Executive summary

In conducting this examination of the New Zealand domestic tourism market a number
of key issues have become clear. If these issues are addressed nationally and regionally
they provide opportunities for those working in domestic tourism to develop a more
robust and cohesive approach to the sector, which in turn will grow business.
Domestic tourism provides critical support to tourism operators in several areas of
industry performance:
Seasonal i ty: A vibrant domestic tourism industry can generate visitor spending in slower
shoulder and off season months.
Regi onal di spersal : Domestic visitors can be vital in providing an even greater level of
spending in emerging regions, i.e. smaller, remote or less developed areas of tourism.
Increased spendi ng domesti cal l y: A compelling domestic tourism offering can motivate
Kiwis to holiday in New Zealand rather than offshore. It can also encourage them to direct more
of their discretionary dollars into domestic holidays.
The history of international tourism overall is one of growth interrupted by short to
medium term crises. Countries with a weak domestic tourism sector are less able to
withstand the impact of major crises in international markets, e.g. economic
depression, terrorist attack, natural disaster. Conversely, countries with a strong
domestic tourism sector are generally better equipped to withstand fluctuations in
international demand.

Actionable initiatives
We propose four areas of further action to boost the performance of the domestic
tourism sector. These should aim to better define the sectors issues and
opportunities. They should also suggest longer term actions and also offer immediate
actions to improve seasonality and bolster visitor dispersal across New Zealand.
1. Insight into attitudes and behaviour of New Zealanders to domestic vs.
international travel options
This insight should build on previous major studies, notably the Angus and Associates
2009 Domestic Travel Study, to better understand:
the motivations to travel internationally
the barriers to domestic travel, including perceptions of New Zealand as an aspirational
destination
price and access issues
In particular, the insight should probe opportunities to move New Zealanders
spending from international travel or other discretionary spending to domestic travel.
2. Domestic tourism leadership
CONTENTS
Executive summary
Actionable initiatives
Why is domestic tourism
important?
The value of domestic
tourism
Characteristics of the
domestic traveller
Enablers of domestic
tourism
Challenges and
opportunities
Gaps in insight
Domestic tourism the backbone of the industry
A range of tourism businesses, regional organisations and local councils are involved in
delivering domestic tourism. They often operate in silos with no national perspective or
coordination. A national domestic tourism working group consisting of the major
stakeholders could drive the development of better insight tools and understanding of
the market through updated market segmentation. It could also encourage greater
and more effective investment in the sector.
3. Resource constraint effect of TNZ regional activity support
Regional Tourism Organisations (RTOs) are regarded as the prime tourism industry
organisation at the local level, and as such are called on to support and facilitate TNZ
trade and international media activity in the regions. While RTOs welcome the
opportunity to showcase their region to potential tourism advocates, providing this
support can sometimes divert considerable resources away from core activities such as
domestic marketing. TNZ could address this by allocating budget for regional resource
support.
4. Regional Tourism Organisation (RTO) capability support
Local government as the primary investor in RTOs is fiscally limited in the level of
support it is able to provide. Regional Tourism Organisations New Zealand (RTONZ)
recommends local government establish a contestable fund to provide RTO insight and
capability building.


