Reinventing Queenstown

Queenstown has taken a body blow over the past two years, bringing the question of how to diversify the town’s economy into sharp focus. As new industries emerge and remote working becomes increasingly attractive, Daisy Hudson looks at how the jewel in New Zealand’s tourism crown is reinventing itself.

James Reid and his family only planned to move to New Zealand for a year.

The Kiwi tech start-up worker and his American immigration lawyer wife were living in California when the Covid-19 pandemic struck in early 2020.

They had to share an office as they tried to work from home, and their two young children could not go to school while the pandemic raged around them.

Within a couple of months, the pair decided on a temporary move back to Mr Reid’s native Aotearoa.

They quickly decided on Queenstown, seeing the appeal of the lifestyle for their 12-month stay.

They rented their house out, packed their bags and flew to the resort.

Not long after, they decided to make the move permanent.

‘‘The lifestyle’s just fantastic.’’

Until it closed late last year, Mr Reid worked remotely for a tech start-up in the United States. His wife runs her own immigration law business, and employs lawyers in the US.

Now looking for work, he says he is focusing on American jobs, saying they align with his skill set and he has found working remotely from Queenstown pretty easy.

One of the silver linings of Covid, he says, is that working remotely has become much more normal, and more appealing, for many people.

That provides an opportunity that Queenstown, struggling with the ramifications of a decimated tourism industry, can tap into.

The town’s reliance on a single industry is not a new issue.

By 2018 it had been building for years, decades, really, frustrating residents and officials.

The picturesque resort town was bursting at the seams with tourists, and its ageing infrastructure was struggling to cope.

Millions of international travellers visited Queenstown each year to cruise the lake, drink wine, hit the slopes and hurl themselves off bridges.

While the clogged roads were like rivers of gold for tourism and hospitality operators, there was an undercurrent of unease about all of Queenstown’s eggs being in the same basket.

The Queenstown Lakes District Council commissioned Arrowtown consultant Benje Patterson to look at what the district needed to do to diversify its economy.

Well, like they say, necessity is the mother of invention.

As the bumper 2019 summer drew to a close, a threat emerged that turned off the tourism tap virtually overnight, sending shockwaves through a district in which almost two thirds of all jobs relied on tourism spending.

The past two years have undoubtedly been a tough time for Queenstown, but residents have not been wallowing in self-pity.

A large programme of work has been under way to broaden the economic, education and training opportunities available in the district and increase its resilience to economic shocks.

If another global disaster strikes, Queenstown wants to be ready.

Mr Patterson released a report in 2020 in which he said the results of his work did ‘‘not paint a particularly pretty diversification picture’’.

The district’s externally generated revenue was narrowly focused on international tourism, and the driver for change was clear in the wake of Covid-19.

He found Queenstown’s economy was less diverse than New Zealand’s as a whole.

In 2019 tourism comprised 40% of the district’s GDP, according to Infometrics.

Even last year, after the industry essentially fell off a cliff, it was still responsible for 21.4% of GDP.

Two years on, Mr Patterson says that pre-pandemic it was difficult for someone to look at changing their business model when that model was so successful.

‘‘You know in the back of your mind that you shouldn’t have all your eggs in one basket, but if it’s going well it’s going well.

‘‘Covid really taught us it can all come crashing down overnight and this is a lot different to an economic crisis or a financial crisis where the sharemarket crashes.’’

He has looked at examples of places overseas that have diversified from single industries, often extractive ones such as forestry or mining.

‘‘Queenstown, it’s a little bit different in that when we diversify our local economy, we’re actually able to build on some of the strengths that make our tourism economy great.

‘‘So it’s that sense of place, and that lifestyle that attracts visitors is also something that can attract entrepreneurs and operate in a whole range of other industries.’’

To an extent diversification has already started to happen naturally, thanks to global events.

Startup Queenstown Lakes chief executive Olivia Wensley says that just after the Covid outbreak began overseas, and the US ‘‘for a brief period of time was just a dumpster fire that everyone wanted to flee’’, she kept bumping into people from Silicon Valley.

She calls them Queenstown’s Silicon Valley refugees.

