Special investigation: What tourist levies are really being spent on

It could be a billboard shot promoting New Zealand’s adventure capital, were it not for the green tinge of treated sewage. The panorama from the banks of the Shotover River ticks most of the boxes – the snow-capped cone of Coronet Peak, the Crown Range, the jagged ridge of the
Remarkables. Every half hour or so, another plane comes in low over the river before disgorging hundreds more visitors. Every hour, the waters are rippled by the wake of the Shotover Jet.

Still, it’s hard to get past the sewage. In March, the Queenstown Lakes District Council began sending about 12,000 litres of treated effluent into the river from a nearby sewage plant after its cost-saving experimental disposal field failed. It claims the sewage is treated to such a high standard that it’s still fine to swim here, although the opaque green liquid flowing into the river may cause some hesitation.

Testing shows doing so would have an element of Russian roulette. Before the Listener’s visit, the council’s weekly monitoring found levels of E coli were almost double those considered safe to swim. Although E coli levels were much lower downstream, it’s not quite the “100% pure” image tourists are being sold.

Then there was 2023’s cryptosporidium outbreak, which stemmed from an unknown faecal source in Lake Wakatipu and led to a near three-month-long boil water notice. Sewage spills into the lake have made regular headlines since.

Not so green: Emergency discharges of treated sewage into the Shotover River near Queenstown threaten the area’s status as a tourism magnet. Photo / George Driver

It would be unfair to blame this entirely on tourists – a Newsroom investigation points to a number of council failures – but during peak times, most of this treated waste comes directly from them. Visitors cause Queenstown’s population to more than double during busy periods. During a year, the number of guest nights per person is 86 to one – about 12 times the national average.

It’s not just the sewage. Within three years, the 11km drive from Lake Hayes to Queenstown is forecast to regularly take an hour, the congestion linked to tourism-related employment and housing growth.

The infrastructure cost pressures are significant. The council’s debt – 272% of revenue last financial year – is the country’s highest. Residential rates are the third highest and during the next three years are expected to increase faster than any other district.

Other tourist towns face a similar equation. Tekapo’s 610 residents are looking at a $47 million bill to upgrade its wastewater system to cater for days when tourists are expected to outnumber locals 15 to one.

In Franz Josef, the district’s mayor says the town’s 500 residents can’t afford the multimillion-dollar wastewater system required to service the 3000 visitors it gets each day.

We’ve had this debate before. Through the 2010s, as the number of international visitors grew by 1.3 million, the public’s tolerance of the industry began to plummet.

Now, as the government spends tens of millions to meet a target of attracting 4.8 million visitors a year by 2034 – 1.4 million more than now – many fear tourism’s growing pains will return.

But shouldn’t it be different this time? Since 2019, the country has had a dedicated border levy intended to generate hundreds of millions of dollars to alleviate the pressures on infrastructure and the conservation estate. The question is: where has the money gone?

Queenstown visitors queue for the TSS Earnslaw cruise on Lake Wakatipu. Photo / Getty Images

The Great Reset

“Tourism in New Zealand will never return to how it was before Covid-19 dramatically affected us,” Stuart Nash confidently declared at Tourism Industry Aotearoa’s 2020 conference. As the pandemic laid waste to the country’s second biggest export earner, Nash painted the border closure as an opportunity to reset and quell the discontent that had grown about overtourism.

In the previous decade, the country had undergone the largest tourism boom in its history, with visitor arrivals increasing by 54% to reach 3.88 million in 2019. As a result, the public’s tolerance of the industry was fraying at the edges (See “Clean, green at risk”, below).

The government had taken some steps to alleviate the pressures. In 2017, the National-led government introduced a temporary $25m-a-year fund to help councils struggling to pay for tourism infrastructure such as carparks and toilets.

A more permanent fix came in 2019. The Labour-led government introduced a $35 border levy, to be paid by about 60% of international visitors (those from most Pacific Islands and Australia are exempt). This was expected to bring in about $80m a year, with the proceeds split equally between tourism and conservation projects.

“This levy will ensure our international visitors contribute to the infrastructure they use and help protect the natural places they come here to enjoy,” then-tourism minister Kelvin Davis declared.

National voted against the levy, its leader Simon Bridges branding it “entirely unnecessary”. “A new tax would simply go straight to the Beehive when they’ve already got very strong coffers,” Bridges said.

The levy had been operating for eight months when the pandemic closed the borders, virtually obliterating the levy proceeds and stopping tourism in its tracks.

Some $8m was directed to the kākāpo recovery programme. Photo / Getty Images

In positioning the pandemic at the industry’s 2020 conference as an opportunity to reset, Nash memorably called for a pivot to attract “high-net-worth individuals” rather than vans of backpackers who “pull over to the side of the road and shit in our waterways”. He also talked enthusiastically about “regenerative tourism”, meaning the industry would aim to give back more than it takes.

