Review of Marlborough Economic Development, Toruism and Events

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REVIEW OF ECONOMIC DEVELOPMENT, TOURISM AND EVENTS SERVICES

Final Report for Marlborough District Council

March 2018

CONTENTS

Review of Economic Development, Tourism and Events Services 1

Preface 7 Executive summary 8

Introduction 15 Scope 15 Approach 16 Current situation 21 Economic development services and investment in Marlborough 21 1. Are the right economic development activities being delivered? 28 1.1 What services/activities should be delivered? 30 1.2 Are there any gaps in economic development services? 50 2. Are services effective and providing value for money? 55 2.1 What outputs are being delivered? 58 2.2 What is known about the impact and effectiveness of existing services? 68 2.3 The overall effectiveness of economic development activities 101 2.5. Are services delivered cost-effectively? 103 2.6 Assessing whether the benefits of economic development activities exceed the costs 107 3. How should the services be delivered? 112 3.1 Does the existing model need to change? 114 3.3 What arrangements could be effective and efficient options for delivering economic development activities in Marlborough? 119 3.4 What is the recommended option? 125 3.5 What are the key benefits and costs of change? 126 4. How should the improvements be implemented? 128 4.1 Key opportunities and recommendations 128 4.2 Sequencing 132

APPENDICES

Appendix 1 : Marlborough economic and industry trends 133 Appendix 2 : Determining a clear rationale for local government in economic development 138 Appendix 3 : Economic development services in other regions 141 Appendix 4 : Summary of national evaluation evidence 145

TABLES

Table 1. Council economic development areas of focus, activities and resourcing 21 Table 2. Key economic development delivery partner arrangements and services 23 Table 3. Challenges and opportunities identified in Marlborough research, strategies and plans 33 Table 4. Economic development outcomes and major areas of activity 37 Table 5. Consistency of economic development services with key economic opportunities and challenges 40 Table 6. Consistency of economic development activities with appropriate roles of local government 46 Table 7. Outputs from local government funded economic development activities 59 Table 8. MDC economic development KPI measures and results 65 Table 9. Resident satisfaction with Council services 66 Table 10. Business Trust Marlborough KPI output measures 68 Table 11. Business Trust Marlborough client measures 69 Table 12. MRC F&B cluster outcome and output measures 72 Table 13. Destination Marlborough’s marketing activity KPIs 78 Table 14. Achievement of Regional Events Strategy 2013-2016 83 Table 15. Progress with Regional Events Strategy 2016-2019 (goals to be achieved by November 2017) 85 Table 16. Estimated economic impacts from Council supported events (2015/16 to 2016/17) 87 Table 17. Destination Marlborough’s Event KPIs 91 Table 18. Destination Marlborough’s i-SITE activity KPIs 92

Table 19. Smart and Connected sector group priorities and achievements 94 Table 20. Smart and Connected community group priorities and achievements 97 Table 21. Example performance measures 110 Table 22. Economic development delivery arrangements in a selection of districts and regions 118 Table 23. Assessment of options for enhancing the delivery of economic development services 121 Table 24. Potential costs associated with implementing improvements 127 Table 25. Selection of economic development services offered in other regions 141

FIGURES

Figure 1. Local government economic development spend as a proportion of operational expenditure (2015) 25 Figure 2. Local government regional marketing and promotion spend per ratepayer (2015/16) 26 Figure 3. Local government marketing and promotion spend per capita (2015/16) 26 Figure 4. Destination Marlborough’s expenditure 2013/14-2016/17 104 Figure 5. Components of Destination Marlborough’s expenditure 2014-2017 104 Figure 6. Proportion of staff costs to total expenditure across selected RTOs, 2015/16 105 Figure 7. Council marketing investment per guest night, Tier 3 RTOs, 2016 106 Figure 8. Visitor expenditure per dollar of Council marketing investment, Tier 3 RTOs, 2016 106 Figure 9. Example hierarchy of outcomes for destination marketing and management activities 109 Figure 10. Growth in real GDP in Marlborough 133 Figure 11. Compound annual growth in real GDP for Marlborough and New Zealand 133 Figure 12. Growth in employment in Marlborough 134 Figure 13. Compound annual growth in employment for Marlborough and New Zealand 134 Figure 14. Population estimates for Marlborough for different age groups 134 Figure 15. Growth in visitor expenditure in Marlborough over 2009-2016 ($m) 136

PREFACE

This report has been prepared for the Marlborough District Council by Stephen Knuckey from MartinJenkins (Martin, Jenkins & Associates Limited).

EXECUTIVE SUMMARY

What economic development services are being delivered and what investment is being made? The main economic development activities currently being supported by the Marlborough District Council are:  Destination marketing and management (e.g., marketing campaigns and collateral, events facilitation)  Business development and innovation support (e.g., support for mentoring, R&D projects)  Sector and community development (e.g., Smart and Connected industry and community groups and related activities). Total Council investment in economic development activities was around $1.7 million in 2014/15 and has grown to around $2.1 million in 2016/17. Around 55 percent of the investment in 2017, $1.16 million, was to support activities delivered by the combination of Destination Marlborough, Marlborough Research Centre and Business Trust Marlborough. Overall, the Council is investing a reasonable amount of resources in economic development activities:  Council investment represented around 2.0 percent of total local government operating expenditure in the region in 2015 and equated to close to $41 of economic development spend per capita. This was close to the average level of Council investment in economic development activities across New Zealand (2.1 percent of operating expenditure and $36 per capita).  The Council’s investment in regional destination marketing activities through Destination Marlborough is also around average, at around $20 per rateable property and $12 per capita in 2016, compared to an average of $23 per ratepayer and $10 per capita across New Zealand.

Are the right economic development activities being delivered? Is there a clear rationale for local government involvement? Our assessment is that the broad types of economic development supported by the Council are consistent with the identified opportunities and needs facing the region and are generally supported by evidence. For example, activities have focused on improving the attractiveness of the region’s town and community centres, connecting local businesses to R&D expertise and growing business support services in the region, growing the number of events, and diversifying the region’s economic base. However, there are two challenging issues, which the Council and delivery partners are aware of and beginning to address, that will require greater emphasis in future:  Growing, attracting and retaining skills and talent  Visitor product and experience development. In part, this reflects that Smart and Connected is based on a bottom-up process to engage with sectors and communities to identify priorities that impact on them. The industry and community groups established to date have not yet emphasised skills and talent issues, although the Visitor Growth Plan has identified destination management as an area that needs to be addressed in future. The Council has also been engaging with the wine industry about the skill demands it faces.

There are also clear rationales for the Council supporting the majority of activities that are being delivered and services tend to be appropriately focused on facilitation, information provision and addressing collective action issues. However, the long-term role for the Council in funding research projects through the Marlborough Research Centre (MRC) may need to be reassessed given the support being provided for the Research Institute for Viticulture and Oenology (RIVO). The Council should discuss the future mix of innovation activities with MRC once RIVO is established. Economic development activities have grown progressively as Smart and Connected has been implemented. The ‘Top of the South’ economic action plan that has been proposed with central government provides an opportunity for the Council to ensure that the investment going into different economic development activities reflects the relative importance of different opportunities and challenges. Several stakeholders said they would welcome a process to determine what the economy should aspire to over the long-term and how economic development activities could support the aspirations. We believe the process for establishing and reviewing Council and delivery partner economic development priorities and for determining the mix of investment and activities can be improved by:  Moving beyond the Smart and Connected framework and developing an overarching economic strategy and plan to shape the priorities for the region’s economic development investment and the related activities of the Council and its delivery partners.  Holding an annual strategic workshop or forum to review economic issues and opportunities facing the region, what has been achieved through economic development activities over the year and whether a change in emphasis and activity mix is required. This would involve a range of economic development partners and stakeholders (e.g., the Council, industry representatives, iwi representatives, community representatives, central government).  Council staff having discussions with key delivery partners early in the planning cycle each year about priorities for the year, the mix of activities to achieve these and related performance measures. These should form the basis of clear funding agreements or business plans (as appropriate) with each agency.

Are there any gaps or overlaps in services? Economic development activities supported by the Council and its delivery partners (e.g., Destination Marlborough, Marlborough Research Centre and Business Trust Marlborough) cover most of the spectrum of economic development services offered in other regions, including destination marketing and management, business development, industry development support, and town and community development initiatives. However, Councils and economic development agencies in other regions are becoming increasingly active in:  Skills and talent initiatives, such as talent attraction campaigns, job-matching websites and youth into employment schemes. These activities are relevant to Marlborough given the aging population and skill demands already facing some industries (e.g., wine, construction).  Supporting communities and business to undertake feasibility studies and business cases on new tourism products and experiences and co-investing in these attractions when there are strong cases. These activities are important to not only attract visitors to the region but to also keep them in the region longer and spending more. They are also relevant as product development is a major theme in the Smart and Connected Visitor Economy Growth Plan. The Council should explicitly consider these areas of economic development in any future economic strategy and action plan. The Council will also need to continue to work with iwi/hapu in the region to ensure that economic development activities and services are adequately connecting Māori to networks and resources to support their aspirations.

Positively, there is little overlap in the delivery of economic development activities between the Council and its three major delivery partners. Although there are activities where the Council and delivery partners are both operating, such as marketing, events and international linkages, our observation is that generally the roles tend to be complementary rather than competing. Indeed, there are several examples of joint economic development work across the organisations in these areas. In addition, stakeholders consulted indicated that economic development activities delivered by the Council and its delivery partners have been generally well coordinated with other organisations delivering related services. A large range of activities and projects have involved joint work between the Council’s delivery partners and other organisations such as Destination Marlborough’s marketing efforts with Tourism New Zealand, Wine Marlborough and the Port of Marlborough; MRC’s relationship with Massey University and Plant & Food Research; and Business Trust Marlborough’s working relationship with the Marlborough Chamber of Commerce. The exception appears to be a duplication of marketing and community development activity that is occurring in Picton across multiple stakeholder organisations, including the Picton Smart and Connected Group supported by Council. Rationalisation of the groups’ activities through a facilitated process would be desirable to improve effectiveness and efficiency.

