Focus On The 2011 Rugby World Cup

As ACT’s Tourism Spokesman I am looking forward to the 2011 Rugby World Cup and the opportunity that it presents to New Zealand, not only to showcase our country to a wider audience as a premium tourist destination, but also to the added boost that it will bring to our economy as rugby fans pour into our country from around the world. I am sure that after enduring these recent tough times, many business owners are looking forward to the potential tourist dollars with anticipation.

The hype leading up to the cup has stepped up a notch in the past month or so, and in the past week the spotlight has been turned onto the issue of accommodation and the high rates being charged by some businesses.

Let’s get this straight – we all know that accommodation is going to be in short supply during this period, especially in the last three weeks of the competition with these matches being held in Wellington, Christchurch and Auckland. It is not surprising then that accommodation prices will be higher than usual. However, while the majority of businesses have increased their prices, there are a few which have lifted their prices to what is seen to be excessive levels – some by over 700 percent. This has angered many and has seen calls for Government intervention and price capping in order to protect New Zealand’s image.

Although this is a risk, ACT does not believe that it’s the Government’s role to tell individual businesses what they can or cannot charge or to impose price ceilings. This is the role of the free market and ultimately business owners will pay the price for charging too much.

The higher the prices become, the stronger the signal will be for other suppliers to enter the market. Entrepreneurial home owners who see stock-standard hotels charging $700 a night will be motivated to put their house up for rent or to maybe rent out their front lawn to campers or motor-home users.

This will increase the supply of accommodation available and the businesses that thought they could get away with charging excessive prices or imposing lengthy minimum stays will find themselves missing out if they misread the market and get too greedy.

In an op-ed piece in The New Zealand Herald (May 13) Martin Sneddon, Chief Executive of Rugby New Zealand 2011 gave businesses a friendly warning when he cited the 2010 Football World Cup in South Africa as a way not to do business. Originally tipped to have 450,000 visitors, excessive pricing has seen many tickets left unsold and visitor numbers have been revised to a mere 200,000. Many businesses hoping to get a slice of the tourist pie have missed out.

I believe that New Zealand business owners will not make the same mistake. There are many options available - from hotels and holiday homes to campervans and home stays, but whatever it is, the seller will ultimately have to match their price to that which the buyer is willing to pay. If they do not, they will miss out. So, while we may see a few opportunists out there trying to make a quick buck, I think most businesses who realise they are charging too much will quickly revise their prices.