Why is domestic tourism important?
Domestic tourism is a multi-billion dollar industry
Domestic tourism has been increasing steadily in New Zealand over a considerable
period of time. Today it is worth almost $14 billion dollars annually to the tourism
industry and makes up 59% of total tourism earnings. Domestic visitors spend $39
million per day, benefiting cities, towns and communities throughout New Zealand.
Domestic tourism makes a substantial contribution to the industrys overall financial
resilience, sustainability and functionality in fact many tourism businesses would not
survive if it were not for the year round patronage of domestic visitors. Kiwis contribute
more visitor nights and higher expenditure than international visitors and help address
seasonality and regional dispersal challenges.
Domestic tourism contributes to regional
economies
The differing travel patterns of domestic visitors mean that they are an important
contributor to regional economies, generating wealth and vibrancy that many regions
and places would otherwise lack.
We have created an indicator of regional impact based on regional gross domestic
product data. Figure 1 shows a regional tourism expenditure comparison between
international and domestic sectors as a proportion of regional GDP (year ended March
2010).
The pie charts show both the proportion of international and domestic expenditure in
each region as well as the relative expenditure size. While most expenditure occurs in
the gateway cities (larger pies), the impact of expenditure is more marked (heavier
shading) in more sparsely populated regions (e.g. West Coast, Otago, Northland,
Marlborough). Domestic expenditure dominates in all regions except for West Coast
and Otago.
Domestic tourism supports commercial
accommodation
The usage of commercial accommodation by domestic visitors is captured by the
Commercial Accommodation Monitor. Figure 2 shows the volume change (from the
same month in the previous year) in guest nights for both international and domestic
visitors from September 2009 to September 2013. This data shows that for most of
this time, domestic guest nights have demonstrated a more consistent pattern of
growth than international guest nights. They therefore make an increasingly important
contribution to accommodation operators financial sustainability, especially during
should and off-peak seasons.
Domestic tourism supports seasonality
Domestic leisure travel is significant for most regions during the summer school holiday
period. Other significant peaks during other school holiday periods and around public
holiday weekends. A different pattern of domestic leisure travel is observed in large
urban centres that have good air-links and where competition exists, e.g. on the main
trunk route.
Most domestic leisure travel is made to places that are within easy driving distance
(around three hours or less) or that have a competitively-priced air service. This means
that for rural regions (e.g. Wairarapa and Coromandel) that are within easy reach of
major urban centres there is good year round opportunity, while remote, less well
connected regions (e.g. West Coast and Gisborne) have much less opportunity to grow
domestic tourism.
Business and convention attendance travel patterns tend to reflect the opposite to
domestic leisure travel, with significant peaks during the middle of the working week,
during school term times and outside weeks that contain public holidays. Beyond this,
New Zealand domestic business travel tends to reach its peaks at either end of the
business year.
Conventions
Meetings, Incentives, Conferences and Exhibitions (MICE) is a valuable niche market that
generates domestic travel. Within the MICE sector, multi-day conferences are likely to
have the greatest impact on the domestic tourism sector and visitor expenditure. A
broad suite of activity is reported in the Convention Activity Survey, including single and
multi-day duration events.
Events
In many regions, events maximise the visibility and the benefits of the visitor industry to
communities. Events enable regions to offer a seamless experience to visitors as well as
providing vitality and excitement for local residents.
Photo: The Secret Location Lunch with Black Barn - at F.A.W.C! 2013/
Hawkes Bay Tourism/photographer Brian Culy
In the past decade, many regions have adopted strategies to invest in festivals and
events, with a particular interest in those which provide potential to address
seasonality and bring domestic visitors into a destination in a traditionally quiet period
of the year.
Some key Taranaki events, for example, not only attracted more visitors to the region
but revitalised community spirit. Similarly, the Whitianga Scallop Festival in the
Coromandel region attracts a large number of visitors each year and provides a
welcome boost to the visitor industry and to community spirit in the off-peak winter
season.
Domestic tourism supports business success and
develops capability
Success in the domestic visitor market provides businesses and communities with the
opportunity to develop their product or experience so that it is of interest to the
international visitor. While most businesses target both domestic and international
markets, very few businesses or communities can rely solely on international visitors for
commercial success.
Domestic tourism creates a platform for tourism businesses to become export ready
by underpinning the international offering and providing year round cash flow. This
has the effect of stimulating product and infrastructure development.

The value of domestic tourism
Domestic tourism expenditure has outpaced
international spending
Domestic tourism delivers many benefits to the New Zealand economy and
communities across our country. The expenditure New Zealanders make on domestic
travel is retained within the New Zealand economy and buffers businesses and
communities from the vagaries of the global economy.
An appreciating New Zealand dollar over the last decade is reflected in the growth of
New Zealanders holidaying overseas. Domestic tourism has also grown during this
period, but not at the same rate.
Since 2003, domestic tourism expenditure has increased by 37% compared with 66%
increase in New Zealanders overseas travel expenditure. Not only does a choice to
travel overseas (rather than travel at home) impact on New Zealand's domestic tourism
expenditure, it offsets New Zealand's international tourism income because Kiwis
travelling overseas are importing travel. The more they import the lower New
Zealand's 'balance of travel' (see Figure 3 below). This reinforces the importance of
domestic tourism to our economy and the need for the industry to create compelling
reasons to holiday in New Zealand.
Tourism s Money Go Round
How we account for tourism depends on who is spending the money and where
they are spending it:
New
Zealanders
spending
their money
in New
Zealand:
When New Zealanders travel at home, the money they spend boosts
our domestic economy (contributes to GDP) but has no effect on
New Zealands trade balance with the rest of the world.
Overseas
visitors
spending
their money
in New
Zealand:
When overseas visitors come to New Zealand the money they spend
boosts GDP and also counts as an export (people from another
country, buying something from New Zealand). Exports increase New
Zealands trading income from the rest of the world.
New
Zealanders
spending
their money
overseas:
When New Zealanders travel overseas, they use New Zealand money
to buy something from overseas. That means they are importing
tourism. Imports reduce New Zealands trading income from the rest
of the world.
When overseas visitors buy New Zealand tourism, we are exporting tourism. When
New Zealanders buy tourism from another country, we are importing tourism. The
more tourism we import (the more New Zealanders travel overseas) the more
overseas visitors we need before New Zealand is better off.

