Inbound Tourism Operators Council conference

I am very delighted to be with the Inbound Tourism Operators Council conference once more.

I am especially pleased to address an ITOC conference with a theme that fits so well with my passion for quality in the tourism industry.

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I am very delighted to be with the Inbound Tourism Operators Council conference once more.

I am especially pleased to address an ITOC conference with a theme that fits so well with my passion for quality in the tourism industry.

Quality is at the heart of a sustainable tourism industry. Visitors who share good memories and experiences are our most effective ambassadors for New Zealand. Constantly striving to improve the quality of the visitor experience is a crucial goal for us.

In 2001 when I launched the New Zealand Tourism Strategy 2010, it was the first time the key players of the tourism sector, both public and private, worked together to articulate a clear plan for the future.

The sector agreed that tourism had to be sustainable. It had to focus more on yield, rather than simply on numbers, and it had to grow wider economic benefits, while enhancing the experience of visitors, and the quality of life of New Zealanders and our environments. Quality is absolutely central to all of this.

Your conference encapsulates all of this - it acknowledges that if we are to achieve the vision and the goals of the Strategy, we have to 'walk the talk'.

Successes - walking the talk on quality

And we do have many successes to be proud of.

As you know, tourism is one of New Zealand's most important export industries, bringing in $7.4 billion in foreign exchange and directly or indirectly employing 1 in 10 New Zealanders.

We have seen consistent and exciting growth in the industry, with airlines offering new and extended services, a multi award-winning marketing campaign, and sustained positive international media coverage, all contributing to our international reputation.

In terms of quality, overall our visitor's continue to rate New Zealand very highly.

As a government, we continue to work closely with the sector to resource and improve quality standards through such initiatives as Qualmark.

Since the launch of the Strategy, the government has invested $2.5 million to develop Qualmark as an expanded business accreditation and quality assurance system.

I was pleased to see Tourism New Zealand announce at TRENZ last month that they would be expecting Qualmark certification from their partners in international marketing initiatives. Not many years ago this would have been greeted with alarm by the industry. Now we see widespread support, from an industry that knows that its future lies at the quality end of the global market.

ITOC too has placed its stake in the ground on quality.

You provide the critical link between the supplier of New Zealand tourism product and the overseas travel companies that buy it.

I applaud ITOC's efforts to constantly improve quality standards, I know how difficult it must be for a voluntary trade association to demand higher benchmarks, with associated higher costs, of its own members. Yet that is exactly what this organisation has done in the interest of ensuring visitors receive quality tourism experiences.

ITOC has been proactive and has moved to create partnerships with other key tourism industry organisations to improve quality, and relationships, amongst the industry. Formal Memoranda of Understanding (MOU) have been signed between ITOC and the New Zealand Hotel Council and RTONZ over the last year, and most recently an MOU has been agreed with the Tourism Industry Association with the agreement being signed at this conference.

Another MOU has been signed with Qualmark with both parties agreeing that ITOC will encourage all allied supplier members to embrace the Qualmark quality standards, and to seek accreditation under the Qualmark licensing system. ITOC will encourage all full member tour operators to use suppliers carrying Qualmark in their brochures and itineraries to ensure they are selling visitor products and services which deliver to the best possible standards.

Qualmark, for their part, will recognise the ITOC self-regulating quality standards imposed on members under the ITOC Code of Ethics and Practice and the Membership, Financial and Best Practice Criteria.

Other initiatives include the ITOC operator of the year award, which I will present shortly, the ITOC and ATTTO Tour Guiding Certificate, a qualification that I'm advised is receiving high levels of industry interest.

And of course, I am in a position to advise you as ITOC members that your trade association is a very active advocate on your behalf to government, on matters where ITOC believes quality is at risk.

All of this is 'walking the talk', and I want to place on record my congratulations to you all for your proactive, enthusiastic approach to meeting the challenges of quality head on.

However, as we strive to continue to raise quality standards other market pressures can act to undo this work.

China challenge

President Stuart referred to the China market.

Let us take the example of the 'China leisure group tour market'.

