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Slowing Chinese visitor numbers could be costly

Arrivals of Chinese tourists to New Zealand are slowing, according to data released by Statistics NZ. 

While nearly 450,000 Chinese tourists visited New Zealand last year, a massive 7.3 increase on the year before, comparing the number of monthly arrivals with the year before shows three consecutive months of decline. 

October 2018 saw a dramatic 8.7 percent decline on the year before, November’s arrivals declined 4.4 percent, and December had 3.3 percent fewer arrivals than the year before. It points to what looks like a disappointing summer season for the New Zealand tourism industry.

It also raises further questions about New Zealand’s trading relationship with China. Other popular designations like Australia and Canada, which have also had strained relations with China, saw visitor numbers increase over the period.

Australia saw arrival numbers rise 0.9 percent in October and 1.6 percent in November compared to the years before, while Canada saw a dramatic 17.4 percent increase in October, and a 7.4 percent increase in November. Neither country has published data for December yet. 

New Zealand Tourism would not comment on the numbers.

'Costing the country more than it can afford'

News of the apparent decline comes after reports that Chinese tourists are being discouraged from travelling to New Zealand. The reports come in the wake of the GCSB’s decision to block Spark’s rollout of a 5G network using technology provided by Chinese telco Huawei, and New Zealand’s increasingly hawkish stance on China. 

A speech given at Georgetown in the US by Foreign Minister Winston Peters and a Strategic Defence Policy Statement delivered in July by Defence Minister Ron Mark were widely perceived as being hawkish on China. 

Last week, Newsroom reported Chinese tourists were being given apparently exaggerated information about the level of threat they faced in New Zealand, and the New Zealand Herald reported that Chinese tourists were patriotically boycotting New Zealand. 

The Prime Minister Jacinda Ardern told media on Monday a Chinese Foreign Ministry spokesperson had denied claims Chinese were unofficially sanctioning the tourism industry. They accused reporters of "making either a big fuss over nothing or harbouring ulterior motives".

University of Auckland politics and international relations senior lecturer Stephen Noakes said the slowdown in visitor arrivals could be a form of sanction, but it was difficult to tell for sure. 

"The trouble is that there's really no way to know for sure, since the rationale behind any decisions on China's side is so opaque, and many stakeholders have reason to deny that there have been upsets in the NZ-China relationship," Noakes said.

"That said, if there has been a chilling of bilateral ties, I think these are minor. I do not expect any chilling that may be happening in the tourist sector to upend the NZ-China free trade agreement, or its upgrades," he said. 

Confirmation bias 

While last week carried a succession of bad news stories about the New Zealand-China relationship, an Air New Zealand plane was turned back from China after its manifest was found to contain references to Taiwan. It is a country China does not recognise and claims as its own. 

Chinese ministers also pulled out of the launch event for the year of Chinese tourism, and Sanford Salmon complained it was having difficulties getting its exports through Chinese ports.

Others urged reading too much into the events. Ardern told media on Monday that officials confirmed goods were passing the Chinese border normally.

“A delay in processing a small number of projects doesn’t change the overall picture in a significant trading relationship, working effectively in both directions,” she said. 

The Air New Zealand incident appears a mistake of the airline, not an attack on the government.

China’s economy is also slowing from the giddy heights of the previous decade. Officially, China posted year-on-year growth of 6.5 percent in the third quarter of 2018, the lowest since the financial crisis. Many concede the official numbers are likely to be exaggerated. 

The Prime Minister herself pointed toward a slowdown to explain the numbers. 

"The numbers have been up significantly. At the same time we do see some softening in the Chinese economy,” she said.

But a wider slowdown would fail to explain why destinations like Canada and Australia failed to see a similar downturn in their visitor numbers. 

It there is a large downturn in New Zealand tourism, it won’t be obvious until the next Statistics NZ data release in March, which will capture arrivals for the period including Chinese New Year — a popular time for travel. 

Chinese visitors crucial to New Zealand 

Crucially, China is seen by the tourism market as a growth market. 

Unlike more mature markets like the US and the UK, there’s still plenty of room for Chinese tourism to grow — not just in visitor numbers, but in the amount of time and money they spend here.

Chinese visitors were once seen in the industry as lower-value, compared to higher-spend tourists from other nations. That has changed in recent years. Chinese visitors now spend roughly $1.6 billion in New Zealand, three times what they spent in 2012. While Chinese tourists still spend less than those from the UK, the US, and Japan, the sheer number of arrivals have led to MBIE forecasting that China will become New Zealand’s largest source of visitor revenue by 2024. 

This shift has, in part, been driven by more Chinese tourists travelling independently, rather than with tour groups. Although no perfect measure of this exists, the most accurate is the increase in the number of Chinese general visa applications - a visa class associated with independent travel - which was up 19 percent for the year ended September 2018, far more than the ADS visa, associated with package tours. 

Independent travellers tend to spend longer in the country, which means they also spend more. 

Chinese tourists now spend, on average, twice as much time in New Zealand than they did in 2010. The median length of stay is now eight days, up from just three in 2010.

A full 38 percent of visitors spend between one-two weeks here, up from just 8 percent in 2009. Then a full 55 percent of visitors spent just three days or less in New Zealand. In the September 2018 quarter, only 28 percent of visitors spent less than three days here. 

On the ultra-high end, the number of tourists spending two-four weeks here has doubled since 2009, to 11 percent. 

All of this will be of concern to policy-makers as they ponder a potential downturn in Chinese arrivals as diplomatic relations between New Zealand and China cool. Arrivals from more mature markets simply do not — and cannot — grow at the same rate as those for China. Arrivals from Australia in 2018 were up 1.5 percent on 2017, and arrivals from the United States grew a respectable 6.6 percent to 352,074.

But other traditional sources of international visitors were all in decline; arrivals from Europe fell by 2.1 percent in 2018 to 568,169, as did arrivals from Japan, falling 2.2 percent to 99,784. 

There were some fascinating areas of growth: visitors from Taiwan were up 25.1 percent to 44,659, and visitors from Vietnam and the Philippines also increased by more than 20 percent.

But none of these nations has the potential to replace what could be lost should Chinese tourism fall away. Losing just 5 percent of the Chinese market would see 22,500 fewer tourists. Losing 5 percent of Chinese visitor spending would equate to a loss of more than $80 million. 

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