Business Tourism – based on bricks & mortar
Crown jewel of tourism with highest per visitor spend
A global leader in the conventions industry is warning New Zealand it needs to do more to cater for the most lucrative section of the tourism market, the business traveller. Business tourism is the conference and meetings sector, visitors who come here for conventions, trade shows, exhibitions, and on corporate incentives programmes.
Mike Kelly, Executive Director of Christchurch-based venue manger NCC (NZ) Ltd, said recent industry research (and reported in CEI Asia Pacific Magazine) increased his concern that New Zealand may not be getting its potential performance in business tourism. For instance, the Australian business tourism sector gets 10.7% of annual tourism earnings – which translates into $A1.86 billion in international or foreign earnings.
“Although we don’t have access to New Zealand’s specific business tourism numbers there’s been noting from government sources to indicate our results would be anywhere near par with that excellent Australian result,” Mike Kelly said.
Mike Kelly, immediate past president of International Association of Assembly Managers (IAAM), does have detailed knowledge of the contribution made by venues his company manages - Christchurch Convention Centre, Christchurch Town Hall and Westpac Centre, the country’s largest indoor arena.
“Christchurch positioned itself to do well with international conferencing by building New Zealand’s first purpose built convention centre, which was officially opened in November 1997. This bricks and mortar approach has served both nation and city well, earning at least $50 – 70 million a year for the city.”
CEI Magazine reports the average daily expenditure of a business tourism delegate is $554 – almost 6 times the $94 average daily spend of international tourists. “That’s certainly a little higher than we have traditionally measured but the business sector has also become more global, sophisticated and wealthy,” Mike Kelly said. “But it’s long been established there is a significant multiplier between business and leisure tourists. There are also significant benefits business travellers bring, including the high spend and low impact on urban environments.”
“Australia has identified this sector and the government there has embraced business tourism as part of a mature tourism strategy where New Zealand is still seemingly focussed on leisure tourism and ‘interactive travellers’. We’re at different points on the business tourism continuum.”
“A strong case can be made that the business tourist is the ideal interactive traveller if we consider maximum financial impact and minimum environmental impact,” he said. “The high yields demonstrated by Australia’s business tourist validate the proposition that the convention industry is a hidden gem for New Zealand. They arrive at our international airports, especially at the gateway cities of Christchurch and Auckland, they’re met, escorted, accommodated in high-end hotels and they use local transport, dine out and shop.”
Mike Kelly said business tourism tends to fall between March and November, occupying 9 months, outside the traditional three month peak leisure tourism season, thus offering a good seasonal fit with the leisure market. “Business tourism tends to be located in man made built up urban parts of the environment, primarily the central business districts. These environmental benefits are delivered while generating up to six times the income per head, assuming Australian numbers are applicable here.”
“New Zealand should care about business tourism. We’ve had leisure visitors come in response to the success of The Lord of the Rings film trilogy. But the smart tourism marketing investment dollar goes on travel product that will increase the commercial yield and international experience shows that business tourism consistently delivers that higher dividend to public and private sector stakeholders. “
Mike Kelly said the requirement to grow business tourism was in bricks and mortar.
“Central and local government hasn’t really invested much in the business tourism infrastructure because it doesn’t have much of a political dividend. It isn’t a tactical short term strategy. Business tourists don’t vote – they come, spend, and leave. There has to be a well-considered strategic plan in place because return on investment is a core expectation of the sector. In Australia, strong domestic competition between the states has been harnessed,” Mike Kelly said.
“In the leisure tourism market, development costs have largely fallen to the private sector where investors can engage in the industry without significant individual investment. The meetings industry is different. Bricks and mortar cost money. Internationally, convention centres are loss leaders based on direct earnings. However, when you take foreign exchange and GST earnings into consideration, all of a sudden it becomes very lucrative both for government and the two primary private sector beneficiaries – accommodations and transportation.”
Mike Kelly said Christchurch City Council had made a strategic decision to invest in infrastructure for business tourism with the $15 million Christchurch Convention Centre and $34 million Westpac Centre for Sport & Entertainment. These purpose-built, international standard venues changed the city’s economic landscape and a wide range of businesses have benefited.
“Business tourism is powerful urban tourism. Leisure tourism is generally scenery and landscape oriented, rural tourism anchored in adventure elements – more invasive and a challenging from a sustainability perspective. New Zealand uses its landscape as a tourism platform, and environmental management issues have arisen in hotspot such as Milford Sound and Abel Tasman National Park. Business tourism will play a significant role in future destination marketing and management.”
Mike Kelly said accommodation and transport demand by business tourism is easily met as capacity is generally underutilised during the leisure tourism shoulder seasons. “This provides an exceptional and sustainable seasonal fit requiring no additional investment other than staffing and flattening out utility and service demands. Auckland’s infrastructure capacity developed for special event and leisure tourist demand delivers significant international meetings capacity. The Australian states have invested progressively in meetings product and have captured global market share.”
“While international conference business represents no more than 10% of all convention bookings, it is pure foreign exchange earnings and a key ingredient in the activity mix. Christchurch has been a flagship for the industry, demonstrating the potential for the international convention industry. During the 9 month convention season, it has achieved 70% occupancy and struggles to accommodate more conferences,” Mr Kelly said.
“The nice thing about the business tourism infrastructure – convention centres - is that they have a minimum impact on the natural environment since these developments are CBD focused. Sure there’s some delegate leakage into the traditional leisure tourism market – attractions, adventure experiences, etc – but when it happens it is with highest yields and participation numbers are out of season and the numbers only 10% of the more demanding leisure market. Business tourism happens during the shoulder season and winter months – March to November- and inject cash flow and investment right when operators need it most. “
“Business tourism infrastructure investments are CBD focused and, because they are used seasonally, aren’t an added strain on the service infrastructure. They compliment existing hard accommodations and transportation infrastructure and occupy softer MAF, immigration and retail services that benefit from managed visitor flows.”
“All in all, New Zealand as a destination has a lot going for it and is well positioned for business tourism growth. However, to achieve its fair share of the international business tourism market within the Australasian region it has to be at the table. Australia has demonstrated how it can be done. Future growth is dependent on bricks and mortar.”