China is a relatively new source of tourism business for New Zealand.

In the five years since the ADS system was put in place visitors from China have grown to 84,000 per year.

Just over 60% of these visitors come here for holiday purposes, or to visit friends and relatives.

Whilst China's performance has been outstanding in terms of numbers, the accelerated growth has given us some unique management and visitor satisfaction challenges.

China's extraordinary economic momentum is well known to this forum. Within China a vast group of people now have the economic means (and growing interest) to travel globally. In 2005 alone it is predicted that the number of travellers from China to overseas destinations will increase from 30 to 40 million.

This could be great news for our economy. The reality is however that the 'China leisure group tour market' has revealed traits that sit somewhat uncomfortably with our strategic goals for tourism.

For example, one of those goals as I have already discussed, relates to emphasising the provision of a quality experience.

However in China, many group travel companies tend to differentiate their advertised tour product on price rather than quality.

The issues raised are not unique to us.

New Zealand is experiencing what every other China group destination market is going through - the decrease of the quality and price of group tours, in a competitive, new, and rapidly expanding market.

We also face our own set of challenges in the Inbound Operator sector in New Zealand.

The 1999 ADS agreement with China stipulated that we would have China ADS groups, handled in New Zealand by 20 quality assured ITOC Inbound Operators.

However, this system has often been bypassed by groups travelling on non ADS visas, using all manner of low grade and "fly by night" inbound operators.

The established practice with these operators is to offer below cost pricing to the group travel companies in China. The goal to simply secure access and control over the group when it arrives in New Zealand so that shortfalls in costs and profit margin can be generated through shopping kickbacks and commissions.

The main issues we have with this sector are:

·removal of most revenue value by offshore intermediaries so that even tours highly priced in China arrive as budget tours,

·extreme cost cutting practices in the operation of the tour leading to low quality services, and replacement of fee paying attractions with free attractions, and

·failure to comply with New Zealand regulations by inbound operators and/or their suppliers.

Both the visitor, and the New Zealand tourism industry, lose when these visitors are denied time and access to some of our best tourism products and experiences.

Further, such practices undermine the value of tours to the New Zealand economy and place higher value tourism from these and other markets at considerable risk. Customer satisfaction from China is measurably lower than other key markets. This poses a risk to the potential that China holds as a large and growing market for high value tourism. But this potential will only be realised if it is managed correctly.

Safety is also a very real concern. As operators and their suppliers disregard transport and other safety regulations, the potential for harm to visitors, and New Zealanders, becomes significantly higher.

Progress
There are a number of you here who will have heard me speak on this issue earlier this year. You will, no doubt, be wondering what progress is being made.

Then, I spoke of last year's negotiation of a new arrangement with China that expands ADS beyond the Beijing, Shanghai and Guangdong areas to a further 6 provinces on and around the eastern seaboard of China.

This may act to ease the demand from outside the ADS system.

The reason we want more China agents within the ADS system is simple:

ADS group visas are subject to a degree of quality control. The current system approves the visas if the travel company handling the tour in China uses an approved ITOC inbound operator in New Zealand.

ITOC's code of ethics, audit procedures, guide and management accreditation processes potentially give us a much higher assurance that these groups will have the quality experience we want for our guests.

To increase the rate at which new travel companies in China get themselves up to ADS standard, I provided Tourism New Zealand and the New Zealand Immigration Service $1.3 million last year to embark on a three year travel industry training programme designed to substantially improve planning and selling knowledge, and ensure agents can reliably act as the first point of screening in the ADS visa application process.

Travel industry training is vital in this market development period - particularly when the rapid growth in outbound travel means a constant stream of new entrants to the travel business.

A thorough, independent investigation of issues in the supply side of the China leisure group market, detailing the true extent of the problem and highlighting where the priority quality issues lie has now been completed.

The Ministry of Tourism has consulted with all relevant New Zealand government enforcement agencies resulting in information sharing and widespread support for action, including, I am happy to say, from NZIS, the key agency in the management of ADS.