Are existing services effective and providing value for money? The Council and its key delivery partners are delivering a large range of outputs and reaching a large number of organisations across economic development activities. The Council has achieved positive but somewhat mixed results on its economic development key performance indicators over 2014/15 to 2016/17. Resident satisfaction with regional development services and tourism services is good but not markedly high. Satisfaction with MRC is higher. Positively, both MDC and Destination Marlborough have been achieving their business/work plan targets each year. However, high-level performance measures do not provide a good sense of how the collective economic development work programme is performing. As is common with economic development activities across regions, there is limited hard or evaluative information on the impact of these activities in Marlborough, with the exception of major events. Although we cannot make a definitive assessment, our judgement is that economic development activities are generally effective and that the benefits generated by the activities are likely to outweigh the costs. This is on the basis that:  Business Trust Marlborough has grown its level of client engagements, referrals, mentor matches and mentors over the last three years.  Relatively high proportions of businesses accessing Business Trust Marlborough support have been satisfied with the service and consider that the service has helped improve their business knowledge.  There are several examples where the Smart Business Marlborough advisory service of the Council has made a difference to business decisions and developments.  The food and beverage innovation cluster has generated a range of new activities for the region, including the Premium Foods for China initiative and Massey University expertise working with local companies. The majority of cluster members indicated that mutual benefit was gained from the cluster.  MRC supported research projects have leveraged significant co-funding and resources from other organisations and have enabled better management decisions based on the research.

 The development of the Ningxia relationship has facilitated wine industry, research and education linkages for local organisations.  Specific marketing initiatives implemented by Destination Marlborough have resulted in uplifts in visits and referrals.  Industry contributions to Destination Marlborough’s activities have increased over the last three years, which suggests that the private sector values the activities and considers they are effective.  The vast majority of the goals and related actions of the Regional Events Strategy 2013-2016 were completed, and good progress is being made on the actions in the updated 2016-2019 Strategy.  Events supported through the Commercial Events Fund are achieving good outcomes in terms of visitor numbers and spend from outside the region and the estimated return on investment from some supported events is very high.  The region has gained market share of business events since 2014 and the number of delegates and delegate days has grown strongly over the same period.  Stakeholders rate the events advisory service of the Council highly and there are several examples where the role has made a real difference to the success of an event.  A national study suggests that i-SITEs in Marlborough are facilitating relatively high levels of visitor expenditure compared to i-SITEs in other smaller regions.  Smart and Connected industry groups have resulted in some projects that otherwise would not likely to have occurred and have improved industry relationships with the Council, resulting in more constructive dialogue and input on environmental and planning issues.  Smart and Connected community groups have delivered a range of community improvement projects. We have also found several areas where the effectiveness of activities could be improved or where better information is required to assess impacts:  There is marked variation in the levels of community satisfaction with economic development and tourism services across different locations, suggesting there is variation in the reach and impact of services.  There is limited information collected about the effectiveness of the information and advice provided through the Smart Business Marlborough advisory service and the outcomes resulting from the service.  Destination Marlborough’s digital and social media performance was low relative to comparable RTOs when last benchmarked.  As noted in the recent review of destination marketing activities, stakeholders consider that the region has too many brand messages, which confuse the visitor value proposition, and that these need to be integrated.  The quality of Commercial Events Fund reporting is variable and further guidance is required to ensure that consistent information is provided on the impact of the funding post-events.  The Council needs to clarify expectations about how it will engage with Smart and Connected Groups and to be upfront and transparent when working on issues that impact on the relevant sector or community.  Smart and Connected Groups should have greater opportunities to share information about work programmes in order to identify joint priorities and ways of improving Group functioning.

 Smart and Connected community groups find it difficult to maintain momentum on implementing their plans in the absence of having a dedicated resource to coordinate and drive activities. In the absence of formal evaluation evidence and noting that in some cases it may take years for outcomes to results from interventions, there are no obvious areas of economic development services that should be discontinued. There is also no evidence of major areas of inefficiency in the delivery of services. For example, Destination Marlborough’s expenditure and staff costs have increased over the last three years but so has the level of outputs. In addition, its proportion of staff costs to total expenditure is about average relative to other comparable Regional Tourism Organisations. However, some minor delivery efficiencies may be possible by transferring decision-making on the Commercial Events Fund to Destination Marlborough, and by encouraging Business Trust Marlborough and the Chamber of Commerce to integrate their service offerings and offer a single front-door for business development assistance. In order to improve the prioritisation of investment in economic development in future and better assess outcomes being delivered, we suggest the Council work with delivery partners to develop an output and outcome framework that sets out the logic between the inputs being used, the activities being purchased and delivered, and the desired short-, medium- and long-term outcomes and associated performance measures.

How should services be delivered in future? Determining how economic development activities should be delivered and whether activities should be provided directly by the Council or through delivery partners requires consideration of:  Economies of scale and scope that are possible – economic development services that are targeted at a common client base, aimed at addressing similar issues and opportunities and achieving common outcomes should generally be delivered together to ensure efficiency and effectiveness.  The type of service – including whether a service is significant in scale and potential risk, requires commercial insight, or is straightforward to contract for.  The context – including whether services are of high strategic importance to the Council (i.e., they give effect to key Council plans and policies); whether the Council has a particular advantage in providing the services due to capability or related activities; whether there are existing potential providers of the activities; and/or whether there has been a history of good or poor performance by external agencies. These factors, the identified areas for improving economic development activities, and an assessment of practical delivery options against a range of criteria suggest that a major change in the existing arrangements is not warranted. Instead, we suggest a range of service and process improvements:  The provision of programme management support to, and improved Council engagement with, Smart and Connected community groups.  The integration of destination branding messages and initiatives.  Business Trust Marlborough works with the Chamber of Commerce to provide an integrated. business development service.  Destination Marlborough manages the Commercial Events Fund and has a greater focus on destination management activities. The Commercial Events Fund should be increased in scale.  The development of skills attraction and retention initiatives in consultation with industries.  A facilitated process to encourage Picton community and promotion groups to integrate and rationalise their economic development activities.

 Further engagement with iwi/hapu in the region on Māori economic development. These delivery improvements should be implemented in conjunction with:  The development of a regional economic development strategy and plan for the region, to balance the current bottom-up development of priorities and actions through Smart and Connected with top-down direction setting.  Improved Council and delivery partner engagement in setting priorities and communicating outcomes each year, including through:  An annual strategy forum with a range of stakeholders.  Early engagement between the Council and delivery partners in the annual planning cycle to confirm priorities for the year ahead.  Improved reporting by the Council and partners on economic development activities. This should be based on an agreed output and outcome framework, improvements in the collection of performance information and the release of a summary report on activities each year. The Council should also formally evaluate its economic development activities, based on the performance framework, in 3-4 years. Key potential benefits associated with the recommended changes include:  Improved visitor outcomes over the long-term resulting from increases in event activities, tourism products and experiences.  Increased ability of community groups to implement their plans and hence likely greater commitment to economic development at the local level.  Reduced Council and community costs involved in engaging on economic development matters in Picton.  Greater likelihood that economic development activities will focus on significant, collective opportunities facing the region.  Improved ability to leverage central government resources (e.g., from having an overall plan developed with central government partners).  Relatively little disruption to Council or delivery partner operations and delivery as a result of implementing changes.  Improved measurement of economic development activity performance and impacts and subsequently a better ability to make appropriate changes to resource and investment decisions.  Increased opportunity to identify efficiencies in delivering activities across the Council and delivery partners as a result of earlier engagement each year. Key costs and risks associated with the recommended improvements include:  An increase in Council and delivery partner staff time required to develop and agree on priorities, including participating in the annual strategic forum and early engagement in the planning cycle.  An increase in Council and delivery partner time required to develop the outcome and output framework and improve reporting, including the annual summary report. This may divert resources away from delivery in the short-term and there will be financial costs associated with a new approach and annual reporting.  Time and costs associated with developing the regional economic strategy and action plan.

 Costs associated with implementing the extension to the Commercial Events Fund and programme management support for Smart and Connected community groups.  A limited ability to achieve economies of scale and scope due to continued delivery through multiple partners. In our view the proposed changes should represent a relatively low net increase in costs in the medium-term. Although the changes will entail more funding in the short-term, the Council should work with delivery partners and stakeholders to identify areas where savings are possible and where resources can be reallocated (for example, in relation to branding). Overall, we consider the benefits of the proposed improvements will outweigh the broader potential costs and risks.

INTRODUCTION

In October 2017, Marlborough District Council commissioned a review of its economic development, tourism and events services. This stems in part from the Local Government Act (2002) s17A requirement for Councils to review the cost effectiveness of their arrangements for delivering good quality services on a periodic basis. Under the LGA (2002), good quality services are those that are effective, efficient and meet present and anticipated circumstances (s10(2)). The Council was also seeking to influence the future of its economic development investment through the 2018-28 Long- Term Plan. More generally, although the Council has undertaken a review of destination marketing services in 2017, several economic development activities supported through the Council have not been formally reviewed and it is important to ensure that these services remain relevant and are having the desired outcomes, consistent with the region’s long-term goals and Council priorities. As is recognised in the District’s Smart and Connected economic development framework and related initiatives, although the region has many opportunities for growth in sectors such as wood, wine, tourism and aquaculture and across different communities, it naturally continues to face the challenges of scale, access to skills and connectivity and how to balance growth and maintain its unique environment. It is important to ensure that economic development services are capable of appropriately assisting industry and the community to overcome these challenges and to capitalise on the region’s advantages such as its natural resources, specialised research base and entrepreneurial culture in the economy. Central government is also placing a greater emphasis on regional development and the ability to partner with capable local organisations to deliver national services. The region needs to have the arrangements in place to be able to take up this opportunity.

Scope

The services included in the review are: a) Council delivered activities, including:  Those that support the Smart and Connected Framework, e.g., support for the community and industry Smart and Connected Groups.  Those under the banner of Smart Business Marlborough, such as regional economic information, the Only Marlborough resource base and materials, advisory services for industrial and commercial developments, and support for international and education connections.  The Regional Events functions (e.g., the events coordinator role, implementation of the events strategy, Commercial Events Fund, Follow-ME). b) Council supported activities delivered by external parties, including those delivered by:  Destination Marlborough, which delivers regional marketing initiatives and campaigns, trade engagement programmes, conference attraction activities, i-SITE services, MarlboroughNZ.com and social media activities. The assessment of Destination Marlborough services has taken into account the outcomes of the recent review of destination marketing activities.  Business Trust Marlborough, which provides advice to start-up and small businesses and facilitates access to business mentors and other support.

