The real reason retail spending has plunged

Tuesday, 23 September 2025

Consumers have been spending any additional money they have on travelling overseas.

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With the cost of living on the rise, it seems Kiwis have been putting any spare income into funding their travels.

Retail spending on apparel and durables, things like hardware, furniture and appliances, has been down much of the year. But there has been a concurrent increase in spending on overseas travel and other experiences.

Flight Centre NZ managing director Victoria Courtney said 2025 so far had been a lucrative year - and one of the biggest - for the travel industry since the pandemic.

The number of Kiwis leaving the country to travel is at an all-time high, says Flight Centre NZ managing director Victoria Courtney.

“Whilst a lot of other countries in the world see travel as a discretionary spend, New Zealanders never have”, Courtney told The Post. “Even though other spend brackets may be pulling back, they still value their travel spend so much - and they'll prioritise travel over other luxury or discretionary items.”

Flight Centre data showed consumers have been spending “more wisely” on travel, however, opting for more affordable destinations and packages, as well as cruises, for the perceived value.

“We’ve seen some shifts in destination. Asia sales are up significantly, as the dollar goes a lot further in places like Thailand and Indonesia. We've seen some good growth there, and consumers are also taking advantage of increased access to places like Japan, Vietnam and South Korea.

“Pre-Covid, Kiwis may have travelled several times a year, [now] they're not travelling as many times, but making the most of the trips when they are going; maybe going for a bit longer.”

Sales to Asia had boomed this year, and current sales to Europe, for the next European summer, had been very strong, as were the traditional strong sales to Australia and the South Pacific, Courtney said.

“Kiwis are definitely still prioritising travel.”

Latest figures

The latest retail spending figures from Worldline, which processes more 75% of the country’s electronic transactions, shows spending at housing-related merchants was down 4.9% in August, compared with the same time last year.

The data showed an uptick in spending on hospitality - while Stats NZ said it was up 1.4% or by $21 million in August.

Stats NZ’s electronic transaction data for the same period shows spending increased by 0.9% in August, the third monthly rise in a row, which Westpac economist Satish Ranchhod said signalled the beginning of an early stage recovery in spending.

Infometrics chief forecaster Gareth Kiernan said spending on recreation and culture was 25% above where it was pre-Covid, as was spending on household utilities and imports of low value goods purchased directly by households - the category grouping spending from the likes of Temu.

Stats NZ does not have transactions data on travel industries, so it was hard to identify any spikes in spending in this category. However, Kiernan said the biggest proxy for a rise in Kiwis travelling overseas was short-term overseas departures - which had been growing, and now at 99.6% of pre-Covid levels.

More than 3.2 million New Zealanders left the country for overseas travel over the last 12 months. Meanwhile the number of international visitors coming to New Zealand for holiday is at 87% of pre-Covid levels.

“Prior to Covid, we saw a long term trend where, as people become more wealthy, as peoples’ incomes rise, they do tend to spend more on services, so I suspect that trend will continue as the economy improves [and mortgage rate relief continues],” he said.

“While there might be a bit of a cyclical pick up in spending on some goods going forward as the economy improves, it is that sort of longer-term trend towards services, and travel which will be one part of that we would expect to dominate.”

Courtney said she believed part of the strong spending on travel was in part due to a hangover of pent-up demand from over the pandemic years, and there had been a marked uptick in spending on travel from young families again.

“We've certainly seen with those mortgage rates dropping, more Kiwi families being able to travel in this past six months or so - that customer demographic is coming back strongly.”

Cruising up

Despite cruise lines pulling out of the New Zealand market, Kiwis are still booking cruises in huge numbers - and willing to travel outside the country to embark on a cruise.

While winter had been particularly slow for retailers of goods across furniture, appliances and hardware, there remained strong interest from people wanting to get away overseas, and cruising had hit the spot with many.

Globally there were more cruises available and lots of options. Bookings for cruises had been the biggest growth area for travel bookings post-Covid, with strong growth across bookings for European river cruises and Mediterranean cruises, as well as those that departed from Australia.

However, even while there were lots of cruises on offer around the world and interest and bookings for cruises from Kiwis is at an all-time high, there had never been fewer cruises out of this country.

Royal Caribbean floats out Legend of the Seas.

Disney Cruise Line is the latest cruise line to leave New Zealand, announcing it would not to return after this upcoming season, following the departure of Carnival-owned P&O Cruises.

Courtney said it was due to the rising costs for cruise lines to operate in New Zealand, including rising port berthing fees and the cost to have the hulls of ships cleaned before coming into New Zealand waters.

“The environmental requirements that cruise ships are required to undertake to cruise around New Zealand, the international visitor levy and the port charges have all increased for cruise ships over the last few years, and it's a commercial decision for those cruise lines to look at other destinations as more commercially viable for them.”

Cruise lines plan their sailings years in advance of a season, so it would take years to get those companies back into New Zealand waters, she said.

“For the New Zealand economy and the New Zealand tourist economy, those cruise lines did provide an awful lot of value. And certainly for us, as predominantly an outbound seller, what we often found was Kiwis would book a close-to-home cruise before they would go further afield, and so probably that has made it more challenging for us to continue to keep growing that cruise segment.

“The biggest impact is obviously on the New Zealand tourism economy, which is still suppressed compared to pre-Covid.”