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Assessing tourism labour market needs What needs to be true for success
NZIER report to Tourism Industry Association
May 2015
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About NZIER
NZIER is a specialist consulting firm that uses applied economic research and analysis to provide a wide range of strategic advice to clients in the public and private sectors, throughout New Zealand and Australia, and further afield.
NZIER is also known for its long-established Quarterly Survey of Business Opinion and Quarterly Predictions.
Our aim is to be the premier centre of applied economic research in New Zealand. We pride ourselves on our reputation for independence and delivering quality analysis in the right form, and at the right time, for our clients. We ensure quality through teamwork on individual projects, critical review at internal seminars, and by peer review at various stages through a project by a senior staff member otherwise not involved in the project.
Each year NZIER devotes resources to undertake and make freely available economic research and thinking aimed at promoting a better understanding of New Zealand’s important economic challenges.
NZIER was established in 1958.
Authorship This paper was prepared at NZIER by Dr Kirdan Lees.
NZIER report -Assessing tourism labour market needs i
Contents Key points ...................................................................................................................... iv
1. Assessing tourism industry labour market requirements .............................. 1
1.1. The opportunity ...................................................................................... 1
2. Regional demands will vary ............................................................................ 4
3. Market demand will influence occupations ................................................... 8
4. Skills need to meet premium visitor experiences ........................................ 10
Box A: Our method for projecting labour market needs ..................................... 11
Figures
Figure 1 Tourism employment needs to grow to meet demand ................................................. ii Figure 2 Some region’s tourism employment could lift 50% by 2025 ........................................ iv Figure 3 New Zealand will need many more people in tourism .................................................. v Figure 4 Domestic and international spend drive worker growth ............................................... v Figure 5 International spending are on track for Tourism 2025 target ....................................... 1 Figure 6 International spending was very strong in 2014 ........................................................... 2 Figure 7 Growth in domestic spending will also create jobs ....................................................... 2 Figure 8 Expect international visitor arrivals to push higher ....................................................... 3 Figure 9 The international visitor mix is changing ....................................................................... 4 Figure 10 China gets Queenstown: spending now 20 times ‘08 levels........................................ 5 Figure 11 Some regions will need more labour than others ....................................................... 6 Figure 12 Visitor preferences make some areas grow faster than others .................................. 7 Figure 13 New Zealand will need many more people in tourism ................................................ 8 Figure 14 Projected employee growth outstrips labour force growth ........................................ 9 Figure 15 China has been shifting away from package deals .................................................... 10
NZIER report -Assessing tourism labour market needs ii
Executive summary This report was commissioned by the Tourism Industry Association in March 2015.
NZIER were asked to project future employment needs for the tourism industry
based on the ambition laid out in the industry-led Tourism 2025 growth aspiration
strategy.
After a period of flat to moderate growth, international arrivals have been growing
rapidly. New Zealand’s international visitor arrivals are growing very strongly helping
the industry realise the ambition set out in Tourism 2025.
That aspirational document – spanning both domestic and international tourism –
sets out the opportunity to grow value through increasing numbers of high value
tourists and through regional dispersal.
By 2025 as many as 36,000 additional FTE workers will need to be directly employed
in New Zealand’s tourism industry (see Figure 1). That’s an increase from the current
94,000 workers to 130,000 workers in 2025.
Figure 1 Tourism employment needs to grow to meet demand
Source: NZIER, Tourism 2025, TSA 2014
130,000 workers
94,000 workers
16 billion
41 billion
-
10
20
30
40
50
0
30,000
60,000
90,000
120,000
150,000
2001 2005 2009 2013 2017 2021 2025
Total Spend
(billions) Workers
Employment (left-hand axis) Total spend (right-hand axis)
NZIER report -Assessing tourism labour market needs iii
The visitor mix continues to evolve, shifting towards increasing numbers of visitors
from the Asian region and China in particular. These new visitors will demand
different services that may require different types of workers to meet these new
demands. A fraction of employees will need language skills and most employees will
need a solid understanding of the cultures of new visitors to New Zealand.
While the outlook for tourism is strong, putting in place the labour and skills to meet
additional demand will be challenging: it can be difficult to move people to some of
the regions where tourism demand is highest. So some regions will require more
workers than others.
NZIER report -Assessing tourism labour market needs iv
Key points New Zealand’s international visitor arrivals are growing very strongly
helping the industry realise the ambition set out in Tourism 2025.
