New Zealand Tourism After Covid: Why Recovery Took Seven Years and Who Pays

New Zealand’s tourism recovery has been slower than almost any comparable destination’s because the country is far away, was closed for longer and came back with fewer aircraft seats than it lost. The industry that was once the largest export earner has spent six years climbing back, and has returned to an argument it never settled: visitors use roads, water systems, toilets and tracks paid for by small communities and a stretched conservation department. This article explains the shape of the recovery, how the tourism economy earns money, how the visitor levy works, why Queenstown is the test case and what businesses should take from it. It is part of the New Zealand Company Stories hub.

How important was tourism to New Zealand before Covid?

Before the pandemic tourism was New Zealand’s largest export industry. In 2019 the country received a record 3.89 million overseas visitors, and international visitor spending earned about a fifth of all export receipts, slightly ahead of dairy.

The boom was recent. Arrivals had been about 2.5 million in 2012 and grew by half in seven years, driven by cheap jet fuel, new long-haul routes, a rising Chinese middle class and a marketing campaign, “100% Pure New Zealand”, that dated from 1999 and was amplified by the Lord of the Rings and Hobbit films. The screen connection is examined in the article on Wētā FX, Wētā Workshop and the Wellington screen industry.

Growth brought strain. By 2018 and 2019 the national conversation had turned to “overtourism”: queues on the Tongariro Alpine Crossing, freedom campers in lay-bys, sewage systems in tiny towns overwhelmed in summer. The Parliamentary Commissioner for the Environment published a critical report, and the government introduced a NZ$35 border levy in July 2019 to raise money for conservation and tourism infrastructure. Eight months later the border closed.

How does the tourism economy make money?

Tourism earns money when visitors, foreign or domestic, spend on transport, accommodation, food and activities. In the year to March 2025 total tourism expenditure was NZ$46.6bn, of which international visitors spent NZ$18.1bn and New Zealanders travelling at home the rest.

The industry is not one business but thousands. At the top sit a few large, capital-intensive companies: the airline described in the article on Air New Zealand, the gateway covered in the article on Auckland Airport, hotel owners, and operators such as the campervan group profiled in the article on Tourism Holdings. Beneath them are jet-boat operators, vineyards, motels, cafes and guides, most of them small and many family-owned. Iwi-owned businesses are prominent, including the tourism portfolio described in the article on Ngāi Tahu Holdings.

Tourism counts as an export because foreigners pay in foreign currency for something produced in New Zealand, even though it is consumed there. On the official measure, international tourism was the country’s second-largest export in the year to March 2025, and tourism’s contribution to GDP was put at about 7.7%. Official figures count roughly 328,000 people employed in tourism and hospitality, about one worker in nine.

The economics favour length of stay over headcount. A German couple spending four weeks in a campervan is worth many times an Australian on a long weekend. New Zealand’s distance, usually a handicap, helps here: people who fly 24 hours tend to stay.

Why was the recovery so slow?

The recovery was slow because New Zealand kept its border closed for more than two years, airlines returned fewer seats than they removed, Chinese group travel did not come back, and the cost of reaching a distant destination rose sharply with fuel prices and fares.

The border shut on 19 March 2020 and reopened in stages during 2022, fully only at the end of July that year. Rival long-haul destinations had been open for a year by then, and airlines had redeployed aircraft to routes that recovered first. Seat capacity, more than demand, set the pace afterwards. Air New Zealand’s long-haul fleet was then hobbled by engine faults, and American carriers treated Auckland as a seasonal market.

The numbers trace a long ramp. Arrivals were 3.22 million in the year to July 2024, about 83% of 2019; 3.39 million a year later, 87%; and 3.69 million in the year to July 2026, 95%. July 2026, with 256,638 arrivals, was the first month to exceed its 2019 counterpart, by fewer than 1,100 people. Other destinations had passed that marker two or three years earlier.

Composition changed too. Australians, who need no visa and face a three-hour flight, set a July record of about 134,900 and account for more than two-fifths of all arrivals. Chinese arrivals were growing quickly in 2026, up about 25% in July on a year earlier, but from a base well below the roughly 400,000 a year seen before the pandemic. China’s economy, a shift from group tours to independent travel and limited airline capacity all contributed; the wider relationship is set out in the article on the New Zealand-China free trade agreement.

What is the International Visitor Levy and who pays it?

The International Visitor Conservation and Tourism Levy, or IVL, is a NZ$100 charge collected when a traveller applies for a visa or a New Zealand Electronic Travel Authority. It was introduced at NZ$35 in July 2019 and almost trebled on 1 October 2024.

