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Hobbit returning to New Zealand finds that Middle Earth is expensive

In a fake cave in a Wellington suburb, tourists pose by a statue of Gandalf, a hero of the Lord of the Rings films that boosted New Zealand’s economy by more than $580 million (R5 billion). The country needs the wizard’s magic more than ever when he returns next month.

As the capital prepares to host the world premiere on November 28 of The Hobbit: An Unexpected Journey, the first part of a prequel to the Rings trilogy, New Zealand faces economic hurdles that weren’t there when the first movie from the series of JRR Tolkien’s books opened 11 years ago.

New Zealand cashed in on its role in the Rings film trilogy, in which Elijah Wood played the character of Frodo Baggins. Now the country hopes to do so again with the Hobbit film trilogy, especially since it has come under pressure from a high exchange rate, declining tourist numbers and the need to rebuild Christchurch after earthquakes damaged the city centre. Photo: Reuters. Credit: REUTERS

“The wind is not blowing as strongly for us as it was then,” said John Yeabsley, a senior fellow at the New Zealand Institute of Economic Research, who co-wrote a report for the government on the Rings effect. “We won’t do quite as well.”

The currency has doubled in value, hindering exports and deterring tourists that came in droves after the earlier films. In the capital’s business district, 15 percent of offices lie empty. A 45-minute flight south in Christchurch, the nation’s third-biggest city – gateway to many of the movies’ locations – is rebuilding its ruined centre after two major earthquakes.

The government is hoping the Hobbit movies will reverse a 10 percent drop in tourist spending since 2008 and reinvigorate a film production industry that has increased about 10-fold since New Zealand film director Peter Jackson began using the country’s scenery to recreate Tolkien’s Middle Earth in 1999.

Scenic lure

Tourism is the nation’s second-largest earner after dairy products, contributing NZ$9.7bn (R67.4bn), or 17 percent of all exports in the year to March 2011, according to Statistics New Zealand. The Rings trilogy introduced global audiences to the nation’s mountains and forested valleys, with 7 percent of visitors citing it as influencing their trip in a 2004 survey, according to Tourism New Zealand.

“One would hope that the Hobbit movie will give us a further boost to the extent that people will forget a little bit about the value of the currency and everything else, and still come,” said Gary Tate, 58, a hotelier in the South Island.

Tate owns Minaret Lodge, a five-star hotel in the Wanaka skiing region, near the location used for Gandalf’s ride to the city of Minas Tirith in the Rings films. While the lodge has a popular Hobbit-themed room, bookings have fallen about 20 percent in the last year, according to Tate.

Jackson’s fourth film of the exploits of hobbits, wizards and elves in Middle Earth was filmed from March 2011 to July in the country. He used locations such as Mount Ruapehu in the central North Island to tell the tale of the quest by Bilbo Baggins and a company of dwarves to recover treasure from the dragon Smaug.

Eleven years ago, when Jackson first showcased New Zealand in The Fellowship of the Ring, the local dollar was worth about 40 US cents. Two years later, as a red carpet ran the length of Wellington’s nightlife strip Courtenay Place for the premiere of Return of the King, the final Rings film, which went on to win Best Picture at the Academy Awards, it was 65c.

It bought 82.13c at 8pm in Wellington, the best performance this year among the Group of 10 currencies tracked by Bloomberg.

“It is certainly one of the significant factors that determines how much money people are going to spend and where they’re going to go,” said Grant Webster, the chief executive of Tourism Holdings, which leases campervans to tourists, and built a mobile editing trailer for Jackson.

New Zealand hoteliers haven’t just had to deal with a strong currency. International guest nights in the Canterbury region fell 26 percent in the year to July. Many hotels were in the Christchurch city centre, now a demolition site after the earthquakes in September 2010 and February 2011 caused NZ$30bn of damage.

Visitor numbers to New Zealand from traditionally strong markets were falling, with the UK down 10 percent on a year ago and the US by 4 percent, said Statistics New Zealand.