That aspirational document – spanning both domestic and international
tourism – sets out the opportunity to grow value through increasing
numbers of high value customers and by dispersing visitors to the regions.
Meeting additional demand requires increasing labour supply. After years
of a flat or declining tourism labour force, our projections suggest 36,000
extra workers – directly employed in tourism – could be required to realise
the growth in tourism spending set out in Tourism 2025.
Not only are visitor arrivals growing rapidly, the regional profile of demand
is shifting towards new destinations and away from some traditional
locations. Those regional demands exacerbate the difficulty of meeting the
rapidly growing demand for tourism experiences across New Zealand.
To calibrate the issue, we overlay each international market’s regional
profile on the mix of international visitors that form the 6 percent growth
ambition in Tourism 2025. We also include 4 percent growth in domestic
spending. Figure 2 shows national visitor growth and shifting regional
demand mean labour supply in some regions could lift by 50% by 2025.
Figure 2 Some regions tourism employment could lift 50% by 2025
Source: NZIER
For some regions, labour market needs could be higher than in Figure 2. If
demand continues to shift – towards Queenstown for example – then some
regions’ labour market needs will be higher than elsewhere.
To map potential labour market needs at a regional level we use Census
data to grow the current occupational mix within the tourism industry to
assess potential future demand for specific occupations. Figure 3 shows
0
10
20
30
40
50
60
Au
ckla
nd
Ota
go
Bay
of
Ple
nty
We
st C
oas
t
Can
terb
ury
We
llin
gto
n
Gis
bo
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Tara
nak
i
Sou
thla
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Man
awat
u
Wai
kato
Haw
ke's
Bay
Mar
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No
rth
lan
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Nel
son
/Tas
man
Tourism Employment,
% growth
Employment growth by region, 2014-2025
NZIER report -Assessing tourism labour market needs v
that New Zealand requires many more accommodation managers and
hospitality workers. Some skilled niche occupations will also need to grow.
Figure 3 New Zealand will need many more people in tourism
Projected extra employees needed by selected occupations to 2025 in New Zealand
Source: NZIER
The skill mix of employees is also set to shift. Visitors from Asia will
overtake visitors from Australia by 2025. These visitors will demand
different services. Meeting the needs of these new visitors may require
different types of workers with cultural appreciations and language skills.
A shift towards premium travel is also likely to exacerbate the demand for
workers with and attributes to deliver a premium visitor experience.
Figure 4 Domestic and international spend drive worker growth
8252
6213
4923
1866
1556
1518
631
624
28
18
0 2,000 4,000 6,000 8,000 10,000
Accommodation managers
Chefs
Waiters
Baristas
Taxi drivers
Tourism and travel advisors
Tour guide
Outdoor adventure guides
Tourism information officer
Bungy jump master
NZIER report -Assessing tourism labour market needs 1
1. Assessing tourism industry labour market requirements
1.1. The opportunity After a period of flat or even falling international spending, Figure 5 shows that
spend has grown strongly in the last two years, even outstripping the growth
ambition in Tourism 2025 and is on track towards a steady 6 percent growth each
year.
Figure 5 International spending are on track for Tourism 2025 target
Source: Tourism Industry Association, NZIER, IVS MBIE, TSA Statistics New Zealand
According to the Ministry of Business, Innovation and Employment, spend was up
13.16 percent in 2014 – more than double the 6 percent target for growth from
Tourism 2025 – because of strong value and volume growth (see Figure 6).
Growth in domestic spending is also responsible for job creation and was up 3.22
percent in 2014. Tourism 2025’s ambition for growth in domestic tourism is more
modest – running at 4 percent annual growth (see Figure 7) but that growth is
responsible for employment across many of New Zealand’s regions.
0
5
10
15
20
25
2001 2005 2009 2013 2017 2021 2025
spend (billions)
international domestic
NZIER report -Assessing tourism labour market needs 2
Figure 6 International spending was very strong in 2014
Source: MBIE International Visitor Survey, Tourism 2025
Figure 7 Growth in domestic spending will also create jobs
Source: Statistics New Zealand Tourism Satellite Account, Tourism 2025
3.74
13.16
6.00 6.00 6.00
0
5
10
15
2013 2014 2015
Actual Tourism 2025 Forecast
1.92
3.22
4.00 4.00 4.00
0
1
2
3
4
5
2013 2014 2015
Actual Tourism 2025 Forecast
NZIER report -Assessing tourism labour market needs 3
Figure 8 Expect international visitor arrivals to push higher
Source: Statistics New Zealand, NZIER, Tourism 2025
2.47
2.86
3.80
4.59
0
1
2
3
4
5
2007 2014 2021 2025
Visitors (millions)
NZIER report -Assessing tourism labour market needs 4
2. Regional demands will vary Now more than ever, New Zealand’s visitor mix is shifting and increasingly orientated
towards Asian markets and China in particular. By Tourism 2025 we expect spend
from the China market to more than triple while advanced markets, such as the US
and Canada will also contribute to growth (see Figure 9).
