Tourism – Leveraging Future Opportunities

Tourism businesses that improve their adaptability will have a better chance of setting themselves up for long-term financial success, according to a report by Westpac’s Economics team.

Westpac’s Industry Economist Paul Clark says that as the tourism sector continues its recovery, firms are going to find it increasingly challenging to grow revenues.

“To thrive in this environment, tourism firms will need to better sense opportunities in their operating environment and organise the resources they need to grab them. They will also be able to transform themselves in order to capture the added value from these,” Mr Clark says.

“At a practical level tourism firms should be boosting their analytical capabilities, leveraging off existing tourism ecosystems and making sure that they engage with customers on their terms. They should also be minimising barriers to innovation, not least of which is management time.”

“Underpinning this is the role of technology. Firms are already using digital technologies to improve operating efficiencies. In the future, firms that prosper will be using advanced technologies within completely new business models that deliver not just operating efficiencies but also new revenue streams.

“Achieving this will not be easy. This is a sector dominated by small, operationally focused firms that struggle to keep their heads above water even in the good times. Under-resourced, they often do not have the capacity to quickly adapt and innovate.”

“That’s not to say that there won’t be change. As costs fall, we think that tourism firms in New Zealand will increasingly adopt new technologies to improve their adaptability. But this is likely to be on a piecemeal basis and drawn out.”

A quicker but more disruptive option, would be for the sector to consolidate through mergers and acquisitions, joint ventures and/or strategic alliances. That would create economies of scale as well as boost investment capacity levels, both of which are necessary if tourism firms are to make more of the opportunities in their operating environment and transform their operations.

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