Without the new Jackson films, the situation could be even worse, said Dominick Stephens, the chief economist at Westpac Banking. “In the absence of The Hobbit, visitor arrivals would be less than even we’re forecasting now,” he said. “The exchange rate would still be high, fuel prices would be high and the global economy would be weak.”

Prime Minister John Key, a former head of foreign exchange at Merrill Lynch, promised Warner Bros Productions as much as $25m in subsidies in 2010 to film the Hobbit movies in the country after the studio demanded incentives to offset the currency’s gain.

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“It certainly was the right decision,” said George Hickton, the former chief executive of Tourism New Zealand and now a director of Hobbiton, where tourists can visit the hobbit village movie set. “Having these films made in New Zealand is critically important. They’re what I call three-hour television commercials.”

Tourism New Zealand in August began a “100 percent Middle Earth” advertising campaign that compares the nation’s attractions to scenes in the Tolkien stories.

The country that made bungee jumping famous also has other attractions, such as vineyards, geothermal hot pools and skiing. It last year hosted the Rugby World Cup, which attracted more than 130 000 visitors over six weeks and was won by the nation’s All Blacks rugby team.

“People don’t want to come here just to see the hobbits’ little huts,” said Dave Brennan, the owner of Kotane, a Christchurch-based Maori culture tourism business. “It’s part of the trigger, but it’s not the be-all and end-all.”

Key was due to fly to Los Angeles last week to boost his nation’s film industry, attending a dinner with Hollywood studio chiefs, hosted by James Cameron and Jon Landau, the director and producer of Avatar, which was partly made in New Zealand. The visit “is about jobs for New Zealanders”, Key said.

“It’s not easy at the moment when you’ve got a high exchange rate, you’ve got a depressed international environment, when your lifeblood is whether people come from overseas to visit,” he said at a conference in Wellington on Tuesday.

The screen industry contributed almost NZ$3bn to the economy last year, according to Statistics New Zealand.

The country’s production spending for film and television totalled NZ$307m in 1998/99, according to a 2002 report by consulting group NZIER.

New Zealand’s economy needs more than Jackson’s talent to propel growth. The jobless rate rose to 6.8 percent in the second quarter, the manufacturing industry is shrinking and the government is selling about NZ$6bn in assets to cut debt and rebuild Christchurch. Growth may fail to meet the 0.6 percent target for the third quarter, the Treasury Department said on Monday.

“There is no magic bullet out there that’s suddenly going to turn New Zealand into a high-growth economy,” Cameron Bagrie, the chief economist at ANZ New Zealand, said. The nation needed support “from multiple sectors”.

The Rings trilogy contributed NZ$352.7m to the film industry over about four years, according to the NZIER report. With the flow-through tourism spending benefits in just 2004, the three earlier movies may have had a combined boost of at least NZ$700m, according to Statistics New Zealand.

“It’s a business that governments seem to want to attract,” said Joe Letteri, the Oscar-winning effects supervisor at Weta Digital who created the slimy, half-naked Gollum creature for the films. “There’s a lot of hi-tech that goes with it, and there’s a lot of things that spill out to the rest of the community.”

Weta Digital, which is co-owned by Jackson, is part of the campus-style village of studios in the Wellington suburb of Miramar. Cameron, who bought more than 1 000 hectares of farmland an hour’s drive away, would “almost certainly” make two sequels to Avatar in Miramar, he told the New York Times in July.

Four years ago, Jackson’s studio opened The Weta Cave, a museum and memorabilia shop that houses the Gandalf statue and sells handmade swords for as much as $8 000.

Tim Launder, the general manager of Weta, said he expected visitor numbers to rise by about 50 percent after the first Hobbit film comes out.

“People fly down from America or Europe to come and pick up their swords and scabbards, with tears running down their cheeks,” he said. – Bloomberg

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