By 2022, New Zealand is expected to welcome 4.5 million visitors a year. But can our infrastructure cope?

About 4.5 million international tourists are expected to visit New Zealand in 2022. How will we cope? MICHAEL WRIGHT reports.

The most recent meeting of the Westland District Council was a rousing success. The organisation adopted its 2016-17 annual plan – always a relief for a local authority – and this year's iteration budgeted $500,000 to widen and reseal the tourist-heavy Hokitika Gorge road.

"We all walked out for the meeting and thought, 'Jesus Christ, we've made some progress this year, we got a road sealed'," Westland mayor Mike Havill said.

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It might seem a disproportionately large celebration for approving a mid-sized roading contract, but in the Westland district the bar is set low. Eighty-seven per cent of its territory sits in the Department of Conservation (DOC) estate, which means no rates. A $500,000 roading contract is the equivalent of a five per cent rates rise – if the council could afford to pass that sort of cost onto its ratepayers, which it can't. It funded the gorge road project through debt, after opting for it over sealing the gravel road of a subdivision on the north side of Hokitika.

"Now we've got to tell those residents there we see this job as being more crucial to the district," Havill said.

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MARTIN DE RUYTER/FAIRFAX NZ The Pancake Rocks at Punakaiki are the second-most visited natural attraction in New Zealand, after Huka Falls

Unpalatable as that may be, the decision was a no-brainer. The pristine blue waters of the Hokitika Gorge are a newly-discovered haven for tourists, and part of the Tourism West Coast's planning to promote the region as more than glaciers and rocks that look like pancakes. The gorge road is narrow and the last part is unsealed. "The locals, they head for the fence line when these campervans come," Havill said.

Safety and the tourist dollar won out, as they had to. Tourism in New Zealand is in the middle of an unprecedented boom. Last year the country had more than three million international visitors for the first time and expects to top 4m within four years. The climb from the 2m to the 3m mark took three times that long. Tourists are also spending more. Expenditure growth is outstripping the hike in visitor numbers by more than two to one. Two years ago, the industry set a goal of being worth $41 billion a year by 2025 and is tracking well ahead of the curve.

It sounds like a bonanza, but it's a lopsided one. Despite record visitor and expenditure numbers, the sector is short of money in crucial places. More people means more hotels, more car parks, more toilets and better roads with more signs. Who pays for those things isn't clear.

DEBBIE JAMIESON/FAIRFAX NZ By 2022, tourists to NZ will outnumber locals.

Right now, the bulk of the shortfall is being met by local government, but as the Westland model proved, that isn't sustainable. Many of our most popular regions are also our least populated, with tiny rating bases to match. A report from the New Zealand Tourism Council Working Group found councils spent an average of $37.90 a year on tourism per head of population. Auckland Council's figure was just $15.77 per head, while the Mackenzie district, home to tourist heavyweights like Lake Tekapo and Aoraki/Mt Cook, paid more than $80.

In the Westland district the plight is most pronounced in Franz Josef, where up to 5000 tourists can bed down alongside 400 locals. The glacier town is in dire need of a new wastewater treatment plant. Should hotel owners who would directly benefit from such a development have to contribute to its cost? Building and Housing Minister Nick Smith said last month he thinks they should, but why stop there? Ministry of Business, Innovation and Employment (MBIE) figures show international visitors to the West Coast spend more on fuel and transport than accommodation. By that logic, the local petrol station should be contributing even more.

Last month, Prime Minister John Key, who is also the Minister of Tourism, announced a $12m regional tourism facilities fund, to which communities could apply for money for that desperately needed toilet block or car park expansion. The announcement was met with a round of polite clapping and subdued thanks. Everyone, including Key, agreed it wasn't enough.

EDDIE SPEARING Lake Wanaka is experiencing a boom in tourism.

"When he announced the amount everybody cracked up laughing," Tourism West Coast chief executive Jim Little said.

"It's not going to build a heck of a lot of toilets around New Zealand is it?"

The $12m will be spread over four years, making competition even tighter. Key accepts more is needed and that central government must find it.

JOHN BISSET/FAIRFAX NZ Tekapo's tourist boom is seeing locals pay $80 a head for infrastructure compared with $16 for each Aucklander.

"I don't think it's realistic to expect local government to pick up all the bill," he said.

"You've got places where their population's surging as a result of tourism. While that underpins jobs and some flows through rates to the council, a lot flows through to central government."

Last year, the Government took in $929m in GST from visitor spending and critics have been loud in calling for more of that to be returned to the sector. Former chair of the New Zealand Tourism Council Working Group David Hammond said about $630m of the GST take was profit.

