In a controversial move, the New Zealand government has announced a significant hike in the International Visitor Levy (IVL) from $35 to $100, which has sparked outrage across the tourism sector. This increase, effective from October 1, 2024, is seen as a severe threat to the country’s global competitiveness and could have far-reaching consequences for its already struggling tourism industry.

Industry Outcry Over Levy Hike

Tourism Industry Aotearoa (TIA) has expressed deep disappointment with the government’s decision, which they believe disregards the industry’s collective concerns. TIA’s Chief Executive, Rebecca Ingram, highlighted the potential damage this move could inflict on New Zealand’s tourism recovery, which lags behind global competitors.

“Tripling the IVL to $100 creates a significant barrier for visitors and makes New Zealand an incredibly expensive destination,” Ingram stated. “At a time when the government aims to grow exports and the tourism industry, this increase could result in 48,000 fewer visitor arrivals, stripping $273 million from the economy. This is a critical blow when our industry is only at 80% of its pre-pandemic recovery.”

The announcement of the IVL hike comes alongside a substantial 60% increase in government charges for visitor visas, further compounding the travel cost. From October 1, visitors requiring a visa will face charges of up to $500 per person to enter New Zealand. This makes New Zealand more than twice as expensive as Canada and 66% more costly than Australia for travellers from visa-required countries. A family of four, for example, could now be looking at an eye-watering $2,000 to cross New Zealand’s borders, compared to $880 for a similar trip to Canada.

A Blow to Global Competitiveness

The timing of this levy increase could not be worse as the global tourism market continues to recover from the COVID-19 pandemic. According to industry experts, New Zealand’s aviation market recovery is already trailing behind significant markets such as Australia, Canada, France, Spain, the UK, and the US. These countries are either nearing or have already achieved pre-pandemic passenger levels, with full recovery expected by 2024.

Dr. Xie Xingquan, Regional Vice President for North Asia and Asia-Pacific at the International Air Transport Association (IATA), expressed his disappointment with the New Zealand government’s decision. “The IVL increase, combined with the visa fee hikes, makes travel to New Zealand more expensive and less attractive, potentially delaying the recovery in visitor numbers beyond 2026,” Dr Xie warned.

Dr. Xie also criticized the government for failing to indicate how the additional funds generated by the IVL will be allocated. “The lack of transparency regarding the investment plan is concerning. The government needs to ensure that these funds are used to enhance New Zealand’s tourism infrastructure and support initiatives like the decarbonization of the aviation sector,” he added.

Economic Impact and the Need for Strategic Investment

The New Zealand government’s analysis reveals the potential economic repercussions of the IVL increase. For every dollar generated from the additional IVL revenue, more than three times that economic activity could be lost. This poses a significant risk to the country’s second-largest export industry, which is still grappling with the effects of the pandemic.

TIA’s Rebecca Ingram emphasized the need for a clear and meaningful investment plan for the funds raised by the IVL. “Visitor expectations will be high, and the government must work closely with the industry to develop a plan that enhances the visitor experience and addresses critical issues,” Ingram said. “Visitors are already contributing through the existing IVL, GST, and their substantial GDP impact. The return on investment from tourism is incredibly positive, given the billions of dollars the government receives directly from visitors.”

Ingram’s sentiments echo the broader concerns within the industry that the increased levy could dissuade potential visitors, particularly those from key markets like Asia, the United States, and Oceania. These regions have traditionally been strong contributors to New Zealand’s tourism numbers, and any decline in visitor arrivals could have long-lasting effects on the economy.

Global Comparisons and Missed Opportunities

As countries worldwide compete to attract international tourists, New Zealand’s decision to raise the IVL stands in stark contrast to the strategies of other nations. For example, Thailand recently scrapped plans for a tourism tax on air travellers to encourage spending in different areas, a move industry stakeholders widely praised.

Dr Xie pointed out that New Zealand’s increased levy could deter potential visitors who might opt for destinations with lower entry costs. “In an increasingly competitive global tourism market, New Zealand must focus on improving its attractiveness as a destination. The IVL increase does the opposite,” he said.

The IATA had previously submitted a recommendation during the public consultation, urging the New Zealand government not to increase the IVL. However, despite ongoing consultations, the government’s decision to proceed with the hike has raised questions about the effectiveness of the consultation process and the government’s commitment to industry collaboration.

The Path Forward

As the tourism industry braces for the impact of the IVL increase, there is a growing call for the government to reconsider its approach and engage more closely with industry leaders. Ensuring that the funds generated by the IVL are invested in projects that enhance the visitor experience and address critical infrastructure needs will be vital to mitigating the potential adverse effects of this decision.

New Zealand’s tourism industry has long been a vital part of the country’s economy, providing jobs, driving investment, and showcasing the nation’s unique natural beauty. However, introducing the $100 IVL risks undermining these achievements and could have lasting consequences for the sector’s recovery and growth.

In the face of these challenges, the tourism industry urges the government to adopt a more strategic and transparent approach to IVL funds. By working together, the government and industry can ensure that New Zealand remains a competitive and attractive destination for international visitors, safeguarding the future of this critical economic sector.

 

 

Written by: Karuna Johnson

 

 

 

 

 

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