Download The risk of higher oil prices

The risk of higher oil prices
Summary of interviews
(published in Inside Tourism, IT697, page 7)
Susanne Becken
Friday, 11 July 2008
As part of the FRST-funded Tourism & Oil project, ten tourism experts (largely
managers and CEO’s of tourism firms and organisations) were interviewed regarding
their views on climate change and oil prices. The interviews took place between
January and March 2008 and took about one hour each.
All interviewees expressed concern about rising oil prices, and even though media
reported less about oil than climate change, experts considered it as the bigger threat
and determinant of their business decisions. Some mentioned the term ‘Peak Oil’
explicitly and noted that running out of cheap oil would be a huge issue for tourism in
New Zealand; however others preferred to speak of ‘security of supply’ to avoid any
scientific or ideological discussions around Peak Oil. One tourism manger noted that
‘oil prices are a practical issue and climate change is a conscious issue’. According to
one expert, most tourists still make their travel decisions based on financial and not on
ethical consideration. Hence, oil prices would be the more imminent issue that the
New Zealand tourism industry has to deal with. It was also noted that the factors of oil
prices (hence travel costs) and climate change concerns are compounding, which
increases the negative impacts of each one. One manager summarised the situation by
saying “the era of cheap travel is over”.
It was generally believed that New Zealand is a very vulnerable destination due to its
long-distance market, however, there was a wide range of opinions on how exactly a
change in arrivals will manifest. Generally, tourism experts expect less growth than
has been forecast by the Ministry of Tourism, eventually even a reduction in overall
arrivals. Largely this would be driven by fewer arrivals from the European markets,
but also potentially from the United States, depending on the wider economic
situation. One interviewee commented that it is very difficult to predict what will
happen with the Asian markets in times of high global oil prices and potential
economic crises. Australia was considered to be the most stable market, however, it
was commented on that family travel might reduce as disposable incomes drop and
airfares increase. When asked about specific markets some tourism experts believed
that backpacker tourism would be relatively persistent as these tourists have time to
travel and spread their budget. Others, however, believed that backpackers are budget
tourists and would not be able to afford New Zealand as a destination anymore.
Opinions were similarly divided on coach tourists: some believed that coach tourists
would continue to travel as they are relatively wealthy tourists, while others thought
that given the competitive nature of coach tourism and low profit margins, any
increase in price would result in reduced numbers. Changing demographics in our
markets of origin will also impact on how tourism will look like under different future
scenarios.
When asked if global oil prices would affect certain products and destinations within
New Zealand, informants had varying views. Some believe that once tourists have
paid their airfares, they will not really change their behaviour much within New
Zealand. Others predicted that certain destinations will miss out (i.e., those off the
beaten track) and certain products will become less competitive and a natural
selection process will occur. One tourism expert pointed out the opportunity of new
product development, such as a ‘carbon zero bike trail’, and this idea of ‘positioning’
New Zealand was supported by other interviewees. There might even be an increased
opportunity for Maori tourism to develop products under manaki tanga to show
people the unity of people and land in a bicultural society.
There are already a large range of measures in place that help businesses reduce their
energy demands and carbon footprints, but as one expert pointed out there is also a lot
of ‘cynicism’ out there and ‘heads in the sand’. Regulations are generally weak and
do not necessarily incentivise energy efficient behaviour. Some businesses have
invested in staff training and modern equipment but in some cases there are structural,
regulatory or technological hurdles that make it very hard to push for environmentally
friendly options. Carbon offsetting has been taken up by a number of businesses but
as one manager commented it would be the first initiative to go when oil prices reach
levels that compromise the business. Other experts did not believe in carbon offsetting
and advocated investing into energy efficiency instead.
Generally, the interviewed experts were not aware of detailed energy and climate
policies by the Government (‘except what one reads in the newspaper’) and some felt
that more information would be very useful. Some managers were quite informed
about climate change, but less so about energy policies. Specific information on
alternative energy options and technologies would make it much easier for businesses
to make investment decisions.
The Tourism & Oil project will model changes in tourist arrivals in response to global
oil prices, as well as changes in on-ground behaviour. In addition, measures will be
identified that help businesses reduce their vulnerability to rising energy costs. The
research team works closely with the Ministry of Tourism and the Tourism Industry
Association and this project is aligned to other initiatives in the area of energy and
tourism currently taking place.