Pedal power may help New Zealand lure tourists, revive economy

New Zealand may turn to pedal power to revive its sinking economy.

In a bid to boost employment and tourism, Prime Minister John Key is promoting a bike path winding about 3,000 kilometers (1,865 miles) that he says would generate 4,000 jobs during construction and entice cyclists to tour the country.

The project — which would cost at least NZ$50 million ($28 million) — is one of almost two dozen that government and business leaders are evaluating following a jobs summit Key held last month. Several proposals support the tourism industry, which accounts for a tenth of the NZ$180 billion economy and employs 187,000 people. With the nation mired in its worst recession in more than three decades, Key says selling New Zealand’s spectacular scenery, ski fields and vineyards will keep people at work.

“We need to make sure the drop in employment doesn’t spiral into something much worse,” said Robin Clements, New Zealand economist for UBS AG in Christchurch. “Doing something is important for the psychology of those who still have jobs. Does it increase the odds that we will recover from the recession later this year? Maybe.”

The Treasury Department is forecasting that the number of people out of work will rise by 65,000 this year, taking the jobless rate to an 11-year high of 7.2 percent by March 2010 from the current 4.6 percent. Tourism businesses say 27,000, or more than a third, of the losses could be in their industry.

Holiday Destination

Key, 47, wants to lure more visitors after arrivals during January and February, the southern-hemisphere summer, fell 6.3 percent to 500,589 people from a year earlier. At the jobs summit he convened Feb. 27, some 200 delegates discussed options including the cycle-way and a NZ$60 million fund to better market New Zealand as a holiday destination.

In January, the World Tourism Organization in Madrid, Spain, predicted tourism may contract 2 percent this year because of the global recession, increasing competition for vacationers.

Canada said Feb. 5 it will spend an extra C$40 million ($32 million) over two years to attract travelers. Australia is investing A$40 million ($28 million) on a three-month advertising campaign based on the movie “Australia.”

“The question is whether we are compelling enough,” said Grant Webster, chief executive officer of Tourism Holdings Ltd., New Zealand’s largest camper-van rental company, who attended Key’s conference. The nation “has to maintain its share of global marketing.”

‘Lord of the Rings’

New Zealand promotes itself as a clean, green destination of rivers and mountains featured as the backdrop for the “Lord of the Rings” movie trilogy, which tourism officials used for publicity in 2001, 2002 and 2003.

The country is a favorite of backpackers and thrill-seekers who like to hike, raft river rapids and bungee jump into gorges. For city slickers who want to experience life on a down-under farm, there are 39 million sheep to shear and 5.3 million cows to milk. Crowds aren’t a problem, with the population just 4.3 million.

Key, who is also tourism minister, said the cycle-way will link the South Island alpine resort of Queenstown and Marlborough’s sauvignon-blanc vineyards with the beaches and marlin-fishing waters of the North Island.

Regional councils must agree to the route, which would be one of the longest in the world — comparable to Europe’s 6,000 kilometer North Sea Cycle Route or the 4,000 kilometer La Route Verte in Quebec. After the path is completed, workers will be needed to manage a network of accommodation, food, bike-rental and support services.

Regulation Relief

Other proposals from Key’s summit include relief from state regulations and a fund supported by banks and government to provide short-term working capital. All are being evaluated by a group of officials and business leaders, with a cabinet minister in charge. Plans that win government approval may get an allocation of funds in the May 28 budget.

The main opposition Labour Party has said there is little scope for new spending on projects that might not deliver jobs any time soon. Standard & Poor’s has said it may lower the nation’s AA+ credit rating because of widening budget deficits.

Key will lead development of the cycle-way idea. He said he also likes the concept of a marketing campaign during which airlines offer low-price fares for visitors who commit to staying longer than the average 12 days. Overseas tourists spent about NZ$6 billion in New Zealand last year, according to the Ministry of Tourism. The country is 13 hours flying time from San Francisco and Beijing.

Cutting Capacity

Foreign carries such as Dubai-based Emirates and Qantas Airways Ltd. in Sydney may be eligible to join the campaign, along with Air New Zealand Ltd., the nation’s only long-haul carrier. None has commented on the proposal. The Auckland-based airline has said it will cut capacity on its routes to Asia, Europe and North America by 14 percent by the second quarter as advance bookings fall.

“The outlook looks very soft” for international tourists, Chief Executive Officer Rob Fyfe said Feb. 26.

Key’s effort to generate jobs comes as manufacturers are firing workers. Sealord Group Ltd., the nation’s largest fishing company, said March 2 it will cut 180 workers at its processing plant in Nelson. Pacific Brands Ltd., a Melbourne-based underwear maker, will close two New Zealand factories and move production to China.

Contracting Economy

Manufacturing shrank for a 10th month in February, and commodity prices plunged 31 percent from a year earlier to the lowest level since March 2006. Goldman Sachs JBWere Ltd. in Auckland forecasts the economy will contract 2.9 percent this year after expanding just 0.3 percent in 2008.

Even if new marketing campaigns are approved, they won’t help tourism companies who haven’t hired as many seasonal staff this summer.

“It’s all to do with demand,” said Dave Hawkey, chief executive of Te Anau-based Real Journeys New Zealand, which operates excursions for 700,000 customers a year. “We are trying to reduce capacity without reducing capability,” he said, adding that he isn’t replacing employees who leave.