To achieve this, the government formed working groups and taskforces aimed at developing a “Tourism Industry Transformation Plan”. As visitor numbers rebounded, however, enthusiasm for transformation began to dissipate. The work was scuppered when the coalition government took office in 2023. Rather than visitor quality, the coalition was firmly eyeing quantity.

In place of working groups, it promised cash. Last year, it decided to nearly triple the International Visitor Levy to $100. This was expected to immediately bring in $190m a year for infrastructure and conservation, rising to $229m from 2026/27 when visitor numbers were expected to return to pre-Covid levels.

At the time, then-tourism minister Matt Doocey said although international tourism was an economic boon, it “also comes with costs to local communities, including additional pressure on regional infrastructure”.

Within months, any hopes for a windfall to help pay for pipes, roads and toilets in tourism hotspots began to evaporate.

At Fox Glacier, $3.9m from the levy was allocated to destination management -including construction of a car park. Photo / Getty Images

Into the coffers

Although the levy was expected to bring in about $145m in the 2024/25 financial year, headlines about massive investments in tourism infrastructure have been conspicuously absent. The government has had other ideas on how to spend the money. Rather than funding conservation projects and tourism infrastructure as intended, the bulk of the levy is effectively going straight to the government to save it money.

It began with a new rule introduced last year that meant any levy money that wasn’t spent within a year would go directly to the crown. This enabled it to bank about $67.5m in 2024/25 that had been earmarked for tourism purposes. Official documents show that by April this year, the crown was expecting to bank $121.5m of unspent levy revenue – more than 40% of the total raised since the levy’s 2019 introduction.

But it wasn’t just the unspent funds the government was eyeing. Documents show that in the last days of 2024, Willis wrote to Doocey outlining a new plan. Rather than the levy proceeds being split between tourism and conservation and rising when tourism numbers increased, the two agencies would get a capped amount each year. Tourism’s share of the levy would be capped at $35m, while the Department of Conservation would get $55m a year.

It meant the portion earmarked for tourism infrastructure may actually shrink, despite the levy trebling. Under the previous 50/50 funding split, the original $35 levy was expected to raise about $40m (less administration costs) for tourism based on 2019 visitor levels. The $55m going to DoC is about $15m higher than under the $35 levy, but still well shy of the $114.5m each agency could have expected from a 50:50 share of the tripled levy.

At the same time, the conservation budget has been cut, with $101.8m of “total savings” made within DoC in the last two budgets.

Under Willis’s plan, another $8m from the levy would go to maintaining the Great Rides cycleways each year – an activity formerly funded by the crown and therefore not new funding.

In total, it means the levy will deliver only $90m a year for new conservation and tourism spending. So, what will happen to the remainder of the $229m the levy is expected to bring in from the start of the 2026/27 financial year? As foreseen by Bridges, it will go into the government’s coffers.

Willis’s loophole

The law that enables the levy stipulates its proceeds must be spent on conservation, tourism infrastructure and the vague “other initiatives related to tourism”. However, last year, Willis found a loophole. She decided the remaining proceeds – about $130m a year – would go directly to both DoC and Tourism New Zealand’s budgets. Only, this would be offset by a corresponding cut in their crown funding, directly saving the government money without delivering the new spending the levy was meant to generate.

For the current financial year, about 82% of Tourism New Zealand’s baseline funding came from the levy and about half its budget will be funded via the levy in future.

A spokesperson for the Ministry of Business, Innovation and Employment confirmed the changes were agreed by cabinet as part of Budget 2025 – although they weren’t detailed in any official budget documents.

It all means the levy hike will not lead to additional funding for tourism infrastructure at all – at a time when the government aims to increase the number of tourists coming here by 1.4 million a year.

Despite this, the government’s immigration website still markets the levy to tourists as “your contribution to maintaining the facilities and natural environment you will use and enjoy during your stay”.

The office of current Tourism Minister Louise Upston did not respond to multiple requests for an interview. The minister has previously rejected criticism about a lack of infrastructure funding, saying there was no need for additional tourism funding because numbers were still below pre-Covid levels.

Visitor demand on the Tongariro crossing is raising infrastructure and environmental pressures. Photo / NZME / Mike Scott

A marketing levy?

While the crown began to take the levy’s proceeds for itself, it also unveiled new intentions for how the $35m allocated for tourism would be spent. After bouncing in and out of recession last year, the government began 2025 with a new slogan: “Going for Growth”.