 Marlborough Research Centre, for example, its support for research projects and the food and beverage innovation cluster.  The New Zealand Research Institute for Viticulture and Oenology (for example, support for the establishment of the Institute).  Education Nelson-Marlborough.

Approach

Our approach to the review involved three main phases and associated analysis, reflecting the requirements of a Local Government Act (2002) s17A review1:

1. Documentation review Our initial review of documentation was focused on identifying the economic development services and activities that should be delivered and the outcomes that are being sought, the services currently being delivered and initial information on reach and impact, and key questions to obtain further information on potential gaps, overlaps, issues and opportunities. Our review of documentation included:  All strategy, policy and accountability documentation that guides the economic development objectives and services of the Council and relevant delivery partners, such as Destination Marlborough, the Marlborough Research Centre and Business Trust Marlborough. This included the Council’s Long-Term Plan and Annual Plans, the Smart and Connected framework and the Council’s Smart and Connected Economic Development Plan 2015/16-2017/18, the Visitor Economy Growth Plan, and the Events Strategy amongst others.  Research and documentation that reports on monitoring and the impact of economic development activities and services, such as Destination Marlborough’s and Business Trust Marlborough’s reports and reporting to Councils, the review of the region’s destination marketing activities, reporting by Smart and Connected Groups, Council resident surveys, and assessments of events. We also reviewed documentation from other agencies that provide and fund economic development services in the region (e.g., Nelson RDA, Business Mentors NZ) to assess collaboration, alignment, overlaps and duplication.  Relevant research that underpins the Smart and Connected framework, such as the innovation and industry stocktake undertaken in 2013. This was to allow us to assess whether services have been focused in the right areas to address key constraints in the economy or to leverage major opportunities.  Research on models of local and regional economic development in other areas of New Zealand. This informed the subsequent analysis of the current services and arrangements in Marlborough.

______1 See, for example, SOLGM (2015). Reviews should include consideration of: the present arrangements (what is being delivered, the rationale for service provision, service performance and costs); identification of delivery options, including delivery by a CCO either wholly owned by the Council or partly owned by the Council, delivery through a contracted private or community sector agency, funding and governance via a joint Council committee, and other practical options; and analysis of options including feasibility, community views and preferences, effectiveness and costs.

The initial review of documentation and research allowed us to develop a framework outlining the activities and services that should be delivered in Marlborough and the outcomes that are being sought, the services currently being delivered, the processes being used and initial information on reach and impact. This enabled us to initially identify areas of alignment, potential gaps or opportunities and helped us to confirm key questions to ask stakeholders during the interviewing phase of work.

2. Interviews To supplement the documentation review, we also met with and/or interviewed representatives of:  The governance (Mayors/Councillors) and senior and operational staff of the Council  Destination Marlborough  Business Trust Marlborough  Marlborough Research Centre  Smart and Connected industry and community groups and workstreams, e.g., from those involved in the wood, aquaculture, visitor economy, Blenheim CBD, Havelock, Picton and Renwick groups, and the Smart and Connected facilitator  Picton and Marlborough Sounds Visitor Economy Group and Picton Business Group  Education Nelson-Marlborough  The Marlborough Chamber of Commerce  Nelson Regional Development Agency  Ministry of Business, Innovation and Employment  Organisations involved in visitor activities in the region (Omaka Aviation Heritage Centre, Scout Jamboree, Garden Marlborough)  Key organisations that influence and have a strong interest in economic development in the region, including Wine Marlborough, Nelson Marlborough Institute of Technology and Port of Marlborough. Questions were based on the initial findings of the documentation review and our analytical framework (see Analysis below).

3. Analysis Our approach to addressing the review focused on four major issues and related questions: 1. Rationale and focus - are the right economic development services being delivered? Assessing this involved consideration of economic and industry trends in the region; key issues and opportunities identified by the work related to Smart and Connected; analysis of the role of local government in economic development; and the Council’s desired objectives and priorities for economic development. It included an assessment of: a. What activities/services should be delivered? i. Are existing services and activities based on addressing clear and well-evidenced problems and opportunities for the region? Are existing services consistent with the Council’s goals and priorities? ii. What economic development activities has the Council committed to purchasing?

iii. Are the problems/opportunities that economic development activities and investment are designed to address still as relevant or require the same emphasis? Are there emerging trends that demand a change in orientation? iv. Is there a clear rationale and role for local government in supporting the existing economic development activities and services? b. Are there any gaps or overlaps in activities and services? i. What activities and services are currently being delivered? What resources are being used to deliver services? ii. How do these match against the activities and services that should be delivered (as determined above)? If any services are not being delivered, why not? iii. How do economic development activities and services in the region compare to other regions? Are there any major differences? If so, why?

iv. Is there any overlap of economic development services across agencies? v. What relationships exist with partner organisations? How well are services being developed and delivered in coordination with other organisations delivering similar services? vi. How does the Council influence the prioritisation and delivery of economic development activities and services? How well are the existing mechanisms working? How do these compare to mechanisms used in other regions? 2. Effectiveness and efficiency – are existing services being implemented appropriately, having the desired impact and providing value for money? This included an assessment of: a. Are sufficient outputs being delivered across the activities and services? Could delivery arrangements (services and governance) be improved? i. How many outputs or activities are being provided or supported? How many participants are being reached overall? How has this evolved over time? ii. How are projects and clients targeted? Are there any barriers to different groups participating? iii. How satisfied are participants with the quality, timeliness and relevance of activities to their needs and the processes to secure support? Are their expectations being met? How do participants rate the compliance costs associated with services? iv. How are core areas of activity governed? Why are these approaches used? Are they effective in providing direction on and monitoring levels of services? Do they help to improve the quality of decision-making? v. How are activities and services monitored and reported on? How is this information used to improve delivery? b. What are the outcomes and benefits from economic development activities and services? i. What is known about the impact and effectiveness of existing activities and services? ii. Are activities and services resulting in benefits to clients, i.e., are they improving business, industry or community access to information, expertise and networks? Are they encouraging new and different behaviours in target businesses, industries or communities? Is there any information about improved business, industry or community performance resulting from services?

iii. What are the broader economic benefits resulting from the services (e.g., improved linkages with other markets, improved profile of the region etc.)? What is known about the potential benefits of these activities and services form other regions? iv. What would have likely happened without Council support? v. Are there any barriers that are preventing outcomes being achieved? How could these be addressed? vi. Have there been any unintended outcomes from activities and services? vii. Are activities catalysing private sector and non-government activity where appropriate and avoiding crowding out? viii. How do the overall benefit of the activities and services compare to costs? c. What are the costs of activities and services and are they being delivered efficiently? i. How much funding, time and associated costs are being invested in different activities? By the Council? By partner agencies? By participants? ii. How have the costs of different activities and services changed over time? Have there been any major unplanned or unexplained variations in costs? iii. Are the costs involved in delivering the activities and services appropriate relative to the levels of support and expected benefits? (e.g., lower costs for those activities that provide relatively little support)? If not, how can these costs be reduced?  Has the level of outputs to inputs improved over time? How does the level of staff costs to operating expenditure compare to comparable delivery organisations in other regions?  Are the current governance arrangements associated with and across different types of support efficient? iv. Is there potential to obtain a higher level of contribution from industry, or existing or potential partners? 3. Opportunities for improving delivery – how should the activities and services (including any areas of improvement) be governed, delivered and supported in future? In order to determine the appropriate delivery arrangements, we considered the following questions: a. Do the existing arrangements need to change? Given the desired services and identified areas of improvement: i. Which activities and services are best delivered together? ii. Are different services best delivered in-house (in Council) or independently (or somewhere along the spectrum)?  Do decisions on these services need to be made close to the Council or at arms- length? iii. Should the level and sources of funding for economic development services change?  Is the proportion of funding obtained from different partners appropriate given the reach and impacts of services?  Is the balance of public versus private investment appropriate? b. What is the appropriate set of arrangements for future delivery? i. What governance, delivery and reporting arrangements are effective and efficient options for delivering the activities?

ii. What are the pros and cons of different options? iii. What is the recommended option/s for delivering economic development activities and services and why? iv. What advantages (including efficiencies) would be possible from the recommended set of arrangements? v. What are the major risks involved in implementing the new arrangements that would need to be managed? 4. Implementation: How could the recommended set of arrangements be implemented (if changes are required)? The prior analysis will have identified the appropriate mix of services and the most effective and efficient model for delivery. To determine how this approach should be implemented, the following have been considered: a. Are there any constraints to making improvements? b. What will be the broad impacts of making changes? c. How could improvements be implemented (including functions, form and funding)? d. What consultation will be required to finalise the approach?

After assessing the current situation and providing an overview of economic development activities in the region, the structure of this report follows the analytical questions above.

CURRENT SITUATION Economic development services and investment in Marlborough

Economic development services and activities in Marlborough are delivered through a combination of the Council and organisations that the Council has funding arrangements with, such as Destination Marlborough, the Marlborough Research Centre and Business Trust Marlborough.

Table 1 provides a summary of the major areas of focus and resourcing of economic development services and activities by the Council.

Table 1. Council economic development areas of focus, activities and resourcing

Marlborough District Council

Vision Over the next decade, Marlborough will become a globally-connected district of progressive, high-value enterprise, known for our economic efficiency, quality lifestyle, desirable location and natural environment. Marlborough will be ‘Smart and Connected’.

Relevant  Economy – Building a strong economy through strategic, thoughtful and innovative use of local resources. Increasing people’s wealth, innovation, entrepreneurship, productivity, flexible labour, community international connections, ability to transform and the ability to connect. outcomes  People – A vibrant community that is flourishing, diverse and inclusive for everyone, presenting opportunities for people to succeed. Quality jobs, increasing incomes, increasing capital wealth, education, life-long learning, diversity, flexibility, creativity, tolerance, engaged and participative.

Areas of Not specifically stated in planning documents, but given the activities supported, areas of focus are assumed to be: focus  Developing the visitor economy  Supporting the growth of key sectors in which Marlborough has an advantage  Supporting improvements in innovation and business capability in the local business community  Supporting improvements in national and international linkages  Encouraging the community to participate in economic development.

