Brexit hits the NZ backpacker market and spending plunges by $167mMay 29th, 2019 | | Backpacking New Zealand
A $167 million drop in spending by youth travellers has the tourism industry worried as British and German backpackers give New Zealand a miss.
Backpacker and adventure tourism businesses are writing a “please explain” letter to Tourism New Zealand (TNZ) wanting to know the reason for the plunging numbers, and what is being done about it.
After bumper growth, total international visitor arrivals have flattened off, but the youth market for dropped 5 per cent for the year to the end of March, and spending by this group fell to $702m compared with $869m for the previous 12 months.
British and German backpackers, traditionally the backbone of the sector, fell 23 per cent and 8 per cent respectively, and last year guest nights in hostels were down by almost 200,000.
Brexit-related uncertainty, changes to the German education system resulting in fewer school leavers taking gap years, competition from cheaper destinations, and TNZ’s focus on attracting well heeled travellers are all creating a bit of a perfect storm.
Backpacker Adventure Tourism and Youth Association chairman Simon Cartwright says some operators, particularly those providing activities and transport, are ‘hurting quite badly,” hence the approach to TNZ.
“We’ve been getting double digit losses out of these markets month on month for a long time and it doesn’t look like turning around any time soon, so we’d like some questions answered, what’s the reason, how long is it likely go on, and more importantly, what are we doing about it?
“For operators who are very reliant on the British and German markets it’s very serious, those kinds of numbers are not sustainable long term.”
The new normal
Phil Leslie runs All Stars Inn, a modern 300 bed lodge in Christchurch, and he says times are tough.
As well as the lingering impact of the earthquakes, and a large number of cancellations immediately after the mosque shootings, there is added competition from freedom camping and unregulated growth in Airbnb accommodation.
Stray Travel‘s backpacker buses carry about 10,000 travellers annually and chief executive Brett Hudson says signs of a softening in the youth market appeared about 18 months ago.
He says TNZ and backpacker networks heavily promote campervans and self drive, and a wave of new rental vehicle companies arrived with big advertising budgets.
To make up for the dip in youth travellers, Stray has invested in a joint venture offering coach tours for the 55-plus age range.
Tamaki Māori Village is on the Kiwi Experience backpacker bus circuit, and it also saw fewer British and German visitors last summer.
“There’s just more competition and we are expensive as a destination, ” says sales manager Sarah Christie. “We’re having to change our product to fit in with them.”
That has meant offering an overnight marae stay with activities such as Māori games and story telling for small groups, rather than old style cultural performances.
Melbourne-based Dinesh Kaku works for Backpacker Deals, sending more than 5000 youngsters our way each year, most of them tacking New Zealand onto the end of their Aussie stay.
Bungy jumping, sky diving, jet boating and Māori culture top their to-do lists, and he says more of them are buying cars to travel around in.
“They will try to avoid staying in hostels as long as they can find a safe place to camp.”
He says the Brits now consider New Zealand an expensive place to travel and there are problems with capacity in popular places like Queenstown in peak season.
“We get calls from people saying ‘what can we do, it’s all booked out’.”
Rotorua economic development agency chief executive Michelle Templer says Brexit is a big issue,.
There are higher levels of unemployment, lower wage growth and general economic uncertainty, not just in Britain, but also across Spain, Italy, Greece and France.
The rise of the gig economy with more reliance on contract work makes it harder to find long term permanent jobs, so when they do, young people tend to work for a couple of years then take two or three months off, instead of a whole gap year.
Australia’s tightening up on working holiday visa conditions has also had a dampening effect on this side of the Tasman.
As Hudson puts it: “When Australia sneezes, New Zealand catches a cold.”
A tourism Industry Aotearoa survey of operators recently revealed that more than half were very or quite reliant on migrant labour, and yet approvals of working holiday visas last year dropped for nine out of 10 source markets.
Cartwright says that reflects the general downturn in the sector but TNZ promotions of “softer” adventure tourism options, such as walking along a beach are not helping.
“Is that going to motivate an adrenaline junky to come to New Zealand? Probably not.”
There is also unhappiness about TNZ’s decision, prompted by a $6m budget cut, to stop targeting super high value and youth sector visitors.
That led to the disbanding of a specialist team which, among other things, promoted backpacking.
It spelled the end of a campaign aimed at British and German backpackers already in Australia to persuade them to add New Zealand to their trip.
Visits by these so-called “transient” backpackers had dropped by 23 per cent in 2017, so TNZ argued its promotional budget was better spent elsewhere.
He says their focus is on a broader group of independent professionals aged 25 to 54.
The average “professional” spends about $265 a day, 2.5 times that of a backpacker who spends less than $100.
De Monchy concedes that value is not just about daily spend, and backpackers tend to stay longer and travel more widely, getting off the beaten track and into the regions.
Industry stalwarts also point out that these young visitors are great advocates for New Zealand, inspiring friends and family to come here, and often returning later in life with their own children.
Overseas students coming here to study are a bright spot in the youth travel market, and more tourism operators should be targeting them according to Henry Matthews, head of international education at the Auckland Tourism, Events and Economic Development agency.
In 2017 (the latest national figures available) 125,000 overseas students came here to study for at least two weeks. They spent $190m on domestic travel, and friends and family coming to visit them spent a further $460m on tourism.
Matthews says Auckland gets 75,000 study abroad students annually who frequently tour the country during their three week winter break and at weekends. Come graduation season in May, families pour in to celebrate their academic success.
“They’re high value visitors in every sense.”
Brazilian student Rodolfo Lage 30, is here for 18 months doing a masters degree in renewable energy at Auckland University, supported by a Ministry of Foreign Affairs scholarship.
By the time he leaves in July, he will have covered the country from top to bottom, including a tour with his sister when she joined him for a month.
The list of destinations he has ticked off include Cape Reinga, the Coromandel, Christchurch, the Abel Tasman National Park, Nelson, Milford Sound, the Catlins, Wanaka, Queenstown and Taranaki.
He did not find travel expensive, saving money by doing free hikes , cooking his own meals, and camping. “But other travellers say food in Europe is much cheaper,”
Keeping up with the Joneses
Lage’s only criticism is that some of our backpacker hostels lack “atmosphere” and good areas for socialising with other guests.
Matthews says the market is evolving rapidly and we need to keep up with the move towards “flashpackers” or “poshtels” seen in Britain and Europe.
“They’re making their hostels much more social, putting in great bars, eateries, live music and art installations. That’s a long way away from your cheap and cheerful backpacker.”
Kaku agrees attitudes are changing.
“Because backpackers are travelling in pairs, they’d rather book an ensuite. Four years ago they’d stay in a dorm, now they want a better quality of accommodation.”
The YHA’s new $9m Lake Tekapo 128-bed hostel has a mix of dorms, private rooms and ensuites and a cafe.
But he is also optimistic his business will pick up thanks to the number of young people who have grown up using public transport, Uber, and Lime Scooters, so they don’t own cars and never learned to drive.
He expects the youth market start to climbing again in mid 2020 “once this Brexit mess sorts itself out.”
Meantime, its a good opportunity for tourism operators to hunker down and take a long hard look at their business model.
“It’s healthy to do through one of these cycles … the cream will rise to the top.”
Sourced by Mike Barrow