Domestic day trips and overnight trips
There has been a significant change in the make-up of domestic tourism activity over
the last decade:
in the year to March 2012, New Zealanders took 34.1 million day trips and 18.6 million overnight
trips
over the period from 2003 to 2012 the number of overnight trips taken by New Zealanders
increased by 10% and the number of day trips decreased by 6%
domestic tourism activity accounts for more than half of the demand for overnight stays
international visitors account for 40% of all commercial guest nights and domestic 60%
some 57% of domestic visitors stay in private accommodation while 33.1% of international visitors
list VFR as their primary purpose of visiting New Zealand

Characteristics of the domestic traveller
The motivations of domestic travellers are typically very different to those of
international visitors, although there are areas of overlap.
Relatively few New Zealand residents travel within New Zealand simply to 'experience' a
destination in the way that international visitors do (i.e. to sightsee, to learn or to
discover something new, to see an iconic attraction or to participate in a 'must do'
activity). Instead, the motivations of domestic travel tend to be more specific and more
'transactional' in nature, i.e. New Zealanders travel to see a particular place or to do
something specific (e.g. to ski, to cycle, to walk, to play golf); to attend a public or
ticketed leisure/business event; to attend an event held by family or friends (a wedding,
a birthday); simply to spend time with friends or family; to do business; to shop; to
study.
Photo: Venture Taranaki/photographer Rob Tucker
While New Zealanders are proud of their country and believe it has much to offer
them, they are also of the view that it will always be there and the attractiveness of an
overseas holiday can be stronger. This is why domestic tourism marketing activity
comes with a very strong call to action and a compelling time-bound offer.
Despite the attractiveness of a holiday offshore, there are domestic opportunities.
Turning VFR trips into leisure trips is a growing trend where people use family
occasions as an opportunity to take a holiday.
Other motivations exist as well, and may help ensure that this trend becomes
increasingly prominent even after the economic recovery.
One of these motivations is New Zealands changing demographics the number of
New Zealanders aged 65+ has doubled since 1980 and by 2025 will be well on its way
to doubling again. The vast majority of these people are healthy and active, with leisure
time and money to spend. As more of New Zealands baby boomers move into
retirement, we can expect them to travel more, internationally and domestically.
Different types of domestic leisure tourism can also benefit from wider trends. Health
tourism (such as spa breaks), for example, will not only be driven by a generation of
health-conscious baby boomers, but also by rising perceptions of time pressure and
blurring distinctions between work and leisure heightening consumer desire for
treats and breaks. Similar trends in health consciousness and a desire for new
experiences will also lead to the growth of active tourism.