Activities 1. Supporting Destination Marlborough, including:  Consumer marketing initiatives  Trade marketing  i-SITE visitor information centres  Business event marketing  Destination management.

2. Facilitating the Smart and Connected industry and community groups, including:

 Wood sector group  Visitor economy group  Aquaculture sector group  Blenheim CBD group (Blenheim Business Association)  Havelock community (Havelock Community Association)  Picton community group (Picton Smart and Connected)  Renwick community group (Renwick Smart and Connected).

Marlborough District Council

3. Smart Business Marlborough activities, including:

 Smart Business Marlborough advice service – coordinating inward requests for support and Council responses for industrial and commercial developments  Providing funding support for Business Trust Marlborough  Infometrics economic and community profile and bespoke research  Only Marlborough website and resource base.

4. Providing funding support for Marlborough Research Centre and innovation activities, including:

 The Food and Beverage Innovation Cluster  Primary research projects  Supporting the New Zealand Regional Institute for Viticulture and Oenology.

5. The regional events coordinator role, including:  Implementing the Marlborough Regional Events Strategy  Managing the Commercial Events Fund  Providing information and advice to major, regional and niches event organisers.

6. Supporting international and education initiatives, such as international education promotion through Education Nelson-Marlborough, participating in trade visits and developing links with China.

FTEs 3.5 FTEs

Funding $1.7m (2014/15) $1.7m (2015/16) $2.1m (2016/17) (estimates Key areas of investment: Key areas of investment: Key areas of investment: based on  Destination Marlborough:  Destination Marlborough:  Destination Marlborough: budgets) $788,000 (marketing grant, $730,000 (marketing grant, $881,000 (marketing grant tourism targeted rate, one- tourism targeted rate, grant and tourism targeted rate, off grant for Marlborough for Havelock i-SITE) grant for Havelock i-SITE) Story & conference  Marlborough Research  Marlborough Research marketing) centre: $211,000 (grant and Centre: $277,000 (grant and  Marlborough Research offset of lease) offset of lease) Centre: $211,000 (grant and  Smart and Connected  Smart and Connected offset of lease) activities: $91,000 activities: $30,000  Smart and Connected  Smart Business  Smart Business activities: $176,000 Marlborough activities: Marlborough activities  Smart Business $137,000 (includes $20,000 $137,000 (includes $25,000 Marlborough activities: to Business Trust to Business Trust $95,000 (includes $20,000 Marlborough) Marlborough) to Nelson Tasman Business  Regional events strategy:  Regional events strategy: Trust/Business Trust $75,000 $30,600 Marlborough)  Commercial Events Grants:  Commercial Events Grants:  Commercial Events Grants: $30,000 $78,000 $60,000  Regional events strategy: $32,600

Source: Annual reports, Council economic development implementation plan, Council information.

A summary of the structure, objectives and resourcing associated with Council supported economic development organisations – the three main delivery partners – is provided in Table 2.

Table 2. Key economic development delivery partner arrangements and services Destination Marlborough Marlborough Research Centre Business Trust Marlborough

Structure Charitable Trust Charitable Trust Charitable Trust and Has a funding deed with MDC. Funding is provided on the Funding is provided on the basis of an annual report to Has a funding agreement with Council. governance basis of an annual business plan. Council on funding allocations. Has a Board of ten trustees with a combination of business Board of 6 (plus a co-opted trustee) with industry and Three Trustees and 8 Board members. The Council and governance experience. Current Manager of the Trust governance experience. Two are appointed by the appoints one Board member. Others currently include is also a Councillor. Marlborough District Council. The other four are selected by representatives of Lincoln University, NZ Winegrowers, an Appointments Committee. Plant & Food Research and industry representatives. Current Chief Executive of MRC is also a Councillor.

Key 1. Position Marlborough as a compelling destination to visit Overall: Research, encourage and promote all forms of 1. Deliver high quality, valued, support to Marlborough objectives pastoral, horticultural, agricultural and arable production in business enterprises: 2. Grow visitor spend in Marlborough in line with or greater or priorities the province of Marlborough. than the New Zealand average. Prioritise effort on  People and funding resources allocated to smoothing seasonality. Priorities for the Council’s funding are for MRC to: targeted sectors  Alliances with other agencies to enhance depth 3. Connect local government and private sector funding to 1. Continue support for primary sector research projects of offering achieve a single collaborative voice and scale in the undertaken in Marlborough.  Attract additional skilled professionals to the marketplace. 2. Continue development of the Food and Beverage Mentor/Trustee Pool Cluster and related initiatives.  Set key measurables for performance outcomes

3. Support New Zealand Wine in the development of the of clients. New Zealand Regional Institute for Viticulture and 2. Demonstrate the successes to support long-term Oenology (RIVO). sustainability/viability for the Trust:

 Create a corporate network of professional, diverse and skilled mentors  Mentees give back to the Trust by joining Mentor pool  Inform/educate and engage existing and future funders.

Staff 7.5 FTEs (7 full-time, 1 part-time) 3 FTEs 0.5 FTEs 1.

Destination Marlborough Marlborough Research Centre Business Trust Marlborough

Operational 2014/15 2015/16 2016/17 2014/15 2015/16 2016/17 2014/15 2015/16 2016/17 revenue Total revenue: Total revenue: Total revenue: Total revenue: Total revenue: Total revenue: Figures for this Total revenue: Total revenue: year are not $1,644,156 $1,581,325 $1,732,905 $831,615 $1,057,636 $900,250 $39,608 $47,686 available as Sources of Sources of Sources of Sources of Sources of Sources of services were Sources of Sources of funding funding funding funding funding funding provided included: included: included: included: included: included: funding funding through the included: included:  $788,191  $730,078  $881,411  $107,560  $114,978  $72,000 (8%) Nelson- (48%) – MDC (46%) – MDC (51%) – MDC (13%) – Food & (11%) – Food & – Food & Tasman  $20,000 (51%)  $25,000 (52%) ($526,000 ($536,520 ($667,992 Beverage Beverage Beverage Business Trust – MDC – MDC grant, $182,191 grant, $178,319 grant, $190,419 Innovation Innovation Innovation for part of the  $2,000 (5%) –  $17,175 (36%) year tourism rate, tourism rate, tourism rate,  $46,380 (6%) –  $153,618  $250,000 Donations – Grants $80,000 one-off $15,239 Havelock i- Premium (15%) – (28%) –  $12,800 (33%)  $5,500 (12%) – grant) Havelock i- SITE grant Foods for Premium MDC grant – Grants Mentor match SITE grant) $23,000)  $627,673 China Foods for  $234,014  $4,800 (12%) – fees (38%) – i-SITE  $650,109  $607,932  $185,000 China (26%) – Mentor match revenue (41%) – i-SITE (35%) – i-SITE (22%) – MDC  $185,000 Drylands fees (including revenue revenue grant (17%) – MDC (grants and advertising, (including (including  $121,745 grant income) commissions, advertising, advertising, (15%) –  $212,171  $60,048 (7%) booking fees) commissions, commissions, Drylands (20%) – – VineFacts  $193,546 booking fees) sales income)  $43,750 (5%) – Drylands subscriptions (12%) -  $197,508  $240,939 Grape Marc (sponsorship,  $281,492 Marketing (12.5%) - (14%) – incomes & (31%) – advertising and Marketing Marketing and  $37,150 (4%) – grants) Operations partnerships advertising and industry VineFacts  $45,800 (4%) – (Vineyard, ($93,130 partnerships contributions subscriptions VineFacts Properties) international, ($74,858 ($75,898  $275,068 subscriptions $69,636 international, international, (33%) –  $2,696 – consumer, $94,200 $138,241 Operations  $342,375 Other $30,780 consumer, consumer, (Vineyard, (32%) – conference) $28,450 $26,800) Properties) Operations (Vineyard,  $34,746 other conference)  $2,623 other Properties)  $3,360 other  $6,000 - Other

Source: Annual reports

As shown, total Council investment in economic development activities was around $1.7 million in 2014/15 and has grown to around $2.1 million in 2016/17. Around 55 percent of the investment in 2017, $1.16 million, was to support activities delivered by the combination of Destination Marlborough, Marlborough Research Centre and Business Trust Marlborough. This represented around 43 percent of the combined revenue of the three agencies, ranging from over 50 percent for Destination Marlborough and Business Trust Marlborough to under 30 percent for the Marlborough Research Centre. In terms of the proportion of investment currently going into different types of activities, the main economic development services currently being supported by the Council (based on 2016/17 figures) are:  Destination marketing & management (including events) – about 60 percent of total investment  Business development and innovation support – around 28 percent of investment  Sector and community development – 10 percent. Across the Council and partner delivery agencies there were around 15 FTEs involved in delivering economic development activities and services in 2016/17. Council investment in economic development represented around 2.0 percent of total local government operating expenditure in the region in 2015. The investment was the equivalent of close to $41 of economic development spend per capita. This is an average level of Council investment compared to other regions as shown in Figure 1 below. Councils across New Zealand spent an average of 2.1 percent of operational expenditure ($36 per capita) on economic development in 2015. Note that, in many regions, multiple Councils pool resources into economic development agencies.

Figure 1. Local government economic development spend as a proportion of operational expenditure (2015)

Napier City Council Rotorua Lakes Council Northland Regional Council Opotiki District Council Queenstown-Lakes District Council Taupo District Council Kawerau District Council Palmerston North City Council Stratford District Council Hawke's Bay Regional Council Auckland Council Gore District Council Wellington City Council Ruapehu District Council Thames Coromandel District Council Nelson City Council Mackenzie District Council Christchurch City Council Hauraki District Council Porirua City Council Manawatu District Council Invercargill City Council Greater Wellington Regional Council Whangarei District Council Hutt City Council New Plymouth District Council Kaikoura District Council Whakatane District Council Marlborough District Council Upper Hutt City Council Dunedin City Council South Taranaki District Council Ashburton District Council Otorohanga District Council Waitomo District Council Rangitikei District Council Clutha District Council Wairoa District Council Hastings District Council Tararua District Council Central Otago District Council Tauranga City Council Buller District Council Whanganui District Council Western Bay of Plenty District Council Waipa District Council Masterton District Council Kapiti Coast District Council Gisborne District Council Timaru District Council Grey District Council Hurunui District Council Westland District Council Horizons Regional Council Waimakariri District Council Hamilton City Council Waimate District Council Far North District Council Bay of Plenty Regional Council Matamata-Piako District Council Kaipara District Council Waikato District Council Waikato Regional Council Horowhenua District Council South Wairarapa District Council Carterton District Council South Waikato District Council Tasman District Council Environment Southland Chatham Islands Council Waitaki District Council 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Source: LGNZ Survey and MartinJenkins calculations. Orange vertical line is national average.