A cabinet reshuffle saw Willis pick up the newly named “Minister for Economic Growth” portfolio, while Upston became the country’s fifth tourism minister in five years, replacing Doocey.

Willis told RNZ in January boosting international tourist numbers was the government’s top priority for growing the economy. She dismissed concerns about whether the country’s infrastructure was ready to handle it.

“Yes, there will be all sorts of arguments made against why people might not want more tourists in their town,” she said, “[but] actually when we’ve got more tourists coming, more tourists spending, that’s good for jobs, it’s good for growth and it’s good for the wealth of individual New Zealand families.”

Money began flowing to sell the country overseas. In February, half a million dollars was spent on a new campaign, “Everyone must go”, targeting Australian travellers. Soon after, another $3m was spent to encourage more tourists here in winter. In April, an additional $13.5m was given to Tourism New Zealand – the government’s tourism marketing arm – for a sustained marketing blitz.

The bulk of the levy is going straight to the government to save it money.

By June, the government revealed the extent of its ambition in a new Tourism Growth Roadmap. Its goal was to double international tourism spending to $19.8 billion by 2034 and grow the number of visitors to 4.78m a year – almost a million more than the pre-Covid peak.

The source of this marketing spending-spree? The visitor levy. What began as a way to get tourists to pay for their impact on the environment and infrastructure was becoming a fund to increase the pressure on both.

The roadmap showed 80% of the $35m earmarked for tourism would be spent on marketing. The remaining 20% would go towards the so-called “supply side” – upgrading the stuff tourists use. However, even this hasn’t been allocated to the basic infrastructure tourist towns have been crying out for. This year, it will go towards a $4m upgrade to visitor sites along the state highway to Milford Sound, along with a new $1.6m bridge for the West Coast’s Wilderness Trail.

Although it’s within the letter of the law, it contravenes the International Visitor Levy Investment Plan, which lists “marketing or brand development for tourism” as off limits for funding, along with upgrades to tourist attractions.

It also goes against the views expressed by those who submitted on the proposed levy hike last year. In total, 53% of submissions opposed using the fund for international tourism marketing, noted in the summary of submissions as “the only area that had more opposition than support”. In contrast, 85% of submitters wanted the levy to address visitor pressure on infrastructure.

“Responses mentioned the need to invest into roading, wastewater, rubbish, toilets, and other public facilities, particularly in communities that have a high visitor to ratepayer ratio,” the summary said.

The tourism roadmap states the government will invest more in the “supply side” – including tourism infrastructure – sometime between 2026 and 2029, although it’s not clear on what and how much.

In September, the government announced a $70m plan to attract international events and support existing events, part-funded with $25m of future levy proceeds.

It includes “up to $10 million for tourism infrastructure upgrades including cycle trails”. However, it’s not clear whether this is additional funding, or a re-announcement of existing projects such as the $8m a year for Great Rides maintenance.

It’s also unlikely to address concerns about the impact of tourism. MBIE’s website states these infrastructure upgrades are to “attract more visitors to our cities and regions by enhancing their experiences”.

Cycle trails are one of the few infrastructure items to have gained from the levy. Photo / Otago central Rail Trail

Influx unwelcome

South Island tourist towns are bracing for impact. Though visitor numbers nationwide still lag the pre-Covid peak, many southern towns are already busier than 2019. There, mayors are warning that if infrastructure funding isn’t forthcoming, the government’s growth agenda will be at risk.

Arrivals and departures at Queenstown airport increased 12% in the year to June 30, and passenger movements were up 44% on 2019. Reports about overtourism in Queenstown are rising once more, even gaining international coverage.

Views towards tourism in Otago/Southland remain the most negative in the country. Surveys have found Queens­town residents give tourism an approval rating of 18 – classed as “disapproval” – compared with the nationwide rating of 48. In Mackenzie District, the rating is just 11.

“Once you start getting to those levels, the view of the industry’s in danger,” says Queenstown Lakes District mayor Glyn Lewers. “For a district where nearly two-thirds of the economy is based on tourism, that’s quite alarming.”

Lewers says the negative views are a direct result of the underinvestment in tourism-related infrastructure, and he points the finger at the government.

“This has been a systemic issue over two or three decades and no one’s grabbed it by its horns. If we don’t, my fear is we undermine the industry, and you’ll start to see the pushback. We’re already starting to see it undermine that social acceptance of tourism here.”

Mackenzie District’s Karen Morgan and Queenstown Mayor Glyn Lewers: Visitor numbers are well ahead of pre-Covid levels. Photos / Supplied

His comments are echoed in the Mackenzie Country, where mayor Karen Morgan says visitor numbers are also well ahead of pre-Covid levels. “We were under significant pressure before Covid,” Morgan says. “While the pandemic did give us some relief, we didn’t actually solve the problems we had. So now that the pandemic is over and people are travelling, that’s just come back with a vengeance.”

