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Accommodation demand little changed in August; seen weaker

Friday 10th October 2008

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Demand for paid accommodation in New Zealand was little changed in August from July as the kiwi dollar's weakness against the Australian currency underpinned demand.

The total number of guest nights was 2.695 million, seasonally adjusted, in August, unchanged from July, according to Statistics New Zealand. Guest nights rose 1.7% in July on the same basis. On an unadjusted basis, the figures have fallen for three straight months.

"A very low New Zealand dollar against the Australian dollar has helped," said Doug Steel, economist at Westpac Banking Corp. That's likely to unravel now that the kiwi dollar has gained on its counterpart across the Tasman, he said.

About 47% visitors to New Zealand in August came from Australia, according to the government statistician, dwarfing arrivals from the U.S. and the U.K. New Zealand's dollar traded at low as 77 Australian cents in August and has since climbed to 89.05 cents, lifted in part by the 100 basis point cut in interest rates by Australia's central bank.

Tourism is New Zealand's biggest earner of foreign exchange, accounting for some 10% of gross domestic product.

Campervan operator Tourism Holdings Ltd. fell 4.2% to NZ$1.15 today and has tumbled 49% this year. Air New Zealand Ltd. is down 2.2% to 91 cents, bringing its slide in 2008 to 51%.

Auckland International Airport Ltd., the busiest gateway to New Zealand, fell 1.1% to NZ$1.75 and has dropped about 40% this year.

Westpac's Steel said next year "will be worse than it has been." A slowdown and the credit crunch will reduce visitors from the U.S., U.K. and Japan, while emerging market travel demand won't be as strong as it was. A stronger kiwi against the Australian dollar may also sap demand from across the Tasman.

"The general loss of wealth, partly as stock markets fall, and income growth slowing - that certainly doesn't do any good for the prospects of tourism in the short term," he said.

As a long-haul destination, New Zealand falls into the "luxury-type goods" category and tends to be the first to be deferred, Steel said.

By Jonathan Underhill



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