Given the significance of funding in Destination Marlborough, it is worth considering how local government investment in marketing activities compares to other regions. Excluding spending on i- SITEs, in 2016 the region invested around $20 per rateable property, $12 per capita and $0.72 per guest night in regional destination marketing and promotion (receiving $694 of visitor spend per council dollar), compared to an average of $23 per ratepayer, $10 per capita and $1.11 per guest night (and $628 of visitor spend per council dollar) across all RTOs.2 Hence the region’s marketing spend through the RTO was around the national average as shown in Figure 3 and Figure 4 (and in fact is above average for comparable medium tier RTOs). This excludes the Council’s own investment in district marketing activities, such as events and Only Marlborough.

Figure 2. Local government regional marketing and promotion spend per ratepayer (2015/16)

Destination Clutha Tourism Eastland Hamilton & Waikato Tourism Northland Inc Tourism West Coast Tourism Bay of Plenty Destination Coromandel ATEED Nelson RDA Venture Southland Destination Wairarapa Hawke's Bay Tourism Destination Marlborough Christchurch & Canterbury Visit Whanganui Enterprise Dunedin Tourism Waitaki Tourism Central Otago Visit Ruapehu Destination Kaikōura Destination Great Lake Taupō WREDA Lake Wanaka Tourism Destination Rotorua Destination Fiordland Destination Queenstown $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 Source: Data from MacIntyre, 2016. Vertical line is the New Zealand average.

Figure 3. Local government marketing and promotion spend per capita (2015/16)

Hamilton & Waikato Tourism Tourism Eastland Northland Inc Destination Clutha ATEED Tourism Bay of Plenty Nelson RDA Tourism West Coast Hawke's Bay Tourism Venture Southland Christchurch & Canterbury Destination Wairarapa Visit Whanganui Enterprise Dunedin Destination Coromandel Destination Marlborough Tourism Waitaki Tourism Central Otago WREDA Visit Ruapehu Destination Rotorua Destination Great Lake Taupō Destination Kaikōura Destination Fiordland Lake Wanaka Tourism Destination Queenstown $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00

Source: Data from MacIntyre, 2016. Vertical line is the New Zealand average.

______B Based on the most recent benchmarking survey of Regional Tourism Organisations or RTOs (MacIntyre, 2016)

Overall, the Council is investing a reasonable level of funding in economic development relative to other regions. However, as a single Council region, it does not have the same access to multiple local government investment partners.

1. ARE THE RIGHT ECONOMIC DEVELOPMENT ACTIVITIES BEING DELIVERED?

Summary Are economic development activities addressing relevant opportunities and challenges? Marlborough has identified economic development issues facing the region through the work that underpinned the Smart and Connected vision and framework in 2012 and subsequent sector and community strategies and plans. This work and related research suggested that the region has faced the following major economic development challenges and opportunities:  The need to maintain environmental quality to support key primary sectors and the visitor economy  The hollowing out of the working age population and need to grow, attract and retain skills  Developing amenities in and the attractiveness of the region’s town and community centres  Connecting local businesses to R&D expertise to support the development of value added products and services in a range of industries  Expanding the region’s economic base beyond wine and tourism, to scale up primary processing and related service sectors  Growing the availability of business support services in the region  Improving the consistency of branding and promotion of the region to other markets and growing the number of events, tourism products and experiences. Our assessment is that over the last five years the Council’s investment in economic development activities have largely focused on addressing these issues and opportunities. However, there are two challenging issues, which the Council and delivery partners are aware of and beginning to address, that will require greater emphasis in future:  Growing, attracting and retaining skills and talent  Visitor product and experience development. One of the reasons that these two areas have not yet received a significant emphasis is that Smart and Connected is not a regional economic development strategy per se that identifies economic priorities for the region through a top-down process. Instead it is based on a bottom-up process to support sectors and communities to develop their own strategies and identify their own priorities. The industry and community groups established to date have not yet emphasised skills and talent issues, although the Visitor Growth Plan has identified destination management as an area that needs to be addressed in future. We believe that the Council should consider additional interventions in the two areas in future.

How is the mix of economic development activities and investment determined? Economic development activities have grown progressively as Smart and Connected has been implemented. The ‘Top of the South’ economic action plan that has been proposed with central government provides an opportunity for the Council to ensure that the investment going into different economic development activities reflects the relative importance of different opportunities and challenges. Several stakeholders said they would welcome a process to determine what the economy should aspire to over the long-term and how economic development activities could support the aspirations. We believe the process for establishing and reviewing Council and delivery partner economic development priorities and for determining the mix of investment and activities can be improved by:  Moving beyond the Smart and Connected framework and developing an overarching economic strategy and plan to shape the priorities for the region’s economic development investment and the related activities of the Council and its delivery partners.  Holding an annual strategic workshop or forum to review economic issues and opportunities facing the region, what is being achieved through economic development activities and whether a change in emphasis and activity mix is required. This would involve a range of economic development partners and stakeholders (e.g., industry representatives, iwi representatives, community representatives, central government).  Council staff having discussions with key delivery partners early in the planning cycle each year about priorities for the year, the mix of activities to achieve these and related performance measures. These should form the basis of clear funding agreements or business plans (as appropriate) with each agency. Are there clear rationales for the Council supporting current economic development activities? There are clear rationales for Council supporting the majority of activities that are being delivered and services tend to be appropriately focused on facilitation, promotion, information provision and addressing collective action issues. However, the long-term role for the Council in funding research projects through the MRC may need to be reassessed given the support being provided for the RIVO. There is a stronger rationale for ongoing support to encourage cluster activity and to link businesses with research expertise. The Council should discuss the future mix of innovation activities with MRC once RIVO is established. Are there any gaps in economic development activities and services? Economic development activities supported by the Council and its delivery partners (e.g., Destination Marlborough, Marlborough Research Centre and Business Trust Marlborough) cover most of the spectrum of economic development services offered in other regions, including destination marketing and management, business development, industry development support, and town and community development initiatives. However, Councils and economic development agencies in other regions are becoming increasingly active in:  Skills and talent initiatives, such as talent attraction campaigns, job-matching websites and youth into employment schemes. These activities are relevant to Marlborough given the aging population and skill demands already facing some industries (e.g., wine, construction).  Supporting communities and business to undertake feasibility studies and business cases on new tourism products and experiences and co-investing in these attractions when there are strong cases. These activities are relevant as product development is a major theme in the Smart and Connected Visitor Economy Growth Plan.

The Council should explicitly consider these areas of economic development in any future economic strategy and action plan. The Council will also need to continue to work with iwi/hapu in the region to ensure that economic development activities and services are adequately connecting Māori to networks and resources to support their aspirations. Several Councils and economic development agencies in other regions are more active than Marlborough in supporting investment attraction and facilitation (e.g. developing investment prospectuses, identifying investment opportunities in the region, and working with NZTE to identify potential investment partners). However, we did not identify a clear need or demand for these activities in Marlborough from the review of research or conversations with stakeholders. The Council is currently considering options for establishing regional film office functions in the region. Although several other regions have a film office, we do not consider there is a strong rationale for establishing a full office in Marlborough at this time. The region has excellent locations for screen productions and could attract more screen activity, but it does not have the strong base of screen facilities or capabilities that several other regions have that help them to attract regular productions. As such, we believe it would be better to leverage the capabilities of an existing office, such as Screen Wellington, at least initially and to test the level of demand over time. Are there any overlaps or gaps in delivery across partners and other organisations? Positively, there is little overlap in the delivery of economic development activities between the Council and its three major delivery partners. Although there are activities where the Council and delivery partners are both operating, such as marketing, events and international linkages, our observation is that generally the roles tend to be complementary rather than competing. Indeed, there are several examples of joint economic development work across the organisations in these areas. In addition, stakeholders consulted indicated that economic development activities delivered by the Council and its delivery partners have been generally well coordinated with other organisations delivering related services. A large range of activities and projects have involved joint work between the Council’s delivery partners and other organisations such as Destination Marlborough’s marketing efforts with Tourism New Zealand, Wine Marlborough and the Port of Marlborough; MRC’s relationship with Massey University and Plant & Food Research; and Business Trust Marlborough’s working relationship with the Marlborough Chamber of Commerce. The exception appears to be the duplication of marketing and community development activity that is occurring in Picton across multiple stakeholder organisations, including the Picton Smart and Connected Group supported by Council. Rationalisation of the groups’ activities through a facilitated process would be desirable to improve effectiveness and efficiency.

1.1 What services/activities should be delivered?

1.1.1 Are existing services/activities based on addressing clear and well-evidenced problems and opportunities for the region?

To answer this question, we considered a number of sub-questions:

a. What are the key economic development issues and opportunities facing the region?