We have also been closely monitoring progress in Australia including the Queensland tourism services legislation and recent enhancements to Australia's ADS system which include registration of inbound tour operators, mandatory compliance with a code of business ethics and practice and significantly increased monitoring and enforcement.

Yesterday, the Ministry of Tourism, Tourism New Zealand, and the New Zealand Immigration Service met with the ITOC China Market Portfolio Group to discuss strategies for improving this situation and gain the members' input.

Later this morning, George Hickton will be outlining the China Challenges Summit that will be held in Shanghai early next month to identify issues and potential solutions across the whole distribution channel. This summit will involve representatives from New Zealand's government agencies abroad including TNZ, NZIS, Ministry of Foreign Affairs and Trade. Also present will be the Ministry of Tourism, ITOC, and airline representatives.

At this stage options remain open. However, I can say that a wide range of possible strategies are on the table for consideration. These include enforcement options to ensure a level playing field, so that operators who obey New Zealand regulations are not able to be undermined by operators who do not.

This includes priority raising with enforcement agencies, and ensuring that coordination and information sharing is maximised to assist evidence gathering and prosecution of illegal operators.

Some activity is already underway. For example, the Inland Revenue Department has recently conducted successful simultaneous raids in Auckland, Rotorua, Christchurch and Queenstown of a tourism related souvenir shop chain.

Also up for discussion are amended or new regulation options. These include how to broaden ADS coverage by amending immigration regulations, strengthening the ADS quality system, and investigating broader regulation of aspects of the inbound tour sector.

Clearly we need to focus on solutions in the market. Encouraging the China market to use the same high quality visitor attractions as our other key markets is a process that must be demand led.

It is vital that better-informed consumers in China lead this change. Clearly, marketing into such a vast market as China will require careful planning and consideration of the investment required.

We will also be discussing the potential for dialogue at a government to government level, including strategies to work with the government of the Peoples' Republic of China to resolve issues on the China side of the distribution channel.

Ultimately, I believe that we will see a group of initiatives both from government and industry that when implemented, will improve quality in this market.

I stress that these are currently discussion options being looked at in close consultation with the industry. Some options may be easy to implement. We already know that some will be very difficult indeed.

However, if we are going to 'walk the talk' on quality, then we must be prepared to intervene to address poor quality as well as act to encourage good quality.

Tribute to Peter Lowry

I know one person here who will agree with me on this point. In fact this person has been one of the first to recognise and bring quality issues to the forefront of the tourism industry.

I want to conclude my comments this morning by paying tribute to the extraordinary contribution to New Zealand's tourism industry made by Peter Lowry.

Peter has championed quality in the tourism industry. He has seen tourism develop from relatively small beginnings dominated by government run travel agencies, into a huge, vibrant, diverse and successful industry sector playing a major part in the economy of New Zealand.

Peter has played a key role in this development, and he has made a real difference. His achievements have been recognised several times.

He is a life member of the New Zealand Institute of Travel and Tourism and was awarded the Eric Grimes Memorial Award for contribution to Trans-Tasman relations. In 1994 Peter was awarded the MBE for services to the Travel and Tourism Industry.

I know that Peter has seen a number of Ministers of Tourism come and go during his 26+ years as Chief Executive of TAANZ and ITOC. In my almost six years as Minister, I have seen Peter in action.

He has been gentlemanly, yet determined, thorough and principled, and absolutely dedicated to ensuring that visitors to New Zealand receive the best possible experience. This is clearly more than just good business to Peter. I know that he fervently believes that nothing else will do.

Peter, as Minister of Tourism, I thank you for your important contribution, I have very much enjoyed working with you and I wish you and Karin all the very best for your retirement.

Finally, I want to congratulate Paul Yeo on his appointment to the position of Chief Executive of TAANZ and ITOC - and congratulate TAANZ and ITOC for such a smart appointment. I look forward with confidence to further building the strong relationship between your organisations and government.

Thank you again for the opportunity to join you again for your conference. I wish you all well for the productive working sessions, of your conference, and of course, enjoyment of each others good company during the social sessions!

ENDS

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