Overseas visitors is running at around 80% of pre-pandemic levels

It’s been almost two years since our drawbridge was let down. International tourism, however, is not yet back to full strength. Supply-side constraints were key impediments to tourism’s recovery. Now, the return to full strength largely hinges on a continued recovery in key international tourist markets – notably China.

Unlike migration, short-term travel has been slower to recover

The first of our two-part “At the border” series examined the state of long-term cross-border flows. This note takes a closer look at short-term visitor arrivals.

Tourism was once one of New Zealand’s largest export industries. In 2015, tourism accounted for around 20% of total exports, dethroning dairy as the top export earner. But along came Covid in 2020. International travel came to an unprecedented standstill. Tourism’s contribution to total exports fell to just 2%, and it’s reign abruptly ended. Following an extended period of border closures – with the exception of travel bubbles – October 2022 marked Aotearoa’s grand reopening to the rest of the world.

It's been almost two years since our drawbridge has been let down. International tourism, however, is not yet back to full strength. During the 2023/24 summer, short-term overseas visitor arrivals were running at just 80% of pre-pandemic (2019/20) levels. In the year to March 2023, tourism’s contribution improved to 11% of total exports, just 60% of pre-pandemic levels. The gradual recovery in tourism in part explains the rather lacklustre end to 2023 for the Kiwi economy. 

While international tourism is only slowly recovering, domestic tourism rebounded strongly. Overseas trips were off the cards in 2020, and Kiwi were left exploring God’s country. There’s no doubt that the strength of domestic demand was the lifeline needed by local tourist operators. But the absence of international visitors still left a deep void. And despite a lift in domestic spend, overall tourism expenditure declined 35% in the year to March 2021. Since the border has reopened, departures have climbed as Kiwi ventured abroad once again. 

Labour shortages and insufficient airline capacity were key constraints. However, with the help of a surge in migration, supply-side constraints have now eased. The return to full strength now largely hinges on a recovery in key international tourist markets – notably China. 

A downside risk, however, is the global economic outlook. Financial conditions are tight and unemployment across the globe is slowly rising. Such circumstances may temper demand for expensive, long-haul travel. A mitigating factor, however, is our expected depreciation of the Kiwi dollar. We expect the Kiwi economy to be weaker relative to our trading partners. A weaker exchange rate means travelling to our corner of the globe becomes cheaper. 

80% recovered

Internationally

It’s been four years since Covid sumo-slammed international arrival numbers to the ground. The recovery since has been gradual. Because the timing and extent of the recovery has been rather uneven across countries. Some governments were relatively quick to remove restrictions, while others experienced a more protracted recovery. Globally, UN Tourism estimates that international tourism ended 2023 at 88% of pre-pandemic levels, with around 1.3bn international arrivals.

In Aotearoa

The recovery too has been slow yet steady. First, we experimented with a trans-Tasman travel bubble which led to a slight rise in international arrivals in mid-2021. However, it was not until October 2022 – when our drawbridge was fully let down – and arrivals began to climb. Short-term overseas visitor arrivals picked up to be around 40% of pre-pandemic levels by the end of 2022. Fast-forward to today, arrivals have recovered to a little over 80%. Looking ahead, we are likely to see a return to full health this year with ongoing release of pent-up demand as well as a continued recovery of Asian markets (more below). 

The recovery in short-term travel has been especially pronounced among those visiting friends and relatives (VFR). That comes as no surprise. Border closures deferred family reunions and limited catch-ups with friends overseas to laggy FaceTime calls. Since the border reopened, VFR arrivals accounted for over a third of all overseas arrivals in the year to October 2023 (first full year of the border reopen). That compares to a just a 27% share of all arrivals pre-Covid (year to October 2019). The number of visitors arriving for holiday travel has been the slowest to recover. Again, no surprises there. Holiday travel has lifted to about 80% of pre-Covid levels. It follows a later reopening of the border to key tourist markets, notably China.

Visitors from China

Indeed, the gradual recovery in arrivals largely reflects fewer visitors from China. Prior to Covid, China was our second largest source of arrivals, after Australia. Today, China has dropped to 3rd place, surpassed by the arrivals from the United States. Chinese arrivals are currently running at just 75% of 2019 levels. In saying that, momentum is picking up. Chinese short-term arrivals are making up for a growing share of monthly arrivals. During the 2023/24 summer – peak international tourism season – Chinese arrivals accounted for 8% of all arrivals. That’s a big improvement from the 2% share during the 2022/23 summer. They’re (slowly) making up for lost time. 

Australia

In contrast, short-term visitor arrivals from Australia have recovered the fastest. International travel in Australia was also limited. But the travel bubble extended the backyards of both countries. The relatively rapid recovery is also consistent with the speedy recovery in VFR arrivals. Prior to Covid, Aussies made up over half of all short-term VFR travel. Today, nothing has changed.