What do key economic indicators and trends suggest? A brief analysis of economic trends is provided in Appendix 1. In summary:  The regional economy has had a mixed performance over the last five years, with relatively low real GDP growth, job growth and population growth compared to the national average.3 Although the region has outperformed some comparable regions and districts on GDP growth, such as the Nelson, West Coast and the Far North, it has experienced lower growth than areas such as Northland, Tasman and Thames-Coromandel.  Marlborough’s population growth rate has been below the national average over the last ten and five years and has been below comparable regions such as Northland, Hawke’s Bay, Nelson and Tasman (it has been the same as Gisborne’s over the last ten years). The region is expected to have limited, if any population growth over the next 10-20 years. The young and working age population is expected to decline over the next two decades, and the decline is expected to be more pronounced than in several other comparable regions.  Estimated productivity (or GDP per FTE) is lower than nationally but higher than or similar to most comparable regions, such as Nelson, Tasman, Hawke’s Bay and Gisborne. However, productivity growth has been lower than most comparable regions over the last five years. Real GDP per capita is higher in Marlborough than nationally, at around $50,850 compared to $49,120 in 2017. GDP per capita grew slightly more strongly than nationally over the last five years.  Mean annual earnings ($50,720) and median annual person income ($27,900) are slightly lower than national figures but higher than several comparable regions. Marlborough’s median household income, at $55,200 in 2013, also compares well to other similar regions such as Northland, Gisborne, Hawke’s Bay, Nelson and Tasman.  The region is somewhat concentrated in particular sectors, with beverage product manufacturing, property & real estate services, electricity & gas supply and health care & social services representing over 30 percent of the economy. Other major sectors include agriculture support services, professional & technical services and horticulture & fruit growing.  Beverage product manufacturing has only performed moderately over the medium-term, experiencing 1.4 percent real GDP growth over the five years to 2017. However, primary and related servicing sectors have achieved relatively strong growth, with very strong growth in the value of forestry & logging and fishing & aquaculture, and solid growth experienced by agriculture support services and horticulture & fruit growing over the five years.  There have been mixed results for manufacturing industries – with the value of fruit, cereal & other food product manufacturing remaining static, and seafood processing and transport equipment manufacturing declining in value over 2012-2017. However, wood product manufacturing, machinery & other equipment manufacturing and fabricated metal product manufacturing all grew strongly (from a small base).  Several service sectors have performed well, with construction services, health care & social assistance, professional & technical services, and retailing growing relatively strongly, although accommodation & food services and education & training grew more moderately.

______3 The GDP and job figures are derived from the Infometrics regional profile for Marlborough. These estimates differ from Statistics New Zealand’s regional GDP estimates, which suggest that the region has achieved stronger growth – although its statistics for 2015 and 2016 are still provisional.

 The visitor economy is relatively large but has been growing more slowly than several comparable regions, although this is likely due to the long-term impact of the Canterbury earthquake on visitor numbers, compounded by the Kaikoura quake at the end of 2016. Estimated visitor expenditure in the year ended November 2017 was around $358 million, which was higher than several other small comparable regions and districts such as Nelson, Tasman, Thames-Coromandel, Gisborne, Napier and New Plymouth. Visitor expenditure has grown at 2.9 percent per annum over 2012-2017, well below the national average (7.7 percent per year). This was also below several comparable regions and districts such as Nelson-Tasman, Taranaki, Coromandel, Southland and the Hawke’s Bay. In particular, domestic visitor expenditure has grown relatively slowly over the five years to November 2017, by 0.7 percent per year compared to 5.5 percent per year across New Zealand.  Marlborough’s average length of visitor stay in commercial accommodation in the year ended December 2017 was 2 days, which was around the New Zealand average (and increased over 2016-17, likely as a result of workers staying the region for the Kaikoura rebuild). However, this was lower than several comparable regions and districts, including Northland (2.2 days), Coromandel (2.2 days), Gisborne (2.5 days), Hawke’s Bay (2.3 days) and Nelson-Tasman (2.5 days).  Most domestic visitor expenditure comes from visitors travelling from Canterbury (25 percent), Auckland (14 percent), Wellington (13 percent), Tasman (7 percent) and Waikato (6 percent). However, visitor spend by visitors from three of these centres – Auckland, Wellington and Canterbury – declined over 2012-2017. Again, the fall in visitor spend by Canterbury visitors is not surprising given the impact of the earthquakes on travel.  Marlborough’s international visitor expenditure has a different profile to the national average, with a larger proportion of expenditure from visitors from the UK (16 percent compared to 10 percent), and the Rest of Europe (28 percent compared to 15 percent). The region receives a much lower proportion of visitor expenditure from visitors from China (3 percent compared to 15 percent nationally) and the rest of Asia (7 percent compared to 16 percent). The implications of the above for economic development are that we would expect:  That economic development activities would seek to encourage further growth in the value being generated by primary industries but also try to facilitate growth in related processing and service sectors that the region has underlying advantages in, such as beverage product manufacturing, seafood processing, fruit and food product manufacturing and transport equipment manufacturing.  That there would be a focus on attracting people to and retaining people in the region to ensure there will be a sufficient level of working age population to support industry growth.  That destination marketing and management efforts would be aiming to turn around the slow- down in visitor expenditure resulting from the earthquakes, for example by growing new domestic markets and developing and promoting new products to keep visitors in the region for a longer period.

What do regional strategies, plans and research suggest? The Council developed the Smart and Connected Vision and Framework over 2012. The vision is: Over the next decade, Marlborough will become a globally-connected district of progressive, high- value enterprise, known for our economic efficiency, quality lifestyle, desirable location and natural environment. Marlborough will be “smart and connected”.

The Framework includes six characteristics that will underpin Marlborough becoming ‘Smart and Connected’: governance that is inclusive, enabling, participative, transparent and strategic; people that are educated, diverse, flexible, creative, engaged; an economy that is innovative, entrepreneurial, productive; an environment that is attractive, has systems for protection and care and is sustainably managed; Mobility or local, national and international accessibility; and living conditions that include access to quality housing and education, cultural facilities and events and social cohesion.4 The research and consultation work that underpinned the vision and framework identified several issues and opportunities facing the region at the time. The region has also developed a visitor economy strategy, events strategy and several industry and community plans over the last five years. Key challenges and strengths and related opportunities identified by the collective strategies, plans and research are highlighted in Table 3.

Table 3. Economic development challenges and opportunities identified in Marlborough research, strategies and plans

Cross Cutting Issues and Opportunities

Challenges Key strengths and opportunities

Natural Resources Environmental sustainability and balancing the The Marlborough Sounds and related natural protection of natural assets with growth is seen amenities provide genuine advantages for aquaculture as a critical part of the region’s future. and the visitor economy. Land availability, function, productivity, urban The region’s temperate maritime climate and free encroachment, and managing the effects of draining, fertile soil underpin the region being New land-based activities on water-based activities Zealand’s largest wine region. (both recreational and aquaculture) have been regarded as important issues. Smart & Connected suggested that the diversification of land use was a way of maximising economic opportunity and for managing economic downturns in particular industries or sectors.

Skills and Talent Smart & Connected emphasised that there was Relationships between colleges, and between colleges a hollowing out of the population in the region, and NMIT and industry had improved due to the with working age people up to 45-55 leaving and launch of Vocational Pathways. taking trade, business and capital with them. One opportunity that was identified was for Massey There are concerns about College entry-stage University to potentially provide degree level and levels of literacy and numeracy in children in the professional development courses in Marlborough. region. Smart & Connected proposed a stocktake of education NMIT indicated they found it difficult to maintain providers and industry training and employment levels of service in a range of areas given the demand to understand current and future gaps and low population and student base in Marlborough how they might be filled. relative to Nelson.

In several areas, local training was identified as not meeting the needs of industry (e.g., forestry . and wood processing). Smart and Connected also noted that there needed to be improved industry connections with education providers in the region to ensure relevance of training.

______4 Although the Framework provides a solid foundation, we note that the Framework was actually based on the European Smart Cities benchmarking model, rather than being a regional economic development framework per se. The Smart Cities model is used for ranking medium and larger sized cities (much larger and with very different conditions to Marlborough). As such, in our view, several elements of regional development are given less emphasis in the framework, such as the quality of the business environment, a region’s image and identity, and the industrial mix. In addition, several elements relate to the outcomes of being a smart city rather than the enablers of regional development.

Cross Cutting Issues and Opportunities

Challenges Key strengths and opportunities

Infrastructure & A major premise of Smart & Connected was that Smart and Connected proposed an infrastructure connectivity the region was becoming isolated and that there stocktake to assess opportunities for infrastructure was a breakdown in connectedness locally, improvements. nationally and internationally. At the time of the development of Smart & Connected, infrastructure constraints identified were capacity constraints at the Port of Marlborough for container transport and more cruise ships; air transport capacity for high volume, time sensitive food exports; and limitations for the road network to support high productivity motor vehicles.

Business At the time of the development of Smart & The Marlborough Research Centre was regarded as a development & Connected, a gap was identified for a business positive base of local research and expertise for innovation engagement and connection service to analyse businesses to draw on. business needs and connect business to the resources they require. The need for support for capital raising and a facilitated service to help local businesses to identify and secure appropriate investors was also identified. Access to knowledge can constrain business activity in Marlborough as there is no university and limited research expertise available to support knowledge transfer. Smart & Connected identified a need for greater industry access to knowledge and the need for local-based R&D programmes.

Town and At the time of Smart & Connected, the Blenheim Opportunities identified included improving the community CBD and other centres were regarded as not attractiveness, vibrancy and amenities in Picton, development reflecting a leading region, i.e., they were not Blenheim, Havelock and Renwick and supporting the visually appealing or well-serviced. towns to develop and own their own identify and contribute to the overall Marlborough Story.

Māori Although iwi leaders were being approached for On a case-by-case basis, it was considered that there investment, they were finding the quality of are brand and story opportunities for Māori business readiness and cases was low. businesses. Investment analysis and portfolio management skills were identified as areas where capability An opportunity was identified to develop mechanisms could be improved. that promote collaborative investment and that enhance iwi and iwi-Council relationships.

Other Smart & Connected indicated that business and industry leaders thought there was a lack of trust at the local level, resulting in a lack of collaboration on joint projects and limited use of collective resources.

Sector issues and opportunities

Overall At the time of Smart & Connected, there was Smart and Connected advocated for strategy concern that previous economic development development and cluster development for a range of efforts focused too much on wine and tourism industries in Marlborough, including creative, forestry and that a more balanced approach was & wood processing, agriculture & horticulture, visitor required from local government, central economy, aviation engineering, food & beverage, and government and the community. professional and technical services.

