Tourism sweet spot for economic growth

12 May 2016

There's a big shift going on in many countries, towards services.
When countries become more developed, their services sector tends to become more important than their manufacturing sector.
Services like education, accommodation, transport, tourism, financial services, entertainment, communications, and so on increasingly become a source of economic growth. Meanwhile, produced goods – 'things' – become less prominent.
A classic example of this is China, where services now account for 50% of its economy, while manufacturing accounts for only 40% of the economy – a reversal that has happened only within the last decade.
That reversal has affected our own economy. We now sell fewer things to China (dairy products in particular) and sell more services (tourism in particular).
It's the main reason why tourism – not dairy - is now our largest export earner.
Tourism now earns around $11 billion a year, while dairy is currently earning perhaps $10 billion.
This change is causing a bit of angst in some quarters. I've heard fears about New Zealand's future as a goods-producing nation, and fears that reliance on tourism makes us a third world nation.
These are unfounded fears.
New Zealand's ability to earn its way in the world by selling our food and other products is not under threat. The international market for our outstanding foods and related products continues to grow, the result of great performance by New Zealand companies, assisted by positive trade deals.
And a fast growing tourism industry does not mean New Zealand is becoming a third world nation. It simply means the world is catching on to the amazing experiences offered by New Zealand as a tourism destination.
It's not surprising that visitors want to experience our beautiful natural environment, or that adventure tourists, cruise visitors, package groups, sports and cultural tourists and more want to come here.
Selling high quality experiences to international visitors is a sophisticated service industry.
We should celebrate this growing sector and develop it further.
Infrastructure like roads, ports and airports should be developed with tourism in mind. Smaller scale infrastructure like cycleways, parking areas and public toilets is important too.
This development is not just for the main centres - the tourism industry can be a great stimulus for regional development.
Investment is needed to develop amenities for tourists, including hotels, convention centres and entertainment facilities. We should be open to investment from many sources - including from overseas - to build facilities that will earn more tourism dollars for New Zealand.
And we should be alert to innovative approaches that can help us grow the tourism industry – e.g. the proposal for trans-Tasman visas to allow international visitors to travel freely between Australia and New Zealand, to maximise visitor stays in this country.
Tourism is great platform for New Zealand business.
One of the great strengths of New Zealand business is its flexibility and ability to change to meet market demand.
We've seen sheep farmers diversify into horticulture, wine and dairy as market changes required.
We've seen a generation of software entrepreneurs rise up and create a new homegrown industry where none existed before.
And we've seen the tourism industry grow exponentially within just a few years.
These changes are testament to the New Zealand entrepreneurial spirit and ability to ride international trends.
As we continue to develop the 'products' side of our economy - creating higher-value food and other exports - we should also seize the opportunities afforded by the 'services' side of the economy.
Tourism is a sweet spot for New Zealand's economic growth.

Kirk Hope is Chief Executive BusinessNZ