The exemptions define it. Australian citizens and permanent residents, and people from most Pacific Island countries, do not pay. Since Australians alone make up more than 40% of arrivals, about half of all visitors contribute nothing. The levy is also flat: a backpacker staying three months and a business traveller staying two nights pay the same.

Receipts are divided between conservation and tourism purposes by ministers each year. The money has funded predator control and biodiversity work by the Department of Conservation, track and hut maintenance, and tourism infrastructure. When the rate rose to NZ$100 the industry objected on two grounds: that the increase would deter visitors during a fragile recovery, and that much of the extra revenue was replacing existing government spending rather than adding to it. The first fear has not been borne out by arrivals, which kept growing; the second has more substance.

A second charge is coming. The government has announced plans to charge foreign visitors for access to a handful of the most crowded natural sites on conservation land, with Cathedral Cove, the Tongariro Alpine Crossing, Milford Sound and Aoraki Mount Cook named as the first, at something like NZ$20 to NZ$40 a visit from 2027. New Zealanders would continue to enter free. This is a notable break with a tradition of open access to public land, justified on the ground that overseas visitors make up the large majority of users at those places.

Why is Queenstown the centre of the funding argument?

Queenstown is the centre of the argument because it has the widest gap between visitors and ratepayers. A district with roughly 50,000 residents hosts several million visitor nights a year and must pay for roads, water and wastewater sized for the peak.

The town on Lake Wakatipu is New Zealand’s premier resort: skiing in winter, hiking, wine and adventure sports in summer, and the birthplace of commercial bungy jumping. Tourism dominates its economy to a degree unmatched elsewhere in the country, which made the border closure in 2020 a local depression and the rebound a local housing crisis. House prices are the highest in New Zealand, hospitality workers have been found sleeping in cars, and the district’s wastewater plant has breached its discharge consents.

Local government in New Zealand is funded almost entirely by property rates. GST and income tax paid by tourists and tourism businesses go to Wellington. In 2019 Queenstown Lakes District Council held a non-binding referendum in which about four-fifths of voters backed a local visitor levy on accommodation. It needs an Act of Parliament, and successive governments have declined to pass one.

The issue returned in 2026. Regional deals between the government and councils, signed that April, committed to exploring a bed-night levy from 2027. In August the National Party reversed course with a pledge of no new taxes; Queenstown’s mayor, John Glover, called it “policy made in panic”, and Auckland’s mayor, Wayne Brown, said it undermined the deal his city had signed. In September National proposed instead to share IVL revenue with councils from July 2027, after NZ$100m a year for conservation and NZ$50m for a tourism fund, allocated by international guest nights. Queenstown Lakes would receive about NZ$17m in the first year and Auckland about NZ$19m. Mr Glover estimated that a bed tax would have raised about NZ$40m for his district.

Who are the main players, and how are they doing?

The largest listed tourism businesses had a mixed 2026. Auckland Airport handled 19.04 million passengers, Tourism Holdings lifted underlying profit 34%, while Air New Zealand lost NZ$336m before tax and SkyCity’s earnings fell by more than a fifth.

The spread shows that arrivals alone do not determine profit. The airport earns a regulated return on assets whatever the fares. The campervan operator benefited from a larger fleet and firm rental pricing. The airline was undone by engines and fuel, and the casino group by compliance costs described in the article on SkyCity Entertainment, although its new convention centre gives Auckland a venue for the large conferences it previously could not host.

Outside the listed sector, hotel occupancy and rates in Auckland and Queenstown recovered ahead of visitor numbers because little new supply was built during the pandemic. Regional operators dependent on coach tours and Chinese groups recovered last. Labour has been a persistent constraint, eased by working-holiday visas and by migration settings that successive governments have loosened and tightened.

What is the government’s strategy?

The government’s stated goal is to double the value of tourism exports by 2034. Its Tourism Growth Roadmap, launched in 2025, puts volume first: more marketing in core markets, easier visas, support for events, and only then investment in capacity.

This is a change of emphasis. The previous Labour government, after 2020, talked of “high-value” visitors and of resetting tourism on a more sustainable footing. The National-led coalition elected in 2023, facing a weak economy, treated tourism as the fastest available source of export growth. It funded additional offshore marketing, part of it from IVL revenue, eased visa requirements for Chinese travellers arriving from Australia, and allowed visitors on tourist visas to work remotely for foreign employers.

Louise Upston, the tourism and hospitality minister, has welcomed each month’s arrival figures as evidence the approach is working. Critics reply that arrivals were recovering anyway as airline capacity returned, and that a strategy built on numbers will reproduce the pressures of 2019 without the infrastructure to absorb them. The disagreement is partly about timing. Marketing produces visitors within a year; a wastewater plant takes five to plan and build, a problem set out in the article on New Zealand’s infrastructure deficit.

