Sector hopes for pickup this summer

Just over half of tourism operators are predicting better times for summer as they emerge from a difficult three months of increased discounting and weak demand.

The Tourism Ministry's latest industry monitor figures show 52 per cent of the 504 operators surveyed expected demand to improve in the three months to March, with 29 per cent expecting it to fall.

The average expectation was for a 1.8 per cent increase in profitability off the back of a 2.9 per cent increase in demand.

But the monitor also shows continuing drops in profitability for the three months to December at an average of 0.9 per cent, with bigger business even more affected.

The drop in profitability comes amidst growing concern among tourism operators about the impact of discounting, identified as a damaging factor by 38 per cent of respondents to the survey.

Tourism Industry Association chief executive Tim Cossar said the figures show competition remained "extreme" with more operators discounting heavily.

"There is some pretty extreme discounting and as we push ourselves out of the recession that is going to be a challenge," he said.

"New Zealand doesn't need to be a discount destination. We can be a value destination."

While business remained tough for many, there was growing optimism in the industry, he said. "People are picking up on the notion that the worst is over."

New Zealand Hotel Council chair Jennie Langley said accommodation providers had been discounting during the recession, but only as a last resort.

"There has been some discounting and everybody is very aware that can't continue and won't continue," she said.

She agreed with Cossar that while it remained tough for tourism operators, reports for summer were more positive.

But she emphasised the tourism industry was "patchy" and while some businesses had barely hit a bump during the recession, others were struggling to stay afloat.

Queenstown was one big tourism destination that rode out recession relatively well on the back of a strong winter compared to places more dependent on the Asian tour market, like Rotorua.

Ngai Tahu Tourism southern manager David Kennedy said demand at its Queenstown tourist operations, such as Shotover Jet, was up for the past three months compared to the same period the previous year.

"The recession looks like it's starting to reverse," he said.

Tourism New Zealand's international visitor arrival figures for October show continued contraction in most Asian markets, particularly Japan and South Korea, as well as the United Kingdom and North America.

This was accompanied by more promising signs from China, which was up 16.5 per cent on October the previous year and India, up 15.3 per cent.

New Zealand's biggest international visitor market, Australia has continued to prop up the tourism industry, with visitor numbers in October up 22 per cent on the same month last year.