders closed.
So next time you’re out at a restaurant, drink to the health of our tourism industry. Whether you like it or not, tourists subsidised your date night.
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