Cross Cutting Issues and Opportunities

Challenges Key strengths and opportunities

Primary sectors Forestry & wood processing – key constraints Forestry & wood processing – key opportunities relate were related to the capacity of Port Marlborough to the potential to undertake added value processing to handle wood products, length of time taken for and improve supply chain efficiencies, maximise the consents, ensuring industry input into regional value of residue from wood processing, and to explore planning changes, and maintaining health and niche markets and cooperative marketing safety standards. relationships. Aquaculture – a major challenge is public Agriculture and horticulture – key opportunities relate opposition to the expansion of aquaculture in the to access to R&D expertise and knowledge sharing, region due to concerns about environmental the production of higher value niche foods and impacts, navigational impacts, reduced harbour ingredients, improved farm management systems and space and clean-up costs. environmentally sustainable practices. Aquaculture – The Sounds provide the ideal environment for farming high value seafood such as King salmon and Greenshell mussels. The region is a major centre for marine farming, delivering more than 60 percent of national aquaculture production. A key opportunity for the industry is to demonstrate that it can operate in harmony with the community and the environment and reduce any adverse impacts, i.e., develop a social license to operate. Having a key R&D organisation in relatively close proximity in Nelson provides an opportunity for the local industry to tap into this expertise and develop sustainable practices. Specific opportunities were identified to derive more value from what are traditionally by-products from aquaculture; to work with the Council to create a supportive regulatory environment; and for businesses to undertake cooperative marketing.

Manufacturing & Wine industry – constraints that have been Creative sector – the region is regarded as having a service sectors identified for the future growth of the industry base of design and creativity that could be made more include the availability of accommodation in the visible and be promoted. right locations and of the right quality, variable pastoral care of the workforce, and difficulties in Wine industry – Marlborough is New Zealand’s largest securing a skilled workforce to meet increasing wine producing region, responsible for three quarters demand for vineyard workers (related to limited of NZ’s wine exports and is internationally recognised numbers of school leavers entering the sector, for sauvignon blanc. At the time of Smart & limited appeal of some jobs in the sector due to Connected, a key opportunity was to create an overall the physical demands and seasonality of the brand for Marlborough wines and to develop shared work). marketing and brand building. Another opportunity was to develop a greater level of niche wines. More Professional and technical services – business recently the opportunity to develop a reputation for services in the region were not regarded as social and environmentally sustainable production in being particularly sophisticated, especially for order to attract premiums has been identified. A major export businesses, and the quality of future strength will be the establishment of the professional services in the region was variable. Research Institute of Viticulture and Oenology in the region, which will support the growth of R&D intensity in the sector. Specialised manufacturing – the region has demonstrated capability in transport engineering and related manufacturing. Food & beverage – three opportunities were identified in the food and beverage innovation strategy for the region: to connect businesses to national centres of excellence for food and beverage, to be smart at innovation, and to connect businesses to each other as a cluster to support each other and promote themselves outside the region.

Visitor economy Smart & Connected identified a lack of Marlborough is recognised as having a number of coherence in relation to the Marlborough brand assets and features that are attractive to visitors, and that previous attempts for branding had not including: communicated the region’s diversity.

Cross Cutting Issues and Opportunities

Challenges Key strengths and opportunities Major challenges for the visitor economy include:  Being New Zealand’s largest wine region and recognised for sauvignon blanc  Seasonality in visitor numbers and spend  The Marlborough Sounds, both the waterways  Attraction, retention and skill-base of staff and wildlife (e.g., dolphins, seals and whales)  Trading hours of business and food and  Walking and cycling tracks and trails, including beverage outlets on weekends, public Queen Charlotte Track and cycle tours between holidays and major event weekends the vineyards  Port for the interisland ferry and cruise ships and  Lack of consistency and regional approach marinas for boaties to tourist signage, way finding and communication with travellers in the region  Culture & heritage attractions such as the Omaka aviation centre, the convention centre and  Limited and in some case no public performing arts centre, and the earliest known transport options to some parts of the settlement site in New Zealand. region Specific opportunities identified in the visitor economy  Accommodation capacity. strategy and events strategy include:  Building the region’s capability to respond to meeting the needs of a changing visitor mix, e.g., China and Halal.  Freedom camping that balances the best interests of Marlborough from an economic and environmental perspective as well as from a visitor experience perspective.  Improving broadband and cellular access across Marlborough.  Attracting and growing new events, including business events, and developing a balanced events calendar across the year.  Product and experience development in the Marlborough Sounds, including ensuring infrastructure and facilities are in place to retain and grow cruise ship visits and attract leisure boaties.

Overall, the major economic development challenges and opportunities that have previously been identified for Marlborough relate to:  The region’s natural assets and amenities and the need to maintain environmental quality to support key primary sectors and the visitor economy.  The hollowing out of the working age population and need to grow, attract and retain skills.  Development of amenities in and the attractiveness of the region’s town and community centres of Blenheim, Picton, Renwick and Havelock.  Connecting local businesses to R&D expertise to support the development of value added products and services in a range of industries.  Expanding the economic base beyond wine and tourism, to scale up primary processing and related service sectors.  A lack of business support services in the region.  Improving the consistency of branding and promotion of the region to other markets.  Growing the number of events across the year.

As noted, we would expect economic development activities that have been implemented to be targeting these types of challenges and opportunities. Economic development investments and initiatives have been targeting several of these areas progressively over time, although there has not been an explicit prioritisation of the opportunities or challenges. We also believe there have been some areas of economic development that have been either over- or under-emphasised in previous research and strategic documents, given our analysis of and understanding of the economy:  Most sectoral areas of focus that were emphasised in and have followed from Smart and Connected are consistent with trend analysis and comparative advantages, including aquaculture, forestry & logging, and food and beverage processing. However, some sectors suggested for strategy development by Smart and Connected, such as creative and professional & technical services, were less obvious choices.  It is not clear why there was an emphasis on developing a strategy for all of the sectors suggested by Smart and Connected – while this might have been appropriate in some cases, in other areas the sectors may not have required a strategy or been ready to work together to develop one. However, in reality, only three sector strategies have been developed. This has been a more pragmatic approach.  As with other regions, and given Marlborough’s geographic position, we would have expected a greater emphasis in the economic development research and industry/community strategies on infrastructure and connectivity issues. Some groups, e.g., Renwick and Havelock, have identified local infrastructure constraints. We also note that the Council has been addressing connectivity constraints through a range of other activities, such as implementation of the infrastructure strategic plan and digital enablement plan.  There has been relatively limited emphasis on visitor product and experience development (i.e., destination management) relative to branding and marketing.

What have been Council priorities and desired outcomes for economic development? We would expect to see a high degree of consistency between the priorities identified through trend analysis and the various strategic documents and Council economic development priorities and desired outcomes as articulated in its Long-Term Plan and Annual Plans. The Council has also produced and updates an economic development implementation plan which sets out major areas of activity. Table 4 shows the extent of alignment between Council outcomes and major areas of activity with the priority areas we have identified.

Table 4. Economic development outcomes and major areas of activity

Identified challenges & Council economic development outcomes and major areas of opportunities activity

Maintaining environmental quality A desired Community Outcome of the Long-term Plan is: Marlborough’s unique landscape, natural resources, features and wildlife are managed, embraced to support sector growth and valued for preservation and celebration. A key characteristic of the Smart & Connected framework is the Environment, which includes: control over pollution levels, forms and effects; systems for protection and care; and sustainable resource management. Through its resource management and regulatory activities, the Council guides the use, development and protection of natural resources. As such it does not need to have an explicit ‘economic development activity’ focused on this area.

Improving infrastructure & A desired Community Outcome of the Long-term Plan is: People are able to access and engage in a wide range of recreational, cultural and business connectivity activities locally, nationally and internationally.

A specific characteristic of the Smart & Connected framework is Mobility, which includes taking into account local, national and international accessibility. Through the Infrastructure Strategic Plan 2015-2045 and its activities related to the provision of roads, water, waste water etc. the Council invests in and manages infrastructure quality. As such it does not need to have an explicit ‘economic development activity’ focused on this area.

Growing, attracting and retaining A desired Community Outcome of the Long-term Plan is: A vibrant community that is flourishing, diverse and inclusive for everyone, presenting opportunities skills & talent for people to succeed. A key characteristic of the Smart & Connected framework is People, which includes: quality jobs, education, life-long learning, flexibility and creativity. However, there has not been an economic development emphasis on this area of activities by the Council.

Town and community development A desired Community Outcome of the Long-term Plan is: Creating an environment in which people can participate, connect with and help shape the community’s future. A major economic development focus of the Council has been to encourage community groups to develop and implement strategies to advance their respective areas.

Connecting local businesses to A desired Community Outcome of the Long-term Plan is: Building a strong economy through strategic, thoughtful and innovative use of local resources. innovation and R&D expertise A key characteristic of the Smart & Connected framework is the Economy, which includes being innovative and entrepreneurial. A stated major activity area of the Council in the economic development implementation plan has been to support innovation in Marlborough by developing connections between local companies and high-quality advice, science and market information.

Improving local business support A desired Community Outcome of the Long-term Plan is: Building a strong economy through strategic, thoughtful and innovative use of local resources. services The Council has two major activity areas relevant to this challenge and opportunity area in its economic development plan:  To provide development advice and assistance through Council processes for industrial and commercial proposals in Marlborough  To help start-up and growing businesses to access free or low-cost advice, business mentoring support and access to innovation advice and funding within Marlborough.

Supporting growth and value add in A desired Community Outcome of the Long-term Plan is: Building a strong economy through strategic, thoughtful and innovative use of local resources. a range of sectors A key economic development focus of the Council has been to encourage industry groups to develop and implement strategies to advance their respective interests.

Improving the consistency of The Council has identified two major areas in the economic development plan relevant to this challenge and opportunity area: branding and supporting  Supporting the adoption of Only Marlborough by local businesses, destination management activities Council and community organisations to increase visitation, migration and investment in Marlborough  Marketing and promoting Marlborough as a desirable visitor destination to both international and domestic travellers.

Growing the number of events A key characteristic of the Smart & Connected framework is liveability, which, amongst other things, includes cultural facilities and events. A major area of activity in the Council’s economic development plan is focused on identifying opportunities for growing events in the region and increasing the commercial return to local businesses.

MDC’s current Long-Term Plan (2015-2025) adopts the Smart and Connected framework. The Community Outcomes in the Plan take into account the framework and the Plan explains how the different activities of the Council relate to the framework. It is clear that most of the existing desired Community Outcomes and major activity areas of the Council are well aligned with the challenges and opportunities identified above. The major exception relates to the more limited emphasis on growing, attracting and retaining skills and talent. One issue, consistent with a focus on developing a ‘bottom-up’ approach to economic development through Smart and Connected, is that there has not been an explicit attempt to prioritise the areas of activity or the achievement of particular outcomes over others. b. To what extent are existing services and activities consistent with issues and opportunities apparent from economic analysis, strategies and the plans and desired outcomes of the Council?

