Tourism cuts could cost $53 million

Last updated 12:58 07/04/2014

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The Nelson region could lose $53 million in visitor spending within two years if the councils halt tourism funding.

A research paper shows that when Colorado cut its tourism funding, its tourism plunged 30 per cent.

The Tasman District Council, in its draft Annual Plan, is signalling it intends ceasing funding tourism from rates from July next year as it considers "it is inappropriate to use ratepayer funds for activities that primarily benefit businesses providing services to visitors".

Tasman District Mayor Richard Kempthorne said today it had not done any research into what the impact might be.

With the submissions deadline a week away, warning bells are ringing about what impact the loss of the TDC's $426,000 a year contribution could have on the industry that directly employs 3000 in the region and contributes $128m to the region.

The Colorado experience was a cautionary tale for financial decision makers, said Nelson Tasman Tourism (NTT) chief executive Lynda Keene. The research paper, What Happens When You Stop Marketing? The Rise and Fall of Colorado Tourism, presented by Longwoods International chairman Bill Siegel, showed that marketing was an essential net generator of revenue and profits, not a cost.

In 1993, Colorado became the only state to eliminate its tourism marketing function, when it cut its $12m promotion budget to zero. As a result, Colorado's domestic market share plunged 30 per cent within two years, representing a loss of more than $1.4 billion in tourism revenue annually. Over time, the revenue loss increased to well over $2 billion yearly. In the important summer resort segment, Colorado dropped from first place among states to 17th.

Kempthorne said the Colorado experience did not cause the council to rethink its policy. "It brings us to the same question: how do we equitably fund tourism and what are the specific functions that need to be funded?"

Keene said that for a small ratepayer investment, the Tasman district received worthwhile returns.

Dividing the annual visitor spend in Tasman of $177m by 23,117 rateable properties gives a return of $7656 per ratepayer. That equates to an average $485,000 a day spent in the Tasman district by visitors.

TDC ratepayers pay $24.21 a year, or $2 a month, for supporting the visitor industry through general rates. Tourism also indirectly supported a wide range of other people in support businesses and boosted demand for local produce such as wine, beer and food.

The Tasman District Council says in its Draft Annual Plan that it considers tourism activities should be funded by business operators who benefit from visitor spending.

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However, the research paper found the private sector funding model failed. "It was like trying to herd cats. Industry contributions to the cause were not mandatory, so the people who paid their share were rightly resentful of those who passed the buck. Not surprisingly, free ridership prevailed over altruism and dedication to the private good."

It took until 2000 for the industry to convince the Colorado legislature to reinstate funding and after a further financial injection by 2007 travel to Colorado rebounded to a record high.

Keene said Waikato also experienced a fall in visitor numbers when five councils in the region decided to no longer fund regional marketing, and rose again when a regional tourism organisation was re-established.

NTT is jointly funded by the TDC and the Nelson City Council which contributed $438,000 for regional marketing and the Nelson i-Site, and NTT receives $400,000 from the private sector.

The NTT, which will make a submission to the TDC, has drawn up a list of 30 destination marketing and development activities that will not happen if there is no regional tourism organisation.

Keene said she hoped the community would get behind it in showing the value in ratepayer investment in tourism.


Regional tourism industry Directly employs: 3000

GDP contribution to region: $128 million

Cost to TDC ratepayers: $2 a month

- Nelson


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