The fuel price shock following the outbreak of war in Iran has landed squarely on the tills of New Zealand tourism operators, who say a single tank that used to cost 100 dollars now demands more than twice that, while domestic visitors have shrunk their booking windows from weeks to a single day.
Auckland tour company ExperienceKart, which runs day trips around the upper North Island, said the lift had been more than two and a half times. Managing director Karthik Subramanian told RNZ that what used to be a 100 dollar fill was now coming in at 220 to 240 dollars every time a driver pulled up to the pump. With most tours pre-booked at fixed prices, there was nothing the company could do but absorb the cost.
“We’re just running a business, keeping it afloat, paying our drivers their wages, their contracted hours and their rates, so our profit margins is not really much left,” Subramanian said. “We’re just biting the bullet at this point in time.”
He said price rises were a last resort and the company would welcome government relief if the pressure persisted, but warned that small operators did not have the balance sheet to keep absorbing the squeeze indefinitely.
In Northland, Silver Wave Yacht Charters skipper and director Scott Farrand said the cost of refuelling its motoryacht had almost doubled, with diesel bills now running into hundreds of dollars extra every time the boat went out on a day charter. The company was lucky that two of its three vessels were sailing catamarans, he said, and crews were now sailing where they could, cutting down to one engine where possible and holding a fuel-efficient cruising speed to keep the cost down without dulling the experience for guests.
The pressure is also being felt in destinations that depend on the family carload from Auckland and Hamilton. Destination Hauraki Coromandel general manager Kylie Hawker-Green said the domestic market had dropped off and the lead time on bookings had collapsed. Where regional accommodation providers used to enjoy a forward order book of three to four weeks, the window was now closer to 24 hours, with households waiting until the Thursday before to see if both the weather and the household budget would allow a weekend away.
“We had people who would come for a weekend instead of for a week,” Hawker-Green said. “They’d pay for one activity, instead of an activity a day. They’d go out for lunch instead of going out for dinner so they’re still coming but just spending less and definitely constraining their time and their spend while they’re in Hauraki Coromandel.”
The shorter booking horizon makes it much harder for small Coromandel businesses to roster staff, plan supplies and commit to seasonal hires, and it is dragging on cashflow at a time when input costs have already climbed.
Tourism Industry Aotearoa chief executive Rebecca Ingram said members had not yet pushed prices up across the board, even as costs lifted. “What I see is business owners and business operators going ‘this is tough. It’s putting a squeeze on us right now. But we are also focused on the future, because we have to be’,” Ingram said. The industry body has stood up a programme to keep members informed about the impacts of the Iran conflict, help them plan and feed the situation back to government.
Tourism and Hospitality Minister Louise Upston said visitor numbers had recovered to about 93 percent of pre-pandemic levels post-peak season and that forward bookings from offshore showed limited disruption so far. “Yes, the prices will go up. But we’re not seeing significant reductions or cancellations of bookings, which is really positive,” she said. She pointed to Air New Zealand’s announcement last week of three new long-haul routes out of Christchurch as evidence the sector still had confidence in the rebound.
The wider economic backdrop is less reassuring. Economic consultancy Infometrics warned in its latest Quarterly Economic Monitor that the oil price shock from the Iran war would weigh on the New Zealand economy for two years or more, well beyond any ceasefire. Principal economist Nick Brunsdon said the country had been recovering before the conflict, with 12 of 16 regional economies expanding in the March quarter, but the fuel hit had now pushed recovery further out.
“If we take what’s happened so far with the Iran war and the oil price shock that’s come through, we expect that oil price shock will have reverberations for two years or more, because it takes time for it to flow through to products that use oil and transport, bringing goods to supermarkets, and then it keeps echoing through as it knocks up the prices of other things and then dampens demand for those things as well,” Brunsdon said.
Marketview card spending data suggests households are already adjusting. Early signals show drivers paying for more expensive petrol by simply driving less and cutting back on apparel and hospitality, which is exactly the kind of belt-tightening that punishes a discretionary sector like tourism first. Retail spending lifted only 0.3 percent in the March quarter compared with a year earlier, even before the fuel shock fully fed through.
The squeeze is not evenly spread. Operators that own their own diesel-heavy vehicles or boats are wearing the steepest cost lift, while sail-powered or shuttle-based operators are better placed. Larger operators with hedging or fuel surcharges built into international packages have more room than the small Kiwi-owned tour companies and charter skippers who set their prices a season ahead and now find themselves trapped between fixed revenue and a moving cost base.
Whether the pressure becomes structural or temporary will depend on how long the oil price stays elevated and how quickly the booking lead time stretches back out. For now, tour buses are still rolling, yacht charters are still sailing, and the Coromandel motels are still filling up most weekends, but the margin behind that activity is thinner than it has been for years and a longer fuel shock would force a wave of price increases or quiet closures in the back half of the year.
Are you a tourism operator dealing with the fuel squeeze, or have you cut back your own travel because of pump prices? Tell us how it is playing out in your business or your household in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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