Cook Islands should build more hotel rooms or risk pricing itself out of the tourism market, according to ANZ’s international economists.
The contentious advice runs against the current of the country’s economic strategy, and caused raised eyebrows through the tourism and construction sectors yesterday.
ANZ’s Pacific Economic Outlook says the country has had a “remarkable run” of strong inbound tourism and GDP growth, but that’s about to slow down unless the country takes action.
“Cook Islands could to well to think about increasing tourism capacity,” the report says. “Without additional room stock, it will struggle to achieve strong growth and will run a risk of pricing itself out of the market.
“In turn, this will impact the country’s attractiveness to high-yielding tourists.”
The advice is unexpected, because Cook Islands have adopted a careful destination management strategy that ensures local residents and businesses work seamlessly with tourists to create an attractive high-value destination – not taking a hell-for-leather growth-at-all-costs approach.
However, ANZ’s Australia-based international economists Kishti Sen and Tom Kenny argue that a new phase of investment in the tourism sector will return the country to stronger growth.
“New hotels or significant extensions along with associated infrastructure will drive the next investment cycle,” they say.
“And because the construction sector has a high multiplier impact, the broader domestic economy such as business services will benefit from increased construction.”
Last night, an influential line-up of business leaders cast doubt on ANZ’s recommendations.
Cook Islands Tourism chief executive Halatoa Fua slammed the report as “misleading”, saying it failed to recognise the seasonal nature of its tourism industry.
“While accommodation is near capacity in the high season months of July to September, the other nine months in the low and shoulder season have much lower occupancy,” he explained “Other key source markets such as Australia and the Northern Hemisphere are important to fill the low and shoulder season and travel to the outer islands. There is still capacity to fill all year round to provide a more sustainable tourism industry.”
Chamber of Commerce president Fletcher Melvin welcomed the positive economic growth over the past five years, thanks especially to the increase in tourism-related activity.
“Obviously the boom in building has been a result of a housing and room shortage which has brought with it immediate problems short-term but also a great opportunity for the building industry.
“The increase in Air BnB is continuing to supply some of the room needs but also has contributed to long term housing issues so this needs to be addressed.”
And he warned of challenges to infrastructure if ANZ got its way: “If there is an increase in resort room numbers then it is imperative that the sanitation plan moves quickly to keep up with the pace of change.”
Both Melvin and Tata Crocombe, the owner of The Rarotongan, questioned whether the ANZ economist had actually asked the views of people in the Cook Islands.
“I don’t believe the people who wrote the report have visited the Cook Islands and talked to the major players in the industry,” he said. “If they had, they might have come to a different set of conclusions.”
Crocombe said the challenge was not to build more accommodation, but to better manage pricing across the high season and low season to keep occupancy rates level.
He worried that the glut of budget accommodation had tipped the balance towards lower-yield customers. “A 5-star tourist spending $1000 a night or a budget tourist paying $55 a night, the cost is the same for the water and sanitation and policing.
“I think there’s a break-even point below which they’re actually costing the country money.”
Even in the building industry, John Short said the country didn’t more hotel rooms – “we’re at capacity, in my opinion”.
Builders including his company, John Short Construction Ltd, already had a great deal of work on, he said.
“We’re at the stage where the bubble is going to burst one day – and it’s not going to be much longer, just a couple of years.
“I don’t think the islands have the capacity for any more tourists. It’s not just a strain on infrastructure, but also on services.”