Figure 9 The international visitor mix is changing
Spend by key markets
Source: Statistics New Zealand and Tourism 2025
That changing visitor mix drives visitor growth at the regional level. Each
international market comes with a set of preferences over different regions such that
growth in visitors from one market will be felt differently at the regional level.
In addition, the regional preference from each international market also changes
over time. For example, Figure 10 shows that Chinese visitors have increasingly opted
to spend time in Queenstown over some other regions. According to the Ministry of
Business, Innovation and Employment’s Regional Tourism Expenditure estimates,
spending by Chinese visitors to Queenstown has increased dramatically in only a
short period.
0.69
3.16 2.23
3.80
0.87
2.01
0.35
0.49
0.73
1.96
1.71
2.73
0
3
6
9
12
2013 Tourism 2025
$billions
China Australia UK+Germany Japan+Korea US+Canada Other
NZIER report -Assessing tourism labour market needs 5
Figure 10 China gets Queenstown: spending now 20 times ‘08 levels
Total spending by Chinese visitors relative to January 2008
Source: MBIE Regional Indicators
The map in Figure 11 and bar chart in Figure 12 show that such changes in the
international and domestic visitor mix will drive regional differences across New
Zealand. Expect Auckland and Otago to demand many more employees.
0
500
1000
1500
2000
2500
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Spend index, 2008=100
Queenstown New Zealand
NZIER report -Assessing tourism labour market needs 6
Figure 11 Some regions will need more labour than others
Projected change in employment growth between 2014-2025
Source: NZIER
NZIER report -Assessing tourism labour market needs 7
Figure 12 Visitor preferences make some areas grow faster than others
Source: NZIER
0
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60A
uck
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Ota
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Haw
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Mar
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No
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/Tas
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Tourism Employment,
% growth
Employment growth by region, 2014-2025
NZIER report -Assessing tourism labour market needs 8
3. Market demand will influence occupations
Such shifts in demand can be expected to generate demand for employment to meet
the additional demand. Labour productivity will increase and offset some additional
demand. But with labour productivity growth widely expected to remain close to or
below its historical average of 1.5 percent, labour productivity is only sufficient to
absorb additional domestic demand for tourism. Additional workers will be required
to meet growing international demand.
To calibrate potential additional labour demand, we take the current employment by
occupation profile from the 2013 Census and grow each occupation by the rate of
growth in national demand identified in Section 1, implicitly assuming that the
current productive structure of the tourism sector applies in 2025. Figure 13 shows
growth in selected occupations.
Figure 13 New Zealand will need many more people in tourism
Source: NZIER
That employee growth is likely to far exceed expectations for labour force
participation within each region. Figure 14 shows the expected tourism employment
growth alongside Statistics New Zealand’s projections for regional growth in the
working age population – a good proxy for labour force growth since it is unlikely that
labour force participation will increase from recent highs. Labour markets will need
to adjust along several dimensions to accommodate additional demand for tourism
workers across New Zealand.
8252
6213
4923
1866
1556
1518
631
624
28
18
0 2,000 4,000 6,000 8,000 10,000
Accommodation managers
Chefs
Waiters
Baristas
Taxi drivers
Tourism and travel advisors
Tour guide
Outdoor adventure guides
Tourism information officer
Bungy jump master
NZIER report -Assessing tourism labour market needs 9
Figure 14 Projected employee growth outstrips labour force growth
Source: NZIER, Statistics New Zealand
14.7
54.2
22.1
41.3
27.8
21.8
27.4 26.3
6.1
15.3
28.3 33.7 32.8
46.2
26.8
-20
0
20
40
60N
ort
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Au
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Wes
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Ota
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Growth (percent)
Growth in working age population
Projected tourism employment needs
NZIER report -Assessing tourism labour market needs 10
4. Skills need to meet premium visitor experiences
Not only does labour supply need to adjust to the volume growth in visitors, on
balance, visitor needs while in New Zealand are likely to increase labour demand.