John Kirk-Anderson Freedom campers are rising in number putting a strain on facilities such as public toilets.

"Where's it gone?

"The Government needs to take a stronger lead in this space rather than all these parties thrashing around and talking a lot. A lot of action is not happening and next summer is right around the corner."

INFRASTRUCTURE SHORTAGE IS LOOMING

Hammond is the former chief executive of Ruapehu and Coromandel district councils, two tourist-heavy regions. In the latter role, he watched as three communities – Pauanui, Whangamata and Whitianga – were nearly bankrupted paying for new the wastewater facilities they needed to cope with the tourist high season. There was no clear alternative funding source in the community, he said. Many private tourism operators were already paying rates on commercial-zoned land and were reluctant to give more, even through targeted costs. Hammond had first-hand experience pitching economic development plans to the commercial sector for a contribution.

"It's an extremely testy conversation. Really people are interested in their own bottom line . . . unless it's a specific capital project that's going to benefit them.

"Ruapehu Alpine Lifts [partnering with the government] for the upgrade of the mountain road on Mt Ruapehu is probably a good example of that."

All the players in the sector – central government, local government, private operators, industry groups – agree an infrastructure shortage is looming. In some cases they agree on exactly what is needed and where, such as more toilets on the Tongariro Alpine Crossing.

In 2014 the Tourism Industry Association (TIA) released Tourism 2025, a 10-year growth plan culminating in the $41b spend target. The document was a winner, Hammond said, identifying all the right issues, including infrastructure required, with one crucial failing.

"None of those parties have signed up to [commit] their resources and their responsibilities to address the infrastructure gap.

"[The] gap has been cruelly exposed by the number of visitors coming into the country and we had an opportunity to get on top of this in 2014."

It seemed a logical next step. Current TIA chief executive Chris Roberts calls its absence a "fair enough criticism" but more a symptom of the market at the time: tourism was flatlining.

"The industry's focus was very much on, 'How do we get this industry moving again and why are we not seeing any growth?" Roberts said.

"Things like infrastructure and workforce were there but they probably weren't making the top 10 list and so not as much effort went into those as is needed now.

"If you'd called a meeting back in 2013 to discuss 'How are we going to get more investment in hotels?' the existing hotel operators would have laughed you out of the room."

The TIA is an industry body, yet it led the work on the tourism sector's defining document, around which much of the planning for growth is based. New Zealand used to have a Tourism Ministry, which might have been the source for such a platform, until it was absorbed by the new Ministry of Economic Development in 2010, which in turn became part of MBIE in 2012.

"The industry is filling the gap left by the ministry," Lincoln University tourism professor David Simmons said.

"They've done so with some success in terms of uniting the whole sector in one place. But they have neither the legal powers nor theoretically the long-term vision nor depth of resources that the public sector has so they can only make it up for so long."

MBIE has a tourism policy unit "buried away" in its recesses, Roberts said, and some tourism research capability elsewhere inside it, but not enough. While Tourism New Zealand, the public marketing arm, has enjoyed a funding windfall – its annual budget jumped from $84m to $115m in 2013 – the policy side had waned, he said.

"We're probably in a strange position of the private sector wanting more bureaucrats. We think they need more resourcing. The same issues we've identified they agree are the issues we need to work on but I don't know how much grunt it has and what impact it's going to have."

Policy tended to consist of reports about what had just happened rather than forward planning, Roberts said.

"There's always a tendency to respond to just whatever issue's in the headlines this week.

"The tourism facilities fund was really a reaction to freedom camping and let's build some toilets, rather than what's going to happen over the next 10 years."

Key, the minister at the helm as his ministry was twice subsumed, is comfortable with the policy output on his portfolio. The idea is it piggybacks somewhat on MBIE's significant resources, he said, with Treasury contributing policy legwork as well.

"I think we have the structure about right.

"I think the work they do and the policy advice that they provide has improved over the years . . . It'd be a very marginal call to split [a tourism ministry] off again and not one I think we're likely to support."

In lieu of anything else, Tourism 2025 remains as the sector's mission statement. Last month TIA published a "two years' on" update and addressed the infrastructure question with a new urgency:

"As a nation, we are limited in the peak season by capacity in such areas as our roads, port facilities, accommodation, water and sewerage, and public amenities. It is clear that investment in many areas of tourism infrastructure is lagging behind demand, so we need to speed up our planning, decision-making and investment cycles."

