- NZ service sector

New Zealand service sector must do better

By Siah Hwee Ang

The latest special report in the Economist on China in the global economy rightfully points out the flood of Chinese in the international tourism and education spaces.

At the same time, the great sophistication in their choices and expenditure raises red flags.

Many of us may not have heard of a small town called Bicester in the Cherwell district of north-eastern Oxfordshire in the UK. Last year, the town attracted an astonishing 6.6 million visitors – as many as visited the British Museum.

More importantly, a quarter of these visitors came from China. They spent their money on international luxury goods that are priced lower than those they can find in China. Surely it is worth delving into how Bicester managed to get itself onto the map of Chinese visitors, and whether New Zealand could do the same.

You do not have to be big to play in the international tourism space. Bicester has a population of fewer than 35,000.

New Zealand is a beautiful country with plenty of tourists.

But it's the services part of the tourist experience that the country needs to work on. Good accommodation, food and entertainment are the bare minimum.

Stopping short of creating another Bicester by going down the luxury brand route, are there ways in which services can be improved to complement the country's natural beauty advantage?

How about some more tourist-friendly signs in the cities? How about enticing the city shops to stay open a little longer?

Other than for those visitors who want to buy authentic dairy and honey products, New Zealand is not a shopping destination. Its lack of value propositions doesn't encourage visitors to part with the money in their wallets.

Chinese visitors are the big spenders. They spent more than US$260 billion ($371.60b) abroad in 2016, twice the amount spent by US tourists and one-fifth of all global spending by international visitors.

But they don't spend much in New Zealand, for sure.

International tertiary education finds itself in a slightly different situation.

Despite the rising standards of Chinese universities, Chinese students continue to be keen on studying in Western universities or Asian universities that adopt Western-style education.

But this kind of expenditure is often significantly larger than what a tourist would spend on a trip, so it is subject to tighter scrutiny.

This translates to a higher risk-return scenario for the tertiary education service sector than the tourism sector.

In 2017, more than 600,000 Chinese headed abroad to universities in other countries.

Simplified, if we say that each of these students pays US$40,000 per year on fees, this results in an outflow from China of US$24b.

That doesn't even take into account the cost of living and other associated costs.

We also need to consider the bigger picture: making international students feel at home will surely boost the international reputation of our tertiary institutions, and likewise New Zealand as a country for all international students, not just those from China.

The services that we package around the provision of education are the icing on the cake for strengthening the value propositions of this sector.

The same is true for the tourism sector.

Existing as a tourist destination or providing education is indispensable, however it is the services that we offer in conjunction with these sectors that will make a serious difference to our international customers.