In the year ended November 2015, over three million international visitors arrived in New Zealand, up 8.9% over the same period last year. This was significantly ahead of the long term growth rate over the last 20 years of 4.0% p.a. as well as the Ministry of Business, Innovation & Employment’s (MBIE) annual visitor arrival growth rate forecast of 4.0% p.a. from 2015 to 2021.

While growth was broad-based, with visitors from all major regions up year-on-year, of particular interest was the phenomenal 34% growth rate in Chinese visitors arriving in 2015. Over the last 20 years, Chinese visitors have grown at a staggering 18% p.a., from barely over 12,000 visitors in 1996, to over 340,000 in 2015. In contrast with Japan, once our largest Asian visitor arrival source, visitor arrivals from Japan have halved over the last 20 years, from over 160,000 in 1996 to the current the current 86,000 for the year ended November 2015. [1]

Source: http://www.stats.govt.nz/iva data series

Chinese visitors are big spenders when travelling to New Zealand. MBIE’s international visitor expenditure survey shows that in aggregate, Chinese visitors spent on average over $5,000 per trip and over $400 per night for the year ended September 2015. This compares favourably with the total inbound visitor average spend of $3,400 and $188 respectively. The implications suggest that while Chinese visitors currently only make up 11% of the total visitor arrivals, they have a disproportionate impact on our tourism industry and wider economy.

Given the relatively high spending power of Chinese visitors, combined with fast visitor arrival growth rates, China is expected to overtake Australia as our biggest international spender in the next five years. It is therefore useful to understand the underlying drivers of the recent Chinese tourism boom.

While travel costs, safety and scenic views are often cited as the most important factors Chinese visitors consider when choosing travel destinations, there were two events in 2014 that provided a catalyst for the phenomenal Chinese visitor growth rate.

Firstly, in September 2014 the extremely popular Chinese reality TV show “Dad, Where are we going?” featured 217 minutes of New Zealand destinations. The show was watched by approximately 400 million viewers and according to Tourism New Zealand “the value of the coverage achieved from this activity is estimated at NZD $169 million”.

Secondly, President Xi Jinping visited New Zealand in November 2014, the first by a Chinese head of state since President Hu’s visit in 2003. Both events resulted in a significant spike in online searches for keywords such as “New Zealand”, “New Zealand tourism” and “New Zealand visa” as eager Chinese citizens rushed online to learn more about New Zealand. Many academic studies find that online search trends can be a leading indicator for actual visitor arrival statistics.

Will we continue to see a 30%+ growth in the arrival of Chinese visitors in 2016?

If history is any indication, this trend may be difficult to continue. During President Hu’s visit to New Zealand in September 2003, a 28% increase in the arrival of Chinese visitors was observed for the year ended December 2004. However in the year ended 2005, only a 4% increase was observed. Nevertheless, the positive awareness impact that both events have created, coupled with the low New Zealand dollar, safe environment and beautiful scenery, will continue to make the land of the long white cloud an attractive destination for Chinese visitors for many years to come.

Shing Zhu

Analyst

[1] http://www.stats.govt.nz/iva data series

Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.