Tourism Decline

One thing very clear, tourism is the sect of the economy that will be most affected by the coronavirus shutdown.

Tourism affects many industries (accommodation, retail, transport, etc) so Statistics NZ produces a satellite account to the National Accounts that measures the size of the tourism sector. Some of the data series integrated into it are a bit dodgy, and some of the underlying assumptions behind the ratios used are not very robust, but it does give a reasonable indication of the size of the tourism sector in New Zealand.

The account measures the size of the tourism sector in two ways.

• The direct measure cover business that deal directly with tourists.
• The indirect measure includes businesses that supply the intermediate inputs used in producing goods and services for tourists.

The account for 2019 shows the following results.

Direct tourism value added is 5.2 of GDP.
Indirect tourism value added is 4.3% of GDP.
Total tourism is 9.5% of GDP.

The satellite account also estimates employment in the sector.

Tourism directly employed 230,000 people, which is 8.4 percent of total employment.
A further 160,000 were indirectly employed in tourism generating an additional 6.0 percent share of total employment.
This suggests that the employment of nearly 400,000 people depends on tourism. They are about 14.4% of the workforce.

Business and government travel, which is a smaller segment of tourism (about 15%). The bulk is split fairly evenly between international and domestic tourism. Once we move down from Alert Level 4, business and government travel will begin again, but at a much lower level. International tourism will cease for several years, as strict border restrictions will need to be in place for quite some time, and even when they are removed people will be scared of international travel. Inter-regional travel will be constrained for a while too. With reduced incomes, people will have less spare cash to spend on travel within New Zealand. These factors mean that we can expect a big decline in the tourism sector persisting over the next few years.

If all of the direct and indirect employment on international tourism activities disappear for and half of those with domestic tourism disappear, that could be nearly 300,000 jobs gone. About 6 percent of GDP could disappear.

Only 5% of those directly employed in tourism are in air transport. 13% are in accommodation (hotels, motels, etc). Nearly 30 percent are in the Food and Beverage Services (restaurants, takeaways, bars, etc). 15 percent are in Retail Trade. We have seen airlines putting off staff, but the decline in the accommodation, food services, and retail industries is still to come.

Of course, when these people lose their jobs and income, they will stop buying, so the effect ripples out to other businesses not directly or indirectly connected to tourism. So, the overall effect of the shutdown could be much greater.