Figure 15 shows that visitors from China – one of New Zealand’s largest markets and
a rapidly growing market – have increasingly opted to avoid mass-market packages
tours and adopt more niche, independent and higher value visits, at least in part due
to China’s policy that effectively banned low cost shopping tours from 1 October
2013.
Figure 15 China has been shifting away from package deals
Percent of market that purchase a tour or package deal
Source: MBIE International Visitor Survey
Premium visits can be expected to increase the attributes of tourism employees. A
fraction of employees are likely to need language skills and most employees will need
a solid understanding of the cultures of new visitors to New Zealand in order to
deliver a premium visitor experience.
0%
20%
40%
60%
80%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NZIER report -Assessing tourism labour market needs 11
Appendix A Our method
Box A: Our method for projecting labour market needs
Stage 1: Projecting future tourism demand
To assess potential future demand we use the international and domestic projections
that form part of the Tourism 2025 report. After wide consultation that report set
the industry ambition to grow international tourism spending by 6 percent per year
and domestic tourism spending by 4 percent each year to 2025.
Sitting behind the 6 percent annual growth number is a detailed market-by-market
assumption of what needs to be true to realise that growth number. We use those
market-by-market visitor arrivals numbers to form our baseline for potential
international growth. In the absence of detailed forecasts to 2025, that baseline
seems plausible since the most recent MBIE forecasts suggest spending growth of
5.8% to 2021.
Tourism 2025 also assessed the potential of the domestic market to grow at 4
percent each year to 2025. Since domestic tourism has averaged growth of 4.1
percent since 1999, that projection for growth seems reasonable in the absence of
forecasts for domestic tourism.
What about productivity? Within the tourism industry, labour productivity has been
relatively weak compared with other industries. Across New Zealand’s services sector
labour productivity growth has averaged 1.5 percent since 1978. We also adjust
nominal spend data for two percent growth in inflation. So for our labour market
projection employment growth needs to equal spend growth – labour productivity –
inflation.
Stage 2: Calibrating the regional mix
A key part of the labour market puzzle is identifying just where additional labour
needs will be strongest. New Zealand’s international visitor mix is shifting and
international visitors have different preferences for visiting New Zealand’s regions.
Moreover, those preferences are shifting, exacerbating demand for labour in key
regions.
To assess the potential future impact of shifts in regional demand, we combine two
assumptions:
(i) the future mix of international visitors from Tourism 2025;
(ii) the regional profile of each international visitor from MBIE’s Regional
Tourism Estimates.
This approach captures the impact of particular expanding markets – China and the
US, for example – on New Zealand’s regional profile. If preferences for regions within
NZIER report -Assessing tourism labour market needs 12
each country intensify, whether from marketing specific destinations or market
preferences, then the regional differences could intensify from our baseline.
Stage 3: Occupation by occupation: what types of labour might be required?
But policymakers often need to know more about the type of labour that might be
required. We do something simple – assume the current occupation mix for New
Zealand holds over the projection period and simply extrapolate forward the growth
in occupations required to meet Tourism 2025 demand.
Ideally we would use granular occupational data by Regional Tourism Organisation
but Statistics New Zealand do not supply the data at such a granular level. Instead,
we use occupational data from the 2013 Census at the national level and grow each
occupation by the national needs identified in stage 2.
Pros and cons of our approach
Our approach is a simple one but consistent with the projections and assumptions
used by industry (Tourism 2025, for example). And our aggregate projection is very
close to the international growth rates from MBIE’s forecasts. So our forecast for
aggregate demand seems reasonable.
It is difficult to forecast just how visitors’ preferences for New Zealand’s regions will
change but at least in principle, we should expect some regions to grow more
strongly than others based on fixed natural attractions such as Milford Sound, the
Remarkables, Lake Wanaka or the Bay of Islands.
We have applied the current regional mix on a market-by-market basis. If anything
we might expect regional preferences to intensify. So our regional overlay might be
considered a lower baseline on the regional intensity of demand in some regions.
Of course, labour supply is likely to adjust. Higher wages might attract more people
that are more productive into the labour force. Price discounts for off-season travel
and travel in the shoulder season are also likely to reduce labour demand. Tourism
providers may also use more capital – such as larger hotels that require fewer
managers – to meet additional demand. But our projections show that in the absence
of such adjustments, labour supply needs will increase substantially.