‘‘Most of the families and people I know that came here, they often had some connection to New Zealand, like it might be a Kiwi spouse or they’ve visited, and they came here sort of just seeking shelter ... but what happened is they fell in love with the place and they’re all settling, none of them had gone back.

‘‘It’s like the reverse brain drain.’’

Then there are the New Zealanders who returned home from overseas during the pandemic, and local start-ups.

She points to bio-tech company Phytrac, founded by Owen Darby, and SWITCH motorcycles, founded by Matthew Waddick, as examples of innovative companies with Queenstown bases.

‘‘I don’t want to be another Silicon Valley, but it’s the Silicon Valley level of talent that we can attract.’’

She points out innovation is an environmentally friendly export, ticking many sustainability goal boxes.

Technology is certainly a key growth area being targeted, along with film and people able to work remotely.

Five television shows being filmed around Queenstown in the next few months are expected to be a boost for local economy.

It is hoped growth in these typically highly paid industries will benefit Queenstowners in the pocket.

For example, the average salary in Queenstown Lakes is $56,351, while the average salary for a New Zealand digital technology worker is $119,442.

Simon Flood is one Queenstowner who has been able to make the most of the ability to work remotely.

When he visited Queenstown while living and working in London, he had been away for about 15 years.

‘‘I was out running one morning and I just thought this place is so beautiful, I’d like to have something here for when I come back to New Zealand.’’

In 2015, he relocated his family from Asia to the resort, and he has not looked back.

His work is varied. He has interests in the healthcare industry, including pharmacies in Christchurch and Ashburton.

He is the deputy chairman of Queenstown Airport, as well as being a trustee of the University of Canterbury Foundation and the Lakes District Hospital Foundation.

‘‘When you sort of step back and think about this place, this place started as a town that Southland farmers used to have a crib at and they came to for their summer vacation.

‘‘It’s evolved from there. There’s no place that I would rather be, and if there are inconveniences with that, then I will suck that up in order to be here.’’

Between the lifestyle and access to the airport, he does not find those inconveniences to be too problematic.

But if Queenstown wants to market itself as a place where people can work remotely, there are some issues that need to be addressed, he says.

One is affordability and quality of living.

‘‘We need to make it affordable for people who aren’t super high earners to be able to live here with dignity and to grow their families here.’’

The other is infrastructure. There have been innumerable stories over the years about the increasing pressure on roading, water and electricity infrastructure as Queenstown has rapidly grown, and Mr Flood says it is something that needs to be planned for and addressed to allow for the kind of change the resort needs.

‘‘At the rate this community is growing, it runs the risk of collapsing under its own weight.

‘‘A duck looks quite graceful on Lake Wakatipu, but actually what you don’t see is the frenetic activity under the water. In order for the duck to look as graceful and be as effective as that, there’s a lot of stuff that needs to be going on behind the scenes.

‘‘And that’s what we’ve got to get right, is laying the foundation upon which you build.’’

Two years of pandemic life have undoubtedly been tough — though perhaps, on the whole, not quite as bad as expected — for Queenstown.

While the visitor-reliant industries have been on life support, the area’s strong construction market, for one, has continued to boom.

As the Reserve Bank lowered interest rates and the country became awash with cheap money, it fuelled a property bubble in Queenstown, and investment continued.

And, Mr Patterson says, even if construction activity does begin to taper off over the years ahead, there is still a lot of activity around the rest of the lower South Island to keep people in work.

Job losses in Queenstown have also confounded expectations, in a good way.

At the beginning of the pandemic, Infometrics forecast there would be 7900 jobs lost in the district by March 2021.

As it transpires, estimates for the March 2021 year show there were 2690 job losses.

Perhaps surprisingly, Statistics New Zealand data shows more than 1000 jobs were added within Queenstown Lakes businesses between March and December last year.

The increase was primarily driven by professional and technical services, as well as momentum in the construction sector.

It has also meant the issue of diversification has been given much more urgent attention, and its challenges recognised.

The cost of living, particularly housing, is one.

Data released in November by property website showed asking prices for houses in Central Otago and the Queenstown Lakes area skyrocketed by 41.9% in the 12 months to October 2021 to reach an average of $1,423,038.

The median rent for a three-bedroom house in Queenstown was $723, according to Tenancy Services.

