The tourism industry is identified as the single most important sustainable income earner for the Cook Islands economy and measured by growth in visitor arrivals.
It is estimated that tourism expenditures generated some $108.5 million in 2004-05 which amounts to around 40% of GDP. Growth in visitor arrivals has averaged around 5.6% for the past 5 financial years with an 8.9% growth rate in 2004-05. This high growth rate is a result of the introduction of cheaper flights in June 2004 and additional flights from March-April 2005, although some of these flights have now been withdrawn. The New Zealand market expanded its share of visitors from 43% in 2003-04 to 50% in 2004-05, while the Northern Hemisphere markets have fallen from a 40% share in 2003-04 to only 32% in 2004-05. This squeeze in Northern Hemisphere markets actually dates from around 2002 and is due to the lack of direct flights, unavailability of seats from Tahiti to Los Angeles, and the strengthening of the New Zealand dollar.
There is also anecdotal evidence that tourism expenditures per head have declined as a result of this change in market share. Tourists from New Zealand are considered to spend less than those from the Northern Hemisphere. This has impacted on local outlets and thus trends in VAT revenues. Given that the most recent visitor expenditure survey was undertaken in 1991, an updated survey should be undertaken as a matter of priority to get a better handle on the yield from different markets and to guide policy development and marketing efforts.
The change in market composition has also led to greater seasonality in the tourism industry and the economy as a whole. Visitors from New Zealand tend to be concentrated in the period from around June to October. Whereas previously this was balanced by high numbers from the Northern Hemisphere between November and March, this is now much less the case. This is posing problems for the industry, particularly the smaller operators.
There has also been a shift in the type of product demanded by tourists. The larger resorts have generally achieved good yields, even though in some cases occupancy rates have been down or they have had to discount their rates. Holiday homes and backpacker accommodation have also done quite well. However, many of the smaller operators are struggling, partly reflecting over-supply in this segment of the market. Some smaller operators have undertaken joint marketing exercises or developed arrangements with larger operators for marketing and management. Restaurants have also reported lower sales with more visitors preferring self-catering style accommodations.
The most recent data indicate very high visitor numbers in July and August 2005, with monthly arrivals exceeding 10,000 for the first time ever in July. However, the last three months have seen a levelling off of previous high growth with arrival figures for the period September to November down 3.6% on the same period in 2004.
It is also more difficult to project short-term trends based on forward bookings. Access to internet bookings and cheaper flights have meant that lead times for booking holidays have been greatly reduced and that projections out further than three months ahead are no longer a good indicator of future occupancy. The outlook for the tourism industry is that growth will moderate to around 3.8% in the medium term, based on the average growth rate over the last ten years.
The Tourism Corporation is currently undergoing a re-branding exercise which is expected to provide a more long term strategic analysis and planning of destination marketing. Arrivals are projected to increase by 4.0% in 2005-06 and 3.9% in 2006-07.
Complete report: MFEM, Half Year Economic and Fiscal Update