Part Two: Recovery, Cost Pressures and Competition — The Luxon Government and the New Economics of Tourism (2023–2026)

By late 2023, New Zealand’s tourism sector had stabilised.

Borders were open. Aircraft were returning. Cruise schedules were rebuilding. International visitors were reappearing in city centres, regional towns, and across the country’s major attractions.

But the industry that emerged from the pandemic was not the one that had entered it.

It was leaner. More fragile. More cautious.

And, critically, operating in a far more expensive environment.

When the National-led government under Prime Minister Christopher Luxon took office following the 2023 election, tourism was no longer in crisis. But it was far from secure.

The challenge was no longer survival.

It was competitiveness.

A Different Starting Point

The incoming government inherited a sector that had:

• Reopened to international markets

• Regained partial visitor volumes

• Rebuilt airline connectivity, albeit unevenly

• Lost significant workforce capacity

• Absorbed two years of suppressed revenue and high debt

At the same time, global tourism had shifted.

Destinations worldwide were competing aggressively for returning travellers. Marketing budgets increased. Air capacity was being strategically allocated. Visitors had more choice, and higher expectations.

New Zealand was no longer competing as a unique, once-in-a-lifetime destination.

It was competing on value.

Tourism Meets Inflation

One of the defining features of the post-2023 environment has been cost.

Across the tourism system:

• Fuel prices remained elevated and volatile

• Labour costs increased significantly

• Insurance premiums rose

• Compliance and regulatory costs continued to climb

• Infrastructure and operating costs increased

For operators, margins were tight.

For visitors, New Zealand was becoming an expensive destination.

This created a fundamental tension:

👉 The industry needed higher yields
👉 But higher prices risked reducing demand

The Policy Shift: Growth Returns to the Agenda

Where the previous period focused heavily on sustainability and system reset, the post-2023 environment has seen a renewed emphasis on:

• Economic growth

• Visitor volume recovery

• International competitiveness

• Airline and tourism sector confidence

The language has subtly shifted.

“Value over volume” has not disappeared — but it now sits alongside a more immediate priority:

👉 Getting people back into the country

Because without volume, there is no industry to sustain.

Infrastructure Reality — Still Catching Up

One of the most persistent issues from the pre-COVID era remains unresolved:

👉 Infrastructure capacity

Despite the reset period, many of the same pressure points remain:

• Congestion in key tourism corridors

• Limited capacity in high-demand regions

• Urban pressure in gateway cities like Auckland

• Gaps in transport connectivity

If anything, the issue has become more complex.

Because the system is now trying to rebuild while managing:

• Higher costs

• Workforce shortages

• Changing visitor patterns

Transport Becomes Central Again

As tourism rebuilds, one factor has become increasingly clear:

👉 Transport is not a supporting function — it is core infrastructure

Tourism depends on:

• Moving visitors efficiently from airports and cruise terminals

• Connecting regions

• Enabling day trips, tours and experiences

• Supporting events, conferences and group travel

Without transport capacity, tourism cannot scale.

This is particularly evident in:

• Cruise ship days in Auckland

• Regional tour circuits

• School and domestic group movement

• Major events and festivals

Every constraint in transport becomes a constraint on tourism.

The Overlooked Constraint: Access and Movement

One of the less visible, but increasingly critical issues, is access.

Across New Zealand — and particularly in Auckland — operators are encountering:

• Reduced bus and coach parking

• Increased restrictions in urban centres

• Limited loading and drop-off zones

• Conflicts between different transport modes

At the same time:

👉 Each coach movement can remove 30–70 cars from the road

Yet in many planning environments, this is not fully reflected.

The result is a growing disconnect between:

• Policy ambition (reduce congestion, increase sustainability)

• Operational reality (limited space for high-capacity transport modes)

Workforce and Capability — Still Recovering

While visitor numbers are returning, workforce recovery remains uneven.

The sector continues to face:

• Driver shortages

• Hospitality staffing gaps

• Loss of experienced operators

• Training and onboarding challenges

This affects not just service quality, but capacity.

In many cases:

👉 Demand is returning faster than the industry can supply it

The Competitive Landscape Has Changed

New Zealand is now competing in a different global environment.

Key pressures include:

• Long-haul travel costs

• Strong competition from Europe, North America and Asia

• Exchange rate impacts

• Perception of New Zealand as a premium destination

The risk is clear:

👉 If New Zealand becomes too expensive, visitors choose alternatives

The opportunity is equally clear:

👉 If positioned correctly, New Zealand can attract higher-value visitors

The Role of Mid-Sized Operators

One of the less discussed, but critical parts of the system is the role of mid-sized transport operators.

These businesses:

• Support schools, communities and events

• Provide flexible capacity

• Fill gaps not served by public transport

• Enable tourism experiences across regions

Yet they operate in a challenging space:

• Between small operators and large corporates

• With rising compliance expectations

• Under increasing cost pressure

Their role is often invisible — but essential.

The Core Tension of 2023–2026

The current phase of tourism can be defined by one central tension:

👉 Growth vs sustainability
👉 Cost vs competitiveness
👉 Policy vs operational reality

New Zealand wants:

• High-value visitors

• Sustainable tourism

• Reduced environmental impact

But it also needs:

• Volume

• Revenue

• Regional economic support

Balancing these priorities is the central challenge of the current government.

Where This Leaves Tourism Today

By 2026, New Zealand tourism is no longer in recovery.

It is in redefinition.

The sector has:

• Survived collapse

• Reopened to the world

• Adjusted to a higher-cost environment

• Begun rebuilding capacity

But it has not yet fully resolved:

• Infrastructure gaps

• Transport integration

• Cost pressures

• Long-term positioning

Coming Next in the Series

👉 Part Three: Transport 2026 — Why Transport Policy Will Decide the Future of Tourism

Exploring:

• The role of buses, coaches and public transport

• Infrastructure alignment with tourism growth

• Urban planning vs visitor movement

• How transport policy will shape the next decade of tourism