THE NEW ZEALAND HOSPITALITY INDUSTRY
MARKET
INSIGHTS
REPORT
SUMMARY
INDICATORS,
INDICES AND
COMMENTARY
JULY 2015
ON THE
NEW ZEALAND
HOSPITALITY
SECTOR
OVERALL HOSPITALITY OUTLOOK
The outlook for the hospitality sector remains positive on the back of strong economic
growth, giving New Zealanders the confidence to spend and travel.
The number of international visitors is expected to grow through the next decade. Not
all hospitality businesses however, are positioned to capture that expected growth.
The data hides a portion of the industry that has been affected by the changes to the
drink driving legislation, depopulation of rural communities and a lack of capital and
capability to deliver to the increasingly demanding requirements of customers.
Those that prosper over the next 12 months will be those that reinvest in their
business with appropriate refurbishment, tourism focus and social media based
marketing strategies, and those that are able to find, train and retain staff to deliver an
outstanding customer experience.
There are multiple factors and trends occurring within the hospitality industry.
There are three key drivers however, that affect almost all New Zealand hospitality
businesses. Understanding the impact of these drivers on individual businesses and
opportunities is the key to the ongoing success of the industry.
THREE MAIN DRIVERS FOR THE HOSPITALITY INDUSTRY
Globalisation
 Overall growth in
tourism and traveller
numbers, especially
from China, India and
other Asian countries
 Importance of social
media to connect
hospitality businesses
with customers via
advertising, booking
systems, customer
feedback, on-site
entertainment
 Increasing importance
of hospitality as a
tourism experience.
Alcohol
Management
Cost of Inputs
 Increasing burden of
legislative compliance
for hospitality
businesses to
implement alcohol
management bylaws
 Upward pressure
from wage costs due
to increases in the
minimum wage and
skills shortages in key
roles
Decreased
consumption of alcohol
within the hospitality
industry (more people
drinking at home) and
changing expenditure
patterns.
 Increasing cost of
land and buildings,
particularly in the main
centres
 Low inflationary
environment –
potentially making
price increases more
difficult to justify.
HOSPITALITY HEALTH INDEX
In order to provide a simple but meaningful view of the economic outlook for the
industry, a ‘Hospitality Health Index’ (HHI) has been constructed. This index combines
weighted cost inputs along with other drivers into an overall indicator of the health of a
hypothetical hospitality business. The authors note that as hospitality businesses vary
widely in terms of the relative importance of wages, salaries and other inputs, as well
as whether alcohol consumption is a key driver, this index is a broad overview only.
Various data contained in this analysis is sourced from Statistics NZ. The intention is
that the HHI reflects changes in the level of cost, competition, and major environmental
or legislative impacts faced by providers in hospitality industries.
The index increased by a modest 0.2 basis points from September 2014 to December
2014 and by a further 0.1 basis points to 101.9 by March 2015. This is largely as a
consequence of increased wage pressures which rose almost 0.43% during the same
quarter, and the introduction of the impact of alcohol legislation on sales measure in
March 2015. The HHI also benefits from a low inflationary environment.
HOSPITALITY HEALTH INDEX
102.3
101.9
101.9
101.6
101.8
101.6
101.3
101
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Source: Crowe Horwath using datasets from Statistics NZ, Hospitality NZ and Crowe Horwath
The HHI reflects the overall positive trend for the hospitality industry based on the
selection of salient industry drivers. Monitoring both the short-term and longer
term market developments in response to key market threats (such as alcohol
legislation) and opportunities (such as increasing traveller numbers) will enable further
development of the HHI over time.
ACCESSING THE FULL REPORT
The full report is available free to Hospitality New Zealand members and available for
purchase by non-members at $75.
Go to www.hospitalitynz.org.nz/Media/market-insights-report for more information.
DISCLAIMER:
While all care and diligence has been used in
processing, analysing and extracting data and
information in this report, Hospitality NZ Inc and
Crowe Horwath (NZ) Limited give no warranty that
it is error free and will not be liable for any loss or
damage suffered as a result of the use, directly or
indirectly, of information in this report.
FURTHER INFORMATION:
For further information please contact:
Hospitality NZ on hospitality@hospitalitynz.org.nz
Tracy McElroy-Rivett of Crowe Horwath at
tracy.mcelroy@crowehorwath.co.nz
Marnus Beylefeld at
marnus.beylefeld@crowehorwath.co.nz.