May 2024
Executive Summary
The Restaurant Association of New Zealand welcomes the opportunity to set out the importance of continued Council investment into the tourism-related functions carried out by Hawke’s Bay Tourism. We wish to appear before Regional Councillors to speak to our submission.
While our preference would be to maintain funding for Hawke’s Bay Tourism at its current level, we recognise that this is not an option. We therefore submit that the only viable proposal is the Council’s ‘Option B’ to maintain funding at $1.52 million for 2024-25, and $441,000 per annum for 2025-26 and 2026-27.
Introduction
The Restaurant Association of New Zealand (the Restaurant Association) welcomes the opportunity to make a submission on the Hawke’s Bay Regional Council’s Three-Year Plan.
We are strongly opposed to the Council’s preferred ‘Option A’ to phase out funding for Hawke’s Bay Tourism.
While our preference would be to maintain funding at its current level of $1.52 million for the next three years, we recognise this is not an option. We, therefore, submit the only viable proposal is the Council’s ‘Option B’ – to maintain funding at $1.52 million for 2024-25, and then reduce to $441,000 per annum from 2025-26.
The Council’s preferred option would force Hawke’s Bay Tourism to shut down in July which would greatly affect the region and New Zealand’s wider economy. As the largest representative body in New Zealand for food and beverage businesses in the Hospitality industry, we are concerned by the significant impacts the proposed funding cuts will have on the region’s tourism and hospitality sectors, the third largest contributor to the region’s Gross Domestic Product (GDP).
Key Feedback
Tourism and hospitality are key contributors to people and place. Our tourism and hospitality industries are integral to our national identity; when they thrive, so does New Zealand. They bring economic diversity and resilience, generate jobs and contribute to regional prosperity while showcasing our cultural richness and timeless experiences, fostering pride and social connectivity both locally and globally.
We recognise that, across New Zealand, local governments are under immense pressure, and are tasked with making difficult decisions. Funding for tourism, however, is an investment in the economic future of every region that consistently generates a significant return on investment, and any cuts to that funding is simply a short-term solution to capital expenditure restraints with long-term negative impacts.
Destination promotion and stewardship is an important investment with collective benefits that extend beyond individual businesses or organisations. Tourism promotion is a public good that requires collaboration and support from governments, communities, and stakeholders to maximise its positive impact.
The opportunity for the Hawke’s Bay Region
After the devastating effects of cyclone Gabrielle, it is more crucial than ever to ensure that local investments are made that help to rebuild our economy. While other investments in the region’s cyclone recovery which are preventative in nature are important (such as stopbanks), investments in visitor attraction help to deliver immediate and ongoing returns which directly support the region’s economic recovery.
International experience tells us that when visitor attraction funding is cut, market share in the visitor economy is lost and can take decades to recover. We submit that the Hawke’s Bay Regional Council has an opportunity to capture a greater share of New Zealand’s national visitor economy.
While every region is making decisions about their investment in visitor attraction, sustained investment in tourism funding provides the Hawke’s Bay Regional Council with two possible outcomes:
Should other regions cut their investments in visitor attraction, by maintaining the Council’s current level of investment the Hawke’s Bay region will naturally fill the gaps left by other regions in both domestic and international tourism.
Should other regions maintain their investments in visitor attraction, the Hawke’s Bay region maintains its market share of the visitor economy and does not lose ground which is notoriously difficult to regain in the future.
The impact of proposed cuts to regional tourism funding
The hospitality, tourism and retail industries are often subject to the availability of household discretionary spend, meaning it is the first to be cut during times of economic downturn. The phasing out of funding for Hawke’s Bay Tourism will inevitably result in a restriction of economic activity that disproportionately impacts these industries that are already reeling from the cost of living crisis, by failing to attract the tourism spend which relies heavily on a flourishing domestic and tourism sector.
Hawke’s Bay Tourism estimates that 1 in every 10 jobs (approximately 10,000) in the region come from these industries, which means that as local businesses lose out on the tourism spend that they depend on, businesses will be forced to cut costs, downsize, or close down entirely, resulting in job losses.
On average, 18,000 visitors come to the Hawke’s Bay region every day. Approximately 20% of visitor spend goes toward tourism-related services and 80% going to the broader community1. If funding for Hawke’s Bay Tourism was phased out, the visitor economy would decrease by at least 20% or $260 million over the next three years2. The cost of continuing to fund Option B would be less than 1% of the loss ($2.4 million).
In the year ended September 2023, the hospitality and tourism industries contributed approximately $1.3 billion both directly and indirectly to the Hawke’s Bay economy. This is 7% of the regional GDP, making these industries the third largest contributors to the region’s GDP behind process manufacturing and agriculture.
The Hawke’s Bay Regional Council’s current investment in tourism of $1.52 million is approximately 0.1% of the industries’ contribution to the region’s GDP – a return on investment of over 85,000%. The proposed $441,000 annual contribution is 0.03% of the $1.3 billion return to the region. Reducing the Council’s investment in tourism by over 70 percent as is proposed will mean these industries—the third largest contributor to local GDP—are unable to maintain their contribution to local GDP, resulting in a significant blow to the local economy.
16. It is clear that the negative effects of implementing Option A and phasing out the funding for Hawke’s Bay Tourism far outweigh the costs of continuing funding at a reduced rate. These negative effects reach far beyond the hospitality and tourism industry, impacting the region and wider economy. For this reason, the Restaurant Association encourages Regional Councillors to vote in favour of Option B while maintaining our position that, were it an option being proposed by the Council, the Restaurant Association would instead support retaining funding for Hawke’s Bay Tourism at its current levels.
Hospitality sector resilience
While the majority of hospitality expenditure comes from local spending and allows for maintenance of operations, the boost to our sector that comes from tourism spending is what allows our sector to innovate, adapt and address the large-scale issues we face.
The Hospitality sector has suffered unprecedented levels of disruption to our industry over the past four years—from the global pandemic and its flow-on effects, to the repeated extreme weather events and the cost of living crisis.
An October 2023 survey by the Restaurant Association, which focused on Hawke’s Bay members’ current operating conditions and future needs, the following points were highlighted:
Inbound tourism was cited as most critical to the ongoing success of the region’s hospitality businesses.
Investment in regional marketing was listed as the top priority to support business.
The primary challenges operators were facing included the impact of the slow economy, the disruptions still in place post-Covid and the weather events, and reduced tourism.
[1] According to Hawke’s Bay Tourism estimates.
[2] According to Hawke’s Bay Tourism estimates.