There is no beating about the bush that affordability is going to be a challenge in any sort of diversification strategy.

‘‘Employers in this area, they often do have to pay more than they would in other parts of New Zealand, particularly for lower skilled roles to enable their workers to sustainably carve out a life in the local area,’’ Mr Patterson says.

‘‘Many of the industries that we’d look to diversify into do offer much higher productivity than the tourism sector, for example. And with higher productivity, there are opportunities to pay people substantially more. So the flip-side can be that housing costs are less important to some of these new industries.’’

Infrastructure-wise, those who live in Queenstown are keenly aware of its road and water failings.

The council has the task of partly playing catch-up for years of under-investment and catering for intense pressure on systems built for a much smaller town.

There is substantial work under way. A major project to improve arterial roads and get traffic flowing better around the CBD area has begun and a $19million wastewater upgrade was completed at the end of last year, while there are plans for improved public transport.

There is also a masterplan for Ladies Mile which will provide more housing, which will be co-ordinated with plans to ease congestion along the main road into Queenstown. All of this, of course, will take time.

It is hoped higher paying jobs, and more resiliency to economic shocks, will take some of the pressure off social services in the district.

In 2019 the Salvation Army in Queenstown saw an increase of about 20% in demand for its services, local director of community ministries lieutenant Andrew Wilson says.

When 2020 came along and brought Covid with it, demand trebled.

‘‘Thankfully a lot of that has reduced, but a lot of that has reduced because those who were most at risk have actually moved away from this region,’’ he says.

‘‘We saw bus-loads of people having to be repatriated to their countries during lockdown, these were people who had their minds set on making New Zealand their new home, and families were being ripped apart, not only because of the lack of jobs but the inability to be flexible within their visa restrictions.’’

Covid has reinforced a drive within the community to rebuild not just the economy, but the quality of living for those within it, he says.

‘‘People want people to enjoy their time here in Queenstown and not just have to suffer week by week just trying to make ends meet.’’

There is a real sense that Queenstown has an opportunity for genuine societal and cultural change post-pandemic.

A more inclusive community goes hand in hand with that.

Ngai Tahu consists of 18 papatipu runanga, which are centred on traditional communities throughout the Ngai Tahu area (for example, Otakou, Karitane and Moeraki).

Seven of those have a shared interest in and around Queenstown.

In 2021 the seven runanga came together to better align mana whenua aspirations and efforts in the area.

This collective, known as Kai Tahu ki Tuawhenua, is at present an informal working party, which will transition to a formal structure with a physical presence in the area this year.

Speaking on its behalf, Dr Michael Stevens says that for mana whenua, collective economic aspirations are inseparable from social, cultural and environmental aspirations for the area.

‘‘For example, the reclamation of traditional place names, which is important to us in and of itself, feeds into our vision of enhanced tourism experiences: goods and services that are more authentic, less transactional, and higher value.”

Ngai Tahu has significant property and business interests in Queenstown, including owning Shotover Jet.

There is a desire for recognition that the iwi’s presence in the area has been continuous, that they are not newcomers or interlopers.

‘‘We are not simply interested in cultivating money in a tourist hotspot. What we want is to participate in this place, and those activities, but in ways that enable us to project and protect the collective mana of Ngai Tahu.’’

There is also a keen awareness of the importance of education and training to Queenstown’s chances of successfully diversifying and building resilience.

District council economic development manager Peter Harris says while attracting talent in the likes of the tech sector is important, diversification will also need facilities to train, and retrain, locals.

‘‘That’s a really important part of it because what we don’t want to do is see that a business sets up and they import their talent, and they sort of sit separately to the community. We want people to see that there’s a way into that if they want to go there.’’

There is work under way with the University of Otago, Otago Polytechnic and the Southern Institute of Technology about what new training could be offered in the area, and Mr Harris expects some exciting announcements in the future.

‘‘There’s some interesting things in the wind.

‘‘It’s almost a bit of chicken and the egg, they want to know ‘well what’s the industry demanding?’ and we’re going ‘well we actually need to grow the industry before the industry’s got the critical mass to demand stuff’.’’

Perception is also going to be key to the recovery.

Queenstown has long been marketed as a tourism hot-spot and playground for the wealthy — the image of it as a family-friendly place to live and work will have to be sold better.

