Key says government mulling options to fund tourism infrastructure spending

Wednesday 9th November 2016

Prime Minister John Key said the government is moving closer to making a decision on how to fund additional infrastructure needed to cater for record tourism inflows.

New Zealand tourism arrivals rose 11 percent to a record 3.4 million in the year through September, and Key, who is also the country's Tourism Minister, told the Tourism Summit Aotearoa at Te Papa in Wellington that more infrastructure spending is needed to cater for the growth.

"I don’t think there’s much doubt that there’s the need for greater investment in infrastructure in tourism," Key told the Summit. Doing nothing wasn't an option because "I don't think you can sustain going to 3 to 4 to 5 million tourists and not be frankly building more toilets and more facilities and all this sort of stuff."

Key noted that there were many "great opportunities" for further development for tourist activities but local councils may not be able to respond to quickly enough or be able to fund them on their own.

Consultancy firm McKinsey & Co is preparing a report for an industry group, spearheaded by Air New Zealand, on infrastructure demands around New Zealand and funding options which is expected to be presented to the government before Christmas. Key said it identified about 50 potential projects and looked at how other countries funded such developments.

The government is likely to take some time to consider the report, which will be publicly available before it makes a call on how to proceed, he said.

"The question then becomes how much money do you need, what would you allow it to be used for, and who would decide, and then the last bit is how would you fund it."

"Around the world as I understand it, there are a range of different models," Key said, noting potential options included the introduction of differential pricing, which could see tourists pay for attractions such as national parks, a departure tax, bed tax, or tourism levy.

He said the decisions were "quite tricky", as some tourism areas requiring infrastructure such as Franz Josef and Fox Glacier could miss out on funding if a bed tax was spent in the area where it's earned, benefiting destinations such as Queenstown. If a departure tax were introduced, how would funding for projects be decided and would it capture everyone or just foreign passport holders, he queried.

Key said such small charges were unlikely to have any great impact on visitor numbers.

Still, some argued that charging extra fees was "too difficult" and the government "should just pony up and put the money in" given it earned nearly $1 billion in GST from tourism, he said. However, he said there was a risk future governments could place less emphasis on tourism and cut back funding. While the government could direct funds to one-off projects, it wasn't fast enough or consistent enough, he said.

Key said international visitors were ambassadors for the country and the sector needed to ensure they had a good experience, as they could communicate broadly and quickly through social media to other potential travellers.

BusinessDesk.co.nz

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