Which destinations compete with New Zealand?

New Zealand competes for long-haul leisure travellers with Australia, Canada, Japan, Iceland, Norway, Chile and South Africa: places that sell landscape and outdoor experience. For Australians it competes with Bali, Fiji, Japan and domestic holidays.

The competition is fought on price, access and novelty. Japan, with a weak yen and abundant flights, has been the outstanding winner of the post-pandemic period and has drawn Australians and Americans who might otherwise have considered the South Pacific. Australia markets heavily in the same source countries and offers more air links. New Zealand’s advantages are a strong brand, safety, compact geography and, for Australians, proximity.

Its handicaps are cost and distance. A strong reputation does not offset an expensive airfare, and New Zealand hotels, rental vehicles and restaurant meals are not cheap by world standards. The levy and the planned site charges add modestly to that. The more serious competitive issue is airline capacity: destinations with several hub carriers competing for traffic recover faster than one that depends heavily on a single national airline and seasonal foreign services.

What are the main risks to the recovery?

The main risks are a jump in travel costs from high fuel prices, geopolitical shocks that disrupt long-haul routes, a downturn in Australia, loss of community support in the most visited places, and climate-related damage to the natural assets visitors come to see.

The first two arrived together in 2026. Conflict in the Middle East pushed jet fuel far above the previous year’s level and disrupted flights through Gulf hubs, which carry many European visitors to New Zealand. Air New Zealand consolidated flights, Auckland Airport forecast flat passenger volumes for the year to June 2027, and Tourism Holdings warned of dampened earnings. The 95% recovery could stall just short of the line.

Dependence on Australia is a quieter risk. More than two in five visitors come from one country, and they stay for shorter periods and spend less per trip than long-haul travellers. A weaker Australian dollar or economy would be felt immediately. Social licence is the long-term risk: if residents of Queenstown, Wānaka, Tekapo or the Coromandel conclude that tourism costs them more than it pays, restrictions follow. And glaciers that have retreated out of easy view, tracks closed by storms and warmer ski seasons are already changing what is on sale.

What can founders and CFOs learn from New Zealand’s tourism recovery?

The clearest lesson is that demand recovery and capacity recovery are different things. New Zealand never lacked people who wanted to visit; it lacked aircraft, staff and, in some places, beds. Businesses that secured capacity early recovered first.

• Balance-sheet strength decides who survives a closure. Operators with low debt in 2020 bought distressed rivals in 2022. Those with heavy leverage needed rescue equity or disappeared.
• Diversify source markets before you have to. Firms built around Chinese group tours waited longest. Those selling to Australians and Americans were full by 2023.
• Domestic customers are a hedge, not a substitute. New Zealanders kept many operators alive in 2020 and 2021 but spend less per day than long-haul visitors.
• Price for yield, not volume. Capacity constraints let hotels and rental operators lift rates. Those that held prices in order to fill up left money behind.
• Public costs eventually become private charges. Levies, site fees and bed taxes are how communities recover infrastructure costs. Build them into pricing rather than treating each as a shock.
• Watch the politics of your input. An industry that depends on public land, public roads and border settings should invest in its relationship with residents and regulators.

More operating lessons from the region’s companies are collected in the Founders Hub.

What happens next for New Zealand tourism?

Arrivals should pass the 2019 record of 3.89 million during 2027 if airline capacity holds, though high fuel prices make that less certain than it looked in mid-2026. The funding question will be decided by the general election and what follows it.

Three policy choices are pending. First, whether councils get a share of the border levy, a local bed-night charge, both or neither; the parties differ, and the mayors of Auckland and Queenstown have made clear they regard levy-sharing as a poor substitute. Second, how the charges for foreign visitors at conservation sites are implemented, including how staff are to distinguish residents from visitors at a car park. Third, whether the levy’s Australian exemption survives; removing it would roughly double the revenue but would sit awkwardly with the long-standing free-travel arrangement across the Tasman.

On the supply side, Auckland’s new domestic terminal opens in 2029, Air New Zealand’s new aircraft arrive from 2027 and the convention centre gives the business-events market a venue it lacked. Queenstown’s growth will be limited less by demand than by airport noise boundaries, roads and housing.

The deeper question is what the country wants from the industry. The pre-Covid model maximised numbers and discovered the costs afterwards. The current strategy again targets growth. A version that prices access properly, returns revenue to the places that host visitors and favours longer stays would earn more from fewer people, but it requires politicians to charge for things that have always been free. After seven years of recovery, that is still the unfinished part of the story.

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