Enablers of domestic tourism
Regional domestic marketing
Regions compete strongly to attract domestic visitors, so the development of domestic
strategies that identify travel determinants, demands, market mix and segments is
important.
Regional events and festivals enhance communities and are two of the most frequently
utilised ways of stimulating domestic tourism growth. They are also a means of
vitalising local economies and reducing the effects of seasonality that are often
attributed more to international visitors.
The marketing efforts that attract domestic visitors to individual regions, often
coordinated through RTOs, are also matched by individual businesses providing
products and services which add to the appeal of a region.
These partnerships and collaborations enable regions to present a coordinated voice
and facilitate opportunities for scaled investment in a highly complex and competitive
environment, therefore increasing the likelihood of achieving positive outcomes.
Photo: Lake Rotoiti, Nelson Lakes National Park, Nelson Tasman Tourism
Domestic Aviation
Domestic aviation links facilitate domestic business, holiday and VFR travel . These
aviation links currently can be categorised in the following way:
routes operated by two or more scale operators (trunk)
routes operated by a single scale operator (regional)
Domestic air capacity is an enabler of both domestic and international tourism. As
[1]
Figure 5 shows, there has been no material growth in total seat capacity between 2005
and 2013. Since 2005 trunk capacity has grown marginally while regional capacity has
reduced slightly. In fact total air capacity in 2013 is well short of the peak capacity of
15.2 million turnaround seats in 2008.
Domestic air capacity growth has primarily been on trunk routes with demand mostly
driven by the corporate and government sectors, with international visitors a small
proportion of total traffic.
This aggregate picture obscures significant change in domestic services throughout
this period :
Origin Pacific exited in September 2006
Pacific Blue commenced services in November 2007
Qantas exited and Jetstar entered the market in July 2009
Throughout this period Air New Zealand has been the predominant provider of
capacity on both trunk and regional services. Jetstar has provided the bulk of the
capacity increases on trunk routes since 2011.
Photo: Wellington International Airport
[2]
Domestic aviation demand stimulation
Infometrics has been monitoring trends in domestic air-travel over the course of 2013.
They observe that:
The cost of domestic air travel has risen by only 3.3 % over the past four years. Over the same
period general prices climbed by 8.8%, implying that the price of domestic air travel fell relative to
most other expenses.
This relative improvement to the affordability of domestic air travel has massively expanded the
size of the domestic market by bringing flying within the budgets of a wider cross-section of
society.
Over the three years to June 2013, total domestic passenger numbers in New Zealand grew by
15%.
Enabling domestic air connectivity growth
The key question for the industry in this area is how it can stimulate market growth to
ensure the sustainability of a multi-carrier domestic market (i.e. profitable airlines) in a
manner which:
increases the likelihood that the positive growth trends since 2011 can be sustained on the trunk
line
stems capacity reductions on regional services
stimulates underlying demand on todays regional routes
Filling existing capacity is the quickest way to secure sustainable capacity. Opportunities
to do so include but are not limited to:
targeting more domestic travel packages at times for which there is available air and
complementary product (hotel, rental car) capacity, and
forming strong on-going collaboration between airports, RTOs and tourism providers and the
airline(s) e.g. the new Kapiti-Christchurch services collaboration by Christchurch and Kapiti
Airport and local government
Continued focus on filling planes (both regionally and on trunk services) will improve
the likelihood of sustaining and improving domestic air connectivity and tourism in the
long-term.
The role of Regional Tourism Organisations
RTOs provide a critical role in the domestic marketing of their regions.
47% ($7.04 million) of total RTO investment by the 29 RTOs is spent on domestic
marketing, with the balance spent on international marketing.
RTOs are focused on delivering increased domestic visitation, length of stay and spend
to generate greater economic returns for their regions. As lead organisations
representing their regions, RTOs work in partnership with tourism businesses to
achieve a single, collaborative voice and scale in the marketplace. This beneficial
relationship is in many cases essential for success.
For many micro and smaller operators, domestic marketing activities undertaken by
the RTO may be the only vehicle through which they can take their product to the
marketplace.
RTOs actively promote their regions domestically, through a variety of mediums, such
as trade marketing, digital marketing, promotional collateral and media hosting.

