What’s behind the boom

Favourable fares, shorter hauls in visiting Asia just the ticket, writes Grant Bradley

Waves of New Zealanders are taking holidays overseas in everincreasing numbers and to new destinations, as what’s been described as the “golden age of travel” shows no sign of ending.

Figures stretching back nearly four decades show the number of overseas holidays has grown nearly five times, from 247,000 a year to 1.1 million.

The rise of Asian countries for a growing number and proportion of Kiwi vacationers has been most spectacular.

According to the Statistics NZ figures, compiled by the Herald’s Data Insights team, in 1979 10,241 Kiwis went to Asia, or just 4.10 per cent of all residents on holiday. This soared to 187,720 last year, to nearly 17 per cent of all travellers, as airlines in the last decade in particular poured capacity into the Asian nations and New Zealanders’ taste for them grew.

Equally dramatic has been the slump in popularity for Britain. The proportion making that big trek has plummeted from 8.3 per cent to 2.5 per cent.

And while Australia remains by far the most popular spot to visit with 430,000 crossing the Tasman last year, as a percentage of all outbound holiday travel it has shrunk from just over half to 38.7 per cent.

Travel experts say the holiday exodus has gained momentum that is hard to see slowing soon.

“Families doing big holidays every school holidays — Fiji or the Gold Coast or further,” says helloworld general manager David Libeau. “The kids just expect to be taken overseas.”

And it’s not just the sun Kiwis are chasing year-round.

“It’s affordable to go to Antarctica now,” said Flight Centre NZ managing director Dave Coombes.

A few years ago it would have been an out-of-range dream — but it’s affordable and available.

Kiwis aren’t the only ones travelling in record numbers. Last year 1.2 billion people took overseas trips, according to United Nations figures, and they spent more than $1.7 trillion.

Many New Zealand travellers can afford it because air fares now are at times a fraction of what they were 38 years ago. Improving aircraft efficiency, stable fuel prices over the past two years and cut-throat competition between airlines are keeping fares low.

In 1983 an economy-class return fare to Los Angeles was $2196, or close to $5000 when adjusted for inflation. Some LA fares have dropped below $800 in the past two years as more airlines fly directly across the Pacific, more than doubling the number of Kiwi travellers over six years.

A Statistics NZ international air fare index dating back to 1981 shows fares climbed to their highest point five years later but in the first quarter of this year fell to levels near those when it was started.

A Flight Centre survey found the biggest increase in travel by household income grouping was in those earning less than $40,000, with a more than 5 per cent increase in travelling long haul and 6 per cent domestically.

Growing costs of holidays within this country are also forcing Kiwis to look for cheaper alternatives overseas as they forget the “don’t leave home until you’ve seen the country” plea of a 1980s campaign.

The flood of overseas visitors — running at a record 3.7 million a year — means domestic air fares are kept high relative to international prices, and accommodation in particular is at a premium. But New Zealanders also have this tourism boom to thank for low international fares, as the inbound market is driving the number of seats.

House of Travel founder Chris Paulsen says there have been 750,000 additional seats in the market in the past 12 months alone.

“That hasn’t come in because of outbound demand. It’s airlines positioning themselves for the future of travel in the Asia-Pacific, of which New Zealand is going to be a key component.”

Demographer Professor Paul Spoonley said the shift towards Asia was due to two main factors, the first being the ease of getting to destinations with more air links.

Parts of Asia which, a few years ago might have needed one or two transfers, could now be reached with non-stop flights.

“But we also have both temporary and permanent arrivals from Asia — and travel now reflects family and friends’ travel. And it is growing so that rituals like the New Zealand OE are now more likely to involve Asia rather than Europe. Some of this is being encouraged by moves by the British Government to make it more

difficult to live and work in the UK,” he said.

Travel agents’ VFR (visiting friends and relatives) divisions are among the fastest-growing parts of their business as new residents from China, India and the Philippines head to their homelands for holidays.

Air New Zealand carries about 40 per cent of travellers out of New Zealand and its chief revenue officer, Cam Wallace, said his airline’s shift in strategy over a decade ago to a Pacific Rim focus meant there were more flights to Asian countries.

“As a country we’re more connected to Asia and more confident as travellers. We made a call more than a decade ago that we wanted to be primarily focused on Pacific Rim growth and the kind of things that enable that is tourism and trade but also equipment,” he said.

Long-haul destinations in Europe were also falling out of favour in relative terms because mid-haul holiday spots were more convenient to get to and fitted better with travellers’ limited leave from work.

Airlines could cut fares more easily to places in Asia. The shorter the distance, generally the more opportunity you had to stimulate demand. It was hard to stimulate demand to an ultra long-haul destination but somewhere half the distances, such as Tokyo, Shanghai or Singapore, was easier.

The stunning rise in travel to places such as Vietnam can also be explained by geopolitical reasons. Just 12 New Zealanders were recorded as going on holiday to Vietnam on holiday between 1979 and 1987 as the communist country recovered from war.

Similarly just 216 New Zealanders went on holiday to China in 1979 when there were tight restrictions. Last year this grew to 25,280 Kiwis.

BNZ chief economist Tony Alexander said the prime driver for the travel boom was lower cost.

“If you go back 30 or 40 years ago going on an overseas trip was a special thing. For some people it was once in a lifetime. These days people are growing up with their parents taking them overseas — because of the decreasing cost it has found its way into a generally expected element of consumption on a frequent basis,” he said. “It’s not an essential and it’s certainly one of the things I’d recommend people put to the side if they’re saving for a house deposit or trying to pay off a mortgage as rapidly as possible.”

But he said any softening of economic growth or property market would not necessarily curb travel.

“In theory if people are worried about their jobs they’ll travel less, if they’re worried about their house price they’ll travel less. History has shown us that analysts tend to overestimate the impact on spending of house-price changes.”

Following rapid overseas holiday travel growth in the lead-up to the global financial crisis, Alexander said there was a muted response when the slump hit hard in 2009, with only a 2.5 per cent drop that year.

He agreed that staying at home was also costing more.

“The cost of travelling domestically is going to go up further, that’s going to make people think ‘why bother seeing the rest of the country let’s go for somewhere overseas, we know we’re going to get better weather’.”

But Tourism Industry Aotearoa, which represents domestic operators, says the lure of a short break in the sunshine during our winter is understandable.

“It doesn’t appear that New Zealanders are necessarily being priced out of travelling in their own country. The most popular destination for New Zealanders is Australia, where the prices are similar if not higher,” said chief executive Chris Roberts.

The tourism industry’s challenge was to overcome the perception by New Zealanders that our tourism activities and attractions here had a lower value than a similar activity or attraction overseas, he said.