In a district with 5500 ratepayers, even paying to clean public toilets has become a significant burden. She says the council recently decided to clean the district’s three busiest public toilets four times a day during peak times rather than three. That alone led to a 1% rate-rise.

“$100 of their rates bill now goes solely towards cleaning toilets,” Morgan says. “It’s great to encourage people to come, but if we can’t deliver the level of service they’re expecting, then we’re actually shooting ourselves in the foot.

“People want to come and see the clean, green, pristine New Zealand that they’ve been marketed, but we’ve got to be able to deliver that, too. We’re out of sync at the moment.”

Nationwide, the number who believe international tourism places too much pressure on the country is also beginning to rise after declining during the pandemic. In total, 73% of those surveyed this year said they’d experienced adverse effects from tourism.

Mackenzie District Council is working on a Tekapo master plan to manage visitors and traffic drawn to attractions such as the Church of the Good Shepherd. Photo / Getty Images

Eyeing alternatives

The industry is expecting a backlash, too. Marketing body Tourism New Zealand has lowered its target for the proportion of New Zealanders who agree international tourism is good for the country, from 93% to 85%. “This is set below the current baseline as rapid growth in the next year could have a negative impact on social licence, particularly in regions already seeing visitor volumes ahead of 2019 levels,” the agency said in its recent Statement of Performance Expectations.

Both Willis and Prime Minister Christopher Luxon have suggested the government’s Regional Deals – agreements between local and central government to help develop infrastructure – would be a way to fund tourism infrastructure in places like Queenstown.

Queenstown and Central Otago districts have collaborated to sign a memorandum of understanding with the government for a deal – one of just three regions to have the privilege – but the details haven’t been publicly released.

Additional funding seems unlikely, however. In July, the government released objectives for the scheme that included ensuring local bodies “make significant progress to close their infrastructure deficits – without new funding from central government”.

Willis has also suggested Queenstown should hike rates to fund what’s required, to which Lewers points to the council’s table-topping debt and rates bills.

“I think we’re doing our bit,” Lewers says. “I just wish we had a central government that, no matter what stripe it is, is putting in a similar amount of effort.”

As funding from the levy has proved elusive, both Lewers and Morgan have been looking at alternative ways of raising revenue from tourism. Queenstown has long been campaigning for its own visitor levy on accommodation providers, which has overwhelming local support and could bring in $22.5m a year, but has repeatedly been ruled out by the government.

Morgan wants to see something similar to raise revenue from Airbnbs – Stuff reported almost half of Tekapo’s dwellings are listed on the platform.

This imbalance has meant families and workers have struggled to afford housing in the village. The town’s sole mechanic recently had to move to Fairlie, Morgan says, after his tenancy was terminated and his rental property put up on Airbnb.

The council is also looking at making two of its busiest public toilets user-pays. But mostly, Morgan wants to see the International Visitor Levy finally delivering the infrastructure funding that was originally promised.

“It was designed to relieve the pressure that tourism placed on communities with small ratepayer bases like ours and the communities aren’t able to manage that on their own.

“But if they’re just promoting tourism and not doing anything about the other, then it will fall over.”

Cathedral Cove on Coromandel Peninsula at Sunrise. Photo / Destination Hauraki Coromandel

The 2010s tourism boom – the biggest in the country’s history – clearly took a toll on councils grappling with the numbers and on the public’s view of tourism. The industry’s regular survey of public views charted growing frustration. Although 92% believed tourism was good for the country, more than half believed visitor numbers were growing too fast.

The proportion who thought tourism put too much pressure on the country doubled in five years, reaching 42% on the eve of the pandemic. In Queenstown – where almost two-thirds of the population depend on the industry for their livelihoods – 72% shared this negative view.

But concerns about overtourism persisted. In December 2019, the Parliamentary Commissioner for the Environment, Simon Upton, released a report claiming tourists were “eroding the very attributes that make Aotearoa New Zealand such an attractive country to visit”.

Among the issues he noted were overloaded wastewater systems in small towns with sharply fluctuating populations due to tourism, leading to systems failing and polluted waterways.

“When things go wrong, not only does the environment suffer, but also tourism and the perception of New Zealand as a clean, green destination,” Upton wrote.

“Worryingly, news of untreated sewage entering waterways in some of the country’s most well-known locations has been reported in articles globally.”

Although Labour’s then-newly introduced border levy – among other solutions – was promising, Upton said it needed to be considerably more ambitious.

The Ministry of Business, Innovation and Employment had put the unfunded cost of international tourism at roughly $250-350 million a year.

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