Challenges and Opportunities
Domestic segmentation provides opportunities to
target niche markets
Domestic market segments are always changing. Almost half of all New Zealand adults
take at least one short domestic breakeach year, but just one-quarter take a longer
holiday(six nights or more) (Domestic Tourism Market Segmentation Angus &
Associates 2010).
Figure 6 shows the incidence of trips by types and purpose, comparing these to the
incidence of international travel.
Averages such as this disguise enormous variation in the travel patterns of New
Zealand residents.
The qualitative research conducted as part of the Domestic Tourism Market
Segmentation shows that both frequency and type of travel were likely to be shaped by
an individuals age, gender, lifecycle stage, interests, personal circumstances and
priorities (i.e. by both demographic and psychographic factors). Economic and weather
factors also come into play in the determination equation.
The incidence of domestic trips by type and purposevaries widely,with trips taken for
business, events and VFR being major components of the domestic mix. Overall
however, the leisure travel segment of the domestic market is a significant 49%.
Each segment has a different driver of demand and requires different marketing
approaches to attract visitation.
Further information on domestic market segmentation can be found here.
Despite its size, significance and the stated importance of domestic tourism, the
industry has grappled with a range of challenges and barriers to its growth as noted in
this paper.
Aspirational destination
For many Kiwis, New Zealand is not the exciting destination they aspire to visit or brag
about with friends and family on their return. Domestic travel is often deferred, with
New Zealanders believing that they can see their own backyard when they are older.
This is likely a long term issue that the industry and country will need to address
gradually over many years. It is a product of New Zealands geographical isolation and
a historical perception that the most exciting events happen overseas.
Expensive vs. the rest of the world
Partly as a result of the issues of connectivity and lack of affordable and compelling
domestic tourism offers, Kiwis perceive New Zealand as an expensive destination
compared with a holiday overseas. In Hawaii, for example, local rates (kamaaina) are a
widespread and effective tool that aim to boost domestic tourism spend. The lack of
differential pricing here means that New Zealand visitors often need to pay the walk up
rack rate without the benefit of accessing deals or offers.
Cohesive domestic tourism marketing lacks budget and
capability
In the absence of a central coordinating agency, domestic tourism marketing is left to
each individual RTO, most of whom have neither the budget or capacity to mount
domestic tourism marketing campaigns. For many RTOs, international tourism
marketing and supporting TNZs programmes are the major focus of their limited time
and resources. Only the largest RTOs have a significant domestic marketing budget. To
boost New Zealand visitor dispersal, many of the smaller regions also need effective
domestic marketing.
Connectivity and infrastructure
As with international tourism, the lack of strong infrastructure and transportation links
are a challenge facing domestic tourism. This includes capacity and/or competition on
transportation routes (road, bus, rail, air) to some centres and also limited facilities (e.g.
accommodation, meetings and event facilities) in some destinations.
Market distortion effect
TNZs significant marketing budget and activities attract industry investment and
resources into international marketing. This has many positive elements but also some
unintended, negative consequences. For smaller operators and many RTOs with
limited resources, it likely moves money and activity from the lower cost, more
accessible domestic market into international marketing activities. The unintended
consequence of TNZs international marketing investment is therefore to dampen
domestic marketing activities and constrain the resource and focus given to this
market. The extent and nature of this market distortion effect needs to be reviewed.

Gaps in insight
While major international markets have been widely researched there are gaps in
understanding the domestic tourism market. To achieve the domestic tourism growth
aspiration to 2025, it is essential these gaps are addressed in order to obtain a full
picture of the domestic sector from which stakeholders can make informed investment
decisions.
Many complex factors come into play when people weigh up decisions to travel
domestically, some of which have not been researched or uncovered.
A number of areas for investigation are immediately apparent and include:
changing holiday patterns the traditional Christmas/New Year shutdown has dissipated and
school holiday breaks have been revised
regional events what effect does the growing number of regional events and festivals have on
longer domestic holidays vs. weekends away
bigger regions are more resourced how does this affect smaller regions wishing to attract
domestic visitors
Barriers to domestic travel also need to be also examined to determine if any
interventions can be used to make it easier for New Zealanders to travel domestically.
Factors impacting on the decision to travel domestically include:
uncompetitive domestic accommodation
high fuel costs
international travel relatively cheaper/more attractive and easier to book
ease of entry to other countries particularly Australia
go now factor lower costs for international travel may not last
domestic travel seen as boring relative to international
Limited insight is currently available. As a first, urgent step, stakeholders should collate
what is available from private and public sources. Various commercial organisations
have domestic research programmes and findings from these may help build greater
understanding (commercial sensitivities can be worked through on a case-by-case
basis). Non-commercial research datasets could also be included. A domestic tourism
research framework should also be developed, given the significant size of the market
and the potential to increase value.


[1] Indirectly the quality of domestic aviation links can influence the ease with which
international tourists can reach regions, over and above car and rail travel which they
may also have access to.
[2] A handful of other small operators connect a small centre to a main hub airport
(e.g. Air Chathams/Great Barrier Airlines/Sounds Air) or connect two small centres (e.g.
Air Napier: Napier-Gisborne). However, these are very small volumes compared to the
jet and turbo prop networks of nationwide operators.