Growing pains in Queenstown as the Government pushes for more tourism

Thursday, 16 October 2025

On Thursday, The Post and Infrastructure NZ are hosting Shaping Queenstown: The 2025 Tourism and Infrastructure Summit with support from Air New Zealand. Speakers include Tourism Minister Louise Upston and former Prime Minister Sir John Key. You can watch the discussion live on The Post from 6pm.

Sir John Key and wife Bronagh were recently on a Ritz-Carlton cruise ship in the Mediterranean, and Key was struck by the age of his fellow cruisers.

“We're in our early 60s, and we were old. It was a luxury cruise ship and the average age, I think, was 48,” he says. “It was a young audience on that ship.”

Key, former prime minister and self-confessed globe trotter, tells the anecdote to make a point: the world is changing and, with it, so are preferences for leisure.

If New Zealand wants to “tap into that” and maintain the tourism economy, it needs to “keep building out what we’ve got”, Key says.

But, “the reality” is this comes with “a lot of pressure on some infrastructure of critical tourism places”.

How can New Zealand afford such tourism? The former tourism minister has some ideas, including a proposal that was contentious when he was in power, and remains contentious for this Government - a bed tax.

“There's no simple answer, but you do need to find an answer.”

Faced with tough economic conditions and sluggish growth, the Government has this year looked to the tourism sector for an answer.

The results have so far been encouraging. In August, there was a 7.5% increase on visitor numbers for the same month last year.

But returning to pre-Covid tourism numbers comes with growing pains in the crown jewel of New Zealand’s tourism crown - Queenstown.

Beneath the national figures, the alpine town is exceeding its pre-Covid tourist numbers, and this means pressure on roading, water and wastewater, electricity and healthcare.

“Queenstown is a very high growth part of New Zealand … New Zealand relies on it as a gateway to the country,” says Nick Leggett, chief executive of Infrastructure NZ.

Infrastructure NZ and The Post are on Thursday evening holding an invite-only event for decision-makers, iwi, industry leaders and political figures called Shaping Queenstown: The 2025 Tourism and Infrastructure Summit, to explore how New Zealand can sustain and grow its tourism sector.

“We're drawing attention to Queenstown, and there are other parts of the country, places like Northland, that have this problem as well,” Leggett says. “There's an opportunity to, really to do this better.”

Key and Leggett are not alone in pushing for revenue tools to help fund sustainable infrastructure.

The idea of a bed tax has long been discussed around Queenstown, as well as in Auckland, where Mayor Wayne Brown and business leaders have campaigned on the issue.

Mat Woods, chief executive of Destination Queenstown and Lake Wānaka Tourism says tourism operators in his region have bounced back fast as visitor numbers have grown.

“If you think about unemployment levels … we're hearing a lot around, ‘move to where the jobs are’. Well, the jobs are actually in Queenstown and Wānaka.

“However, the infrastructure isn't here to support necessarily all of those people coming here.

“How can 52,000 residents fund the infrastructure for three million visitors?”

Road congestion

Congestion on the roads was the main infrastructure concern for residents, particularly the Frankton-Queenstown route, which Woods says has become 8% busier each year.

Some roading work is already underway. The New Zealand Transport Agency (NZTA) has undertaken a $250 million replacement of the so-called BP roundabout in Frankton which connects State Highway 6 with Frankton Rd, which travels the edge of Lake Wakatipu to central Queenstown.

The current roundabout is “at capacity” during peak times, and the replacement traffic light intersection will be completed in 2028.

A more “outside the square” idea, as Woods puts it, is a gondola to serve as a public transport option, creating a 20-minute ride from the airport to the centre of town.

“It's equivalent to a bus a minute. So in essence, you're basically building another Frankton Rd … It’s actually a reasonably cheap piece of infrastructure at $250m, compared to building a road, and quite fast to install,” Woods says.

Among the specific objectives of the regional deal being negotiated between the Government and the Central Otago councils, according to a publicly-released Cabinet paper, is an “offline Mass Rapid Transit to help overcome congestion” in Queenstown.

According to Woods, questions about the gondola project include whether it’s a private-public investment, whether NZTA regards it as infrastructure like a road, and whether the regional council will subsidise it like a bus route.

Southern Infrastructure Ltd is behind one of the proposals for a gondola system spanning the Frankton to Queenstown route.

The firm’s chief executive, Ross Copland, says $250m is the estimated cost for this initial stage of a gondola network, and the company was currently evaluating two tenders from global ropeway builders which want to be appointed “preferred supplier”.

Entrepreneur Rod Drury is an investor in the project and the company planned to file an application to be considered under the Government’s fast-track scheme next year, which could deliver all the necessary resource consents in one decision.

Copland says there has been positive interest from both local and central governments, and the gondola project would “deliver congestion relief Queenstown residents and visitors are anxiously waiting for”.

Other growth issues

Beyond transport, there are plenty of other growth issues facing Queenstown in particular.

Discharging treated sewerage into the Shotover River is “not great New Zealand Inc., 100% Pure,” says Woods. So wastewater infrastructure is high in the agenda.

Queenstown will also need greater connection to the national electricity network as the population continues to grow. Access to healthcare and the reliance on hospitals in Dunedin and Invercargill will need to be resolved.

As with Key and Leggett, Woods says a key aspect of any regional deal should be a bed tax.

Such a tax - which could amount to a 2.5% levy on the cost of each hotel night -- may generate $25m a year, which he says is not a “huge amount” but could be used to build out other infrastructure.

“The bed tax was actually mooted in Queenstown in 2019 … It went out for vote around the election time, and 86% of the district supported it.

“It was about to be implemented with central Government, and then Covid came along, so it just got put on the shelf.”

Despite efforts to take the tax off the shelf, the Government has repeatedly shot down the suggestion.

The tourism minister says the Government’s primary focus for tourism is not supply, as in how much tourism can be served, but demand.

Louise Upston joined Prime Minister Christopher Luxon in travelling to Shanghai and Beijing earlier this year, and last month returned to China with a delegation aimed at further promoting New Zealand as a tourism destination but also understand the local market.

“There's lots of things underway, and I'm really optimistic that those numbers will start increasing,” she says.

Upston earlier this year published a “Tourism Growth Roadmap”, a one-page document which maps out broad objectives for the years to 2034.

The aim for the 2025-26 year is to return to 2019 levels of international visitors to New Zealand, a figure currently sitting at 88%.

As for government spending, the vast majority is to go towards demand initiatives - international marketing, major events. Some $7.4m is directed towards projects to improve tourism supply, such as $4m for Milford Rd corridor improvement.

The plan does not outline specific revenue mechanisms to support tourism hotspots facing supply challenges. Objectives for the medium term, 2026-2029, include ensuring regions and communities are equipped to manage and invest in the tourism system, and that central, local and industry funding is effectively structured for the future.

Upston points to regional deals being the mechanism for this.

Bed tax levy

Why the hesitation on a bed tax?

Key says all governments have an “allergic reaction” to the idea.

He wanted to implement such a levy when he was tourism minister, but says he was talked out of this by Finance Minister Bill English and Economic Development Minister Stephen Joyce.

As with the current Government, Key’s National Party had campaigned on “no new taxes”, so English and Joyce convinced him it was not worth breaking the promise.

They found the money their tourism minister needed from elsewhere.

However, Key says there’s a philosophical argument to make.

More money can always be found on an ad-hoc basis, but tourism will be a part of the economy in the long-term.

“The question is whether we can really deliver on the promise that we have available to us.”