Not only to an international audience, but also to Kiwis.

Anti-Queenstown sentiment reared its head during the pandemic as people grappled with the notion that a place that had revelled in the good life for so long was suddenly in dire straits, begging for taxpayer support.

To say Mayor Jim Boult is unimpressed with the behaviour driven by that sentiment is an understatement.

‘‘A lot of people forget that this district, per head of population, contributed more to New Zealand’s economy than any other part of New Zealand for a long, long period of time.

‘‘I was frankly sickened by some of the comments, social media, letters to the paper, ‘oh Queenstown’s getting its just deserts’, that’s just pathetic.

‘‘Those people need to go and have a hard look at themselves. Bathing in other people’s misery is unacceptable.’’

The Government, however, is not one of the naysayers. It recognises the situation the town finds itself in and Queenstown will not bear the brunt of the costs associated with diversification entirely on its own.

The Government will give a $22.5million loan to Remarkables Park.

Limited, which will match it to create a 6000sqm research and innovation hub with offices and meeting rooms at its Frankton site.

The Government has also created a $20million fund to help underwrite new businesses in the area to support diversification.

Tourism Minister Stuart Nash has seen preliminary business cases for some projects and has asked for full business cases to be drawn up.

There has been talk about proposals for small film studios, which would align with larger film industry projects such as the massive Silverlight Studios development near Wanaka.

Mr Nash says the rejigging of Queenstown’s economy never would have worked if the Government had gone in and said ‘this is what you’re going to do’.

‘‘It always had to be working with a group of key stakeholders to ensure the projects that we were going to fund or help fund were the ones that were right for Queenstown as articulated by the people down there.’’

It will also not happen overnight.

Benje Patterson believes it should be treated akin to large-scale infrastructure investment. Results will not start to be seen for at least five to 10 years.

‘‘Now it’s not to say market forces can’t begin to diversify already on a smaller scale. So what we’ve seen since Covid is people have been reflecting on their lifestyles and they’ve realised through lockdowns that they can operate their businesses anywhere in the country, and we’ve got opportunities in this district for businesses to relocate, existing businesses to relocate, [and] we’ve also got opportunities for larger businesses in New Zealand to open up satellite offices in the district.

‘‘The benefit to them of doing that is taking advantage of the lifestyle that we have, so that they can retain their staff long term.’’
All of this isn’t to say tourism is dead and buried in Queenstown — far from it, in fact.

New Zealand is set to reopen to the world this year. Visitors will return, and it is highly likely Queenstown will host many of them.

There is hope that when that happens, the focus will shift from volume to value.

Mr Nash says a survey done prior to Covid suggested 70% of Queenstowners thought there were too many tourists.

Also, a survey of residents released this week showed 43% of respondents wanted tourist numbers managed, and 32% would like to see a decrease in Pre-Covid tourist numbers.

Mr Nash it was a real recognition that what was happening was unsustainable.

‘‘I believe that tourism was on the cusp of losing that social licence, and that would have created immense problems I think for the industry and for our brand going forward.’’

He cites an article he read in international media about the changes in the way people will travel post-pandemic.

For example, business travellers who usually paid full fare and therefore subsidised budget tourists would not be taking as many long haul flights as they previously had.

‘‘So what this article was saying is that airlines are going to have to think differently about how they price and how they target.

‘‘I do think for four or five years after the borders fully open, the cost to come to New Zealand is going to be higher than it was pre-Covid and so we have got to make sure that we really deliver on expectations of these high value tourists who will spend a lot of money to get here.’’

He steals a phrase from US President Joe Biden, which, while perhaps cliche, does seem to sum up the approach to the future of the resort.

Queenstown wants to ‘‘build back better’’.

- This article was written by our Southern Issues reporter, an investigative role funded by the Public Interest Journalism Fund. As part of the role, journalist Daisy Hudson will take an in depth look at issues affecting Otago and Southland communities. She will examine topics and trends in all areas of Southern life, from local government to the economy, education to housing, health to infrastructure and everything in between. This work will expand on the Otago Daily Times' commitment to bringing you the stories of our people and the matters that affect them.

- Photos by Craig Baxter

- Graphics by Mat Patchett