Otago’s high exposure to tourism means it is facing the “biggest economic struggle” of the post-lockdown recession, according to Westpac’s latest Regional Roundup.
The bank said that Covid-19 would cause a recession in all regions of New Zealand, with the severity in each region and the pace of recovery dependent on the industry makeup.
It added: “Worst affected will obviously be the places that rely most heavily on overseas tourism. That is why Otago faces the biggest economic struggle of any region, and the South Island, in general, will be hit much harder than the North.”
Westpac’s June Regional Roundup presented a gloomy picture of “tourism-dependent” Otago and its outlook given the ban on international visitors, which has taken a toll on accommodation, hospitality, and recreational service and education providers.
“Economic activity in Otago will continue to be severely impacted by a ban on international tourists, making it the hardest hit region in the coming recession, and possibly the slowest to recover,” the bank said.
“Otago should get more domestic visitors and is likely to see an increase in Australian arrivals should a trans-Tasman travel bubble come into existence.
“However, numbers are still unlikely to get close to pre-Covid-19 levels over the coming year and this will weigh heavily on hospitality and retail activity in the region, particularly in the traditional tourist hotspots of Queenstown and Wanaka.”
The report paints a similar picture for Southland, which it predicts is set for a “severe recession in coming quarters and is set for a slow recovery because of the region’s heavy exposure to tourism”. Domestic visitation was unlikely to make up for the “large hole created by the loss of foreign visitors”.
The loss of international tourists is also expected to hit Canterbury’s economy, dampening activity in the region’s hospitality and retail industries, with impacts felt hardest in the Christchurch CBD.
In the Nelson/Marlborough/West Coast region, the West Coast was singled out as being the most vulnerable to the tourism downturn and was forecast to “struggle over the coming year, mainly because just under half of spending by tourists to the region comes from foreign visitor arrivals”.
The North Island is set to fare better than the South, according to Westpac, which picks Wellington and Auckland as having the strongest prospects for the year ahead. They were followed by Bay of Plenty and Waikato, where the impact of border closures is muted by lower reliance on international visitors and where local economies are more diversified.
This was the case for Wellington, where although tourism was expected to struggle, Westpac said it was likely to do so less than other regions because it had a lower proportion of international visitors pre-Covid.
Furthermore, Westpac added that a lack of foreign visitors to Wellington could be partially offset by an increase in domestic travel, with the same said of Waikato, Northland and the Bay of Plenty.
However, in the case of the Bay of Plenty, Westpac added: “This does not apply to all parts of the region. Places like Rotorua, for example, which focus heavily on foreign visitor arrivals, are likely to be more adversely affected by restrictions placed on them entering the country.”
And despite its expectations of a stronger overall economic performance from Auckland – relative to the rest of the country – it too was still predicted to feel the absence of international tourism “acutely”, with the mooted trans-Tasman bubble only likely to “take the edge off rather than save the day”.