Headwinds remain despite healthy summer numbers
Queenstown Lakes businesses still face tough economic conditions despite visitor numbers returning to pre-pandemic levels.
Rising costs and a reluctance to spend money, especially from locals and domestic visitors, mean the district is experiencing "grumpy growth" says Arrowtown-based economist Benje Patterson.
"We've got GDP that's growing in Queenstown, we've got revenue that's growing, we've got more visitors that are coming through," Patterson says.
"But when you strip everything down to a per-business or a per-household basis, it's going backwards."
GDP growth was 5.9% for Queenstown Lakes for 2023, higher than the national 0.7%, but there was -0.2% GDP/per capita growth.
"Businesses are reluctant to spend because their margins are squeezed, households are reluctant to spend because their household budget is squeezed, and visitors are being a little bit more cautious when they're on the ground in Queenstown. So 2024 is likely to be a little bit flatter."
Patterson and Queenstown Business Chamber of Commerce boss Sharon Fifield are guests on The Outlet Queenstown podcast this week, providing and economic update for the district and talking through the results of the Chamber's latest quarterly business survey.
Demand or number of customers remains the biggest single factor limiting growth over the coming months according to the survey, with staff accommodation a close second. Difficulties in recruiting staff, however, a major problem in recent years, appear to have abated.
"I guess from an individual business on the ground, you are competing for spend basically," Fifield tells The Outlet.
"So I think the challenge for businesses is having that strong marketing strategy and compelling value proposition really, to get some of our visitors and customers parting with their cash."
The survey found one-in-six businesses are now providing accommodation for workers, which extrapolated out would mean 500 of the 3000 across Queenstown Lakes.
Fifield says premises rents and wages are the biggest costs to businesses, but input costs and supply costs are also rising.
"For a business to combat this, you either really need to trim your costs or raise your prices," she says. "And then with a cost of living crisis, there is only so much elasticity in that price for businesses.
"A lot of businesses I'm finding have actually raised their prices so much that they might actually already be at that ceiling. I guess that's just the story of inflation. It's across the board. No one is immune."
Despite that, some businesses more focused towards international visitors were reporting record summers, with overseas tourists, especially Americans, more likely to spend.
In the latest economic outlook complied by Patterson for the Chamber, he details that in 2023 in consumer spending was up 11.5% across Queenstown Lakes.
Tourism expenditure was up 8.3%, non-residential consents up 26.1% and car registrations were also up 6.9%, but residential consents were down 25.9% and commercial vehicle registration were down 28.6%.
It's mixed bag but there are plenty of reasons to be positive says Fifield.
"Businesses in Queenstown and our district, they've been through a lot," she says. "They're pretty steady operators and smart operators now that have survived a lot and are making good choices and are positive about the future, the longer term future as well."
Patterson believes businesses should focus on the longer term and is heartened to hear some Queenstown operators continue to invest.
"You hear little anecdotes, popping up through the Chamber and Destination Queenstown, of different businesses doing things like investment going into electrifying their fleet, their tour buses and shuttles.
"That's really reassuring to hear."
