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Diversify travel offerings and invest in infrastructure: ANZ

Wednesday 19 April 2023 | Written by Al Williams | Published in Economy, National

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Diversify travel offerings and  invest in infrastructure: ANZ
Cruise ship passengers at the market. AL WILLIAMS/23030220

Cook Islands along with other Pacific nations require not only hard but soft infrastructure investment such as telecommunications according to an economic outlook report into sustainable tourism.

The 14-page ANZ Bank Pacific Outlook report into sustainable tourism looks at the state of health in the Cooks, Samoa, Solomon Islands, Tonga, Kiribati and Timor-Leste. 

Key concerns listed in the report include limited air inventory, inflation alongside servicing peak demand.

While the number of inbound flights are still below pre-pandemic levels, fewer seats are delaying a return to 2019 arrivals numbers.

However, the report says cashed up travellers are spending 1.5 times more than before Covid-19 and GDP can recover sooner than short-term arrivals numbers.

Growing long-term sustainable inbound demand is key with land availability and efforts to preserve identity tagged as an upside to expanding nature-based boutique travel opportunities.

Inflation is still a problem as the higher costs of imported goods is elevating retail inflation, the report says.

The report states domestic inflation is muted, so does not require a central bank response.

Nonetheless, ANZ expects liquidity to fall to ensure an orderly decline in foreign reserves.

Report authors and economists Kishti Sen and Tom Kenny said arrival numbers are unlikely to reach pre-pandemic levels until the middle of 2024.

“Once there, investment in facilities and infrastructure will drive growth in the medium term. In the meantime, diversifying travel offerings to markets like sports and business tourism could lift occupancy in low seasons and boost GDP and employment.”

This year would see Cook Islands build back towards its inbound demand prior to the pandemic.

“Going forward, the peak level of demand that can be sustained over the long-term without compromising the unique product offering will be decided by each country in consultation with industry. And the infrastructure investment required to service the higher level of peak demand will, we believe, drive the next phase of investment cycle.”

New electricity, water and wastewater construction, along with telecommunication, road, port and airport activity would be the drivers of investment. 

On top of this would be new hotel and resort buildings to scale up to sustainable levels of short-term arrivals.

GDP in the Cooks is forecast to move 14.9 per cent in the 2023 calendar year, better than its Pacific neighbours, with Samoa at 13.4 per cent and Vanuatu at 11.6 per cent.

However, GDP is forecast to ease to 6.5 per cent here in 2024 with the Cooks falling behind Samoa (12.1 per cent) and Vanuatu (13.1 per cent).

“This year, we expect containerised freight rates for the Pacific markets to stabilise. We may even see some softening in some markets but not to the extent of the sharp declines in big global trade freight lines.

“Accordingly, we expect CPI (Consumer Price Index) inflation to fall from the peaks of last year but to remain elevated due to the higher cost of manufacturing goods in source markets. The latter driven by higher upstream price pressures in trading partner countries.”

The report labelled Cook Islands as a boutique eco-tourism-based destination.

“Nature based leisure travel, friendly locals and competitive pricing are its key attractions. Industry liaison suggests current infrastructure supports about 200,000 visitors per year which is close to what the country received in 2019.”

Economic conditions in key markets such as New Zealand and Australia are still supporting international travel.

The unemployment rate in both countries is near record lows, at 3.4 per cent and 3.6 per cent respectively.

In addition, average earnings are rising and discretionary expenditure including overseas travel is above pre-pandemic levels.

And for the first two months of 2023, visitor arrivals were at 83 per cent of 2019 levels.

High season is approaching, more flights are being put on out of Papeete and Honolulu, and flights out of Sydney will commence from June. Forward bookings are encouraging, the report said.

“However, seat capacity out of Auckland, a key market, remains below pre-pandemic levels and it will be a while before that returns to 2019 levels.

“We think this can be offset by higher arrivals from Sydney, pushing peak season arrivals close to the 2019 high watermark.”