NZ RANKED 60TH IN THE WORLD FOR VISITORS PER CAPITA

Not exactly alarmist language but enough to hear the strain in the voice. If nothing is done the infrastructure problem will manifest itself as something more than freedom campers taking over a car park and clogging the loo. Tourists will arrive and they won't have a good time because we can't host them properly. Or they won't come at all.

There's no question New Zealand can host all the tourists who want to come if we build what we need. The visitor rate in the high season equates to about six international tourists in the country for every 100 Kiwis. Off-peak that drops to two in every 100.

"Apart from Queenstown in February or Auckland when a major event's on or Tongariro Crossing or Milford Sound, where clearly there are capacity constraints at times, across New Zealand we've got enormous spare capacity," Roberts said.

"If we have the infrastructure and the workforce in place . . . we could have so many more visitors than we currently have. On an area basis, we're about 107th in the world and on visitors per capita we're about 60th in the world. We are nowhere near being a heavily touristed country."

Fifteen years ago, the Department of Conservation (DOC) had the opposite problem – plenty of infrastructure that wasn't being used. Now it is dealing with a lack of toilets and car parking in places like Milford Sound and the Tongariro Crossing. Last year, 600,000 people visited Milford Sound, up from a record-breaking 500,000 the year before. Even there, though, there is breathing room. The Tongariro Crossing gets about 100,000 visitors a year but as many as 3000 can visit on one day in summer.

"In most parts there's plenty of room for more people," DOC visitor director Gavin Walker said.

"Milford at this time of year is actually a pretty quiet place.

"Our approach is not to focus just on the infrastructure problem. If you just kept on dealing with your infrastructure problem there's no incentive for visitors to want to explore other parts of the country."

WILL VISITORS COME IN SPRING AND AUTUMN?

DOC is employing the same tactics as the rest of the tourism sector to manage the load: encouraging visitors to come at different times of the year and go to different places. Every dollar of Tourism New Zealand's $80m marketing budget now goes into promoting the shoulder seasons of spring and autumn. Tourism West Coast is working on a Top of the South campaign, connecting Kaikoura, Nelson and Marlborough with the Buller region, as an alternative to the well-trodden route from the Pancake Rocks at Punakaiki to Fox and Franz Josef glaciers.

"It's not a simple thing to do," Walker said.

"If people are coming to New Zealand once in their life and they're only spending six to 10 days here we have to be realistic. They're going to want to go to places like Milford Sound."

Shoulder season spread comes organically, too. Chinese travellers are prepared to wait until after the peak Chinese New Year period to come here and Indian tourists – a major new market – prefer to travel in the cooler autumn months. 'No vacancy' signs also force tourists to rethink their itineraries.

"Say you want to go to Tekapo and you can't get a hotel," Christchurch and Canterbury Tourism chief executive Vic Allen said.

"I really, really want to go to Tekapo, but the first hotel booking I can get is in April. So I go in April."

The spread is welcome news for the accommodation sector, which cannot react to boom as quickly as airlines offering more flights or rental car companies growing their fleet.

"I don't think there's a single more important thing than growing the shoulder periods," Tourism New Zealand chief executive Kevin Bowler said.

"The reason we haven't got hotel investors rushing to put money on the table is because they can make a lot of money for a short period of year and then they struggle. Everything we can do to get spring and autumn higher will make the investment proposition for tourism a lot better."

Project Palace – a Government-led plan to assess future hotel demand in the tourist hotspots of Auckland, Rotorua, Wellington, Christchurch and Queenstown – found that 5174 new hotel rooms would be built across the five centres by 2025, just over half of the growth they were predicted to need. Auckland will require up to 4300 extra rooms but only 2518 are expected to be built. Occupancy rates there and in Queenstown are expected to nudge 90 per cent in the next decade, which, in hotel terms, is "practical capacity". New Zealand Trade and Enterprise is charged with "facilitating investment" to bridge the gap.

The Government will consider a business case from the tourism sector, probably early next year, arguing for a dedicated fund to pay for infrastructure upgrades. John Key is open to the idea and using a new charge, such as a bed tax, to fund it.

"There's two options," he said. "One is the Government tips some more money out of its own resources. The second is that . . . some other funding source should be found. Either way, we've got to build more infrastructure.

"If we just leave it all to organically appear then I think we'll have an infrastructure deficit. But if we're conscious of the rate of growth and where those tourists are coming from then yes, I think we can cope with it."

In Westland, Mike Havill has done some rudimentary calculations on his region's contribution to the tourism GST take.

By his reckoning, Westland generates about $60-70m a year, or just over $1m a week.

"A million dollars," he said, wistfully.

"If we could get our hands on something like that each year . . ." he trails off, seemingly mesmerised by the possibilities.

"We would be able to do so much."