The national cycle trail is to receive an extra $25 million over the next four years, Prime Minister John Key has announced.

Photo: 123RF

Mr Key, who is also Tourism Minister, said some of the funding would help connect four Otago rides, including the Otago Central Rail Trail and the Clutha Gold Trail.

The funding is part of a $45 million tourism package in this year's budget.

Mr Key said the government had agreed in principle to support a collaboration by the Central Lakes Trust and the Otago Community Trust by supplying $13 million - half the funding required for the project - subject to application requirements being met.

"The New Zealand Cycle Trail has already been extremely successful in attracting high-value visitors to the regions and getting them to stay longer, with regional economies experiencing positive spinoffs such as a growth in jobs," Mr Key said.

Other regions interested in connecting or expanding existing rides could also apply for funding, he said, with communities and local councils required to co-fund the projects.

Adventure South manager Mike Smith said the number of tourists coming to New Zealand on cycling holidays was increasing every year.

He said small towns were booming, with more attractions on offer, and food suppliers opening up specifically to cater for cycle tourism.

"New accommodation is being built in Kurow, a town where we struggle to get enough beds," he said. "I think the government funding will encourage more investors into small town New Zealand."

Mr Smith said New Zealand was becoming known internationally as a place to come for a cycle holiday.

"The feedback we get is that the tourists love the amount of variety they can experience in a small area.

"On The Alps to Ocean Trail, for example, you can bike from Mt Cook to the Pacific Ocean in a matter of days, so it's a great way to see parts of the country," Mr Smith said.