We would also expect to see alignment between the economic development issues and opportunities identified in research, analysis and the various strategies and plans, and the desired economic development outcomes of the Council, with the economic development work programmes and services of the Council and delivery agencies (i.e., Destination Marlborough, Marlborough Research Centre, Business Trust Marlborough). Table 5 provides a brief overview of the degree of alignment. Overall, there is a good degree of alignment between the types of activities undertaken by Council and economic development delivery agencies, and the desired outcomes and major opportunities and challenges identified in the preceding analysis. Once again, the major opportunity areas where neither the Council nor the delivery agencies are particularly engaged is in skills & talent and destination management (although – as will be discussed later – the role for local government in skills and talent initiatives is relatively narrow). As noted above, although there are no ‘economic development services’ specifically focused on environmental quality or infrastructure and connectivity, the Council is well engaged in addressing these areas through other activities.

Table 5. Consistency of economic development services with key economic opportunities and challenges

Identified Council economic development Council-supported delivery agency challenges & services economic development services opportunities

Maintaining A core role of the Council is to develop and Not a focus (and we would not expect it to be). review environmental policy and planning environmental provisions under the RMA in response to quality to support resource management issues in the region. The Council has been reviewing its resource sector growth management framework and has proposed a single environmental plan for the integrated management of Marlborough’s resources. Given this, there are no ‘economic development’ activities specifically geared to addressing this challenge as it is adequately covered through other activities. We note that both the wood and aquaculture Smart & Connected groups have identified the need to create a social license with the community and to demonstrate their environmental credentials.

Improving In terms of economic development activities, the Not a focus (and, again, we would not expect it to Council supports international economic and be), although MRC does facilitate primary sector infrastructure & education connections through sister city business connections with national research connectivity relationships (e.g., Chinese wine region of expertise. Ningxia); attracting international students to study in Marlborough through its support for Education Nelson-Marlborough; and has developed the digital enablement plan and the application for extension of UFB and mobile funding. The Renwick and Havelock Smart and Connected community groups have been tackling local infrastructure issues and the Wood Sector group has also focused on roading and port constraints. Beyond this, co-investing in network infrastructure is part of core business and the Council owns Port Marlborough and the Marlborough Airport. The Council has proposed a range of infrastructure improvements in its Infrastructure Plan 2015-2045 and Regional Land Transport Plan 2015-21. It has worked with NZTA on strategic cases for major roading projects.

Growing, attracting Has not been a focus. However, one of the Has not been a focus. functions of Only Marlborough (regional brand and retaining skills positioning statement and resources) is to & talent communicate a consistent and positive message about the region, including to people considering relocating to Marlborough. The Council has also co-invested in research on labour market gaps for the wine industry.

Identified Council economic development Council-supported delivery agency challenges & services economic development services opportunities

Town and The implementation of the Smart & Connected Has not been a focus although delivery partners are vision and framework has focused on the engaged at times in Smart and Connected Groups. community development of community groups across development Marlborough. Three community groups and strategies have been developed in Havelock, Picton and Renwick and one is in the process of being established in Seddon. Facilitation has been provided to assist communities to develop, agree and implement a strategy. Council’s role has been to support the establishment of the groups and to work alongside these groups as a key partner. Council has also supported Blenheim to establish a CBD business association and has worked with the association on CBD improvements. In addition to the Smart & Connected economic development activities, the Council has established the Small Townships Programme, which is aimed at upgrading amenities in small towns. The programme includes support for Township Plans and a Contestable Fund for small, low cost infrastructure projects on outdoor public spaces.

Connecting local Invests in relevant services delivered by MRC. MRC provides support for public good research and Also supported the proposal for and is co- regional innovation that support the agricultural, businesses to investing in the New Zealand Regional Institute horticultural, forestry and viticulture industries. This innovation and for Viticulture and Oenology. has included research projects (e.g., Drylands Forestry), PhD student research support, seminars, R&D expertise The Aquaculture Smart and Connected Group weather data monitoring services, phenology has had a strong emphasis on innovation, monitoring, and providing support for a food including the development of a blue mussel technologist to assist businesses in the region. project. MRC has also established and supported the food and beverage cluster. The cluster supports development of new products and ingredients, production and process improvements, and the generation of value from waste streams. MRC supports the cluster through facilitating connections to the national food and beverage network through Massey University, facilitating market connections with China and facilitating access to business support.

Improving local The Council provides the Smart Business Business Trust Marlborough provides business Marlborough service, which assists development advisory services mainly by facilitating access to business support related business proposals through Council mentoring (regional delivery of Business Mentors NZ services processes – including resource consents, services). The Trust also provides training and building consents, liquor licensing, food health, seminars on business start-ups and links businesses infrastructure requirements. with local and central government resources. The Council provides funding support for Business Trust Marlborough.

Identified Council economic development Council-supported delivery agency challenges & services economic development services opportunities

Supporting growth The implementation of the Smart and Connected As noted above, MRC has also established and vision and framework has focused on the supported the food and beverage cluster. and value add in a development of industry groups. Industry groups range of sectors have been established for the wood sector, visitor economy and aquaculture (the Blenheim CBD business association has also been classified as an industry group). Facilitation has been provided to assist industries to develop, agree and implement a strategy. Council’s role has been to support the establishment of the groups and to work alongside these groups as a key partner.

Improving the The Council supports and promotes Only Destination marketing and some destination Marlborough, a regional identify and website that management services are undertaken by the consistency of provides branding, a logo and related resources Destination Marlborough Trust. Destination branding and (e.g., advice on messaging, images) freely to all Marlborough’s priorities are to position Marlborough organisations to encourage a consistent way of as a compelling destination to visit and to grow supporting talking about and promoting Marlborough to visitor spend in the region. destination visitors, investors, workers and businesses. Destination Marlborough delivers promotional management The Council also provides funding support to campaigns and tactical marketing initiatives, hosts activities Destination Marlborough. The Visitor Economy media and international travel sellers, supports Smart and Connected Group developed a visitor cruise ship visits, operates the i-SITE visitor centres, economy strategy and growth plan for the produces the Marlborough visitor guide, the regional region. tourism website and social media.

Growing the Council has developed a Regional Events Destination Marlborough delivers the Marlborough Strategy to identify opportunities for growing Convention Bureau, which markets the region as a number of events events in the region and increasing the return to conference, meeting and incentive destination. local businesses. The Council also employs a Destination Marlborough aims to influence business Regional Events Coordinator to help deliver the event organisers to bring events to the region, hosts strategy, assist communication within the events business event organisers, distributes leads and sector, and to help events offered in the region. enquiries to venues and facilities, supports bids for events, and develops collateral for marketing. The Council also provides the Follow-ME website that lists all events occurring in the region and a Commercial Events Fund to help the development of events in the region.

What is less clear is whether there is alignment between relative levels of investment in the different economic development activities and the relative importance of the opportunities and challenges facing the region. This relates to the lack of an overall economic development strategy discussed earlier. For example, a large majority of economic development investment currently goes into destination marketing (including event) activities. Whether this should be a lesser or greater priority can be considered through a strategy development process. c. What is guiding the prioritisation of economic development investment and activities by Council supported delivery agencies? Ideally, economic development priorities and outcomes should translate from the Council’s plans to delivery agency investment decisions and actions via a combination of:  Discussions between the Council and delivery agencies (e.g., between Councillors and governance representatives of the delivery agencies, between representatives of the executive management of the Council and the executive management of the delivery agencies) on strategy, priorities and alignment.

 For more significant levels of investment, such as with Destination Marlborough, a Letter of Expectation (LOE) or a similar mechanism.  Council funding agreements with delivery agencies.  Delivery agencies’ business plans (and iterations of these) based on these discussions and expectations. In addition, priorities should also be informed by input/feedback from other key economic development partners and stakeholders in the region, such as industry groups, infrastructure organisations, educational institutions, Māori/iwi organisations etc. The Council discusses delivery agency results over the previous six months and plans for the upcoming year during relevant Council Committee meetings. We understand that these are usually relatively short discussions, being one of several agenda items. There are no substantive discussions with delivery agencies on priorities, and agencies are given significant flexibility to propose and essentially determine what will be delivered each year. The Council does not use letters of expectation or detailed funding agreements with delivery agencies but Council staff do work with the agencies in setting performance measures. We agree that the Council is right to trust in the expertise of the Boards and staff of the delivery agencies for identifying how funding might be best utilised, given that a key reason for using such external agencies is to be able to draw on this expertise. However, we believe the Council (and broader stakeholders) is missing an opportunity to consider and debate whether the collective investment is going into the highest priority activities. For example, it is not apparent that Destination Marlborough or MRC undertake environmental scans or reviews of economic development opportunities as part of annual planning or reflect on the Council’s Long-Term Plan and economic development objectives in setting the intended scope of their activities each year. In general, funding to each of the agencies has increased over time but there does not appear to have been consideration about whether areas of activity should be reduced in scale in order to free up resources, There is no regular strategic process between the Council and economic development partners and stakeholders on overall economic development priorities of the Council or delivery agencies each year. Smart and Connected community and industry groups do hold annual strategy/plan review and update workshops for their particular work programmes, but these are naturally narrower in scope.

The Council has a funding agreement with Business Trust Marlborough that specifies deliverables and KPIs and has a Funding Deed with Destination Marlborough (from 2007). It does not have a formal funding agreement with MRC. Although technically the Council is not required to have a contract or binding agreement with organisations that are ‘not-for-profit’, such agreements have the advantage of providing for early discussions with the delivery agencies about required service levels, performance measures and targets, any risks to be managed and how accountability is to be enforced.

The Destination Marlborough Funding Deed requires the Trust to provide a business plan for each year, an annual report and a copy of the annual accounts. The Business Plan is to include performance targets. Apart from needing to be updated to reflect current circumstances (for example, clause 4.1 of the Deed refers to the Council paying the Trust $300,000 per annum), the broad content of the Funding Deed is reasonable. What is more important in our view is for the Council to engage in a more meaningful way with Destination Marlborough, for example, by having early discussions each year about priorities, rather than relying on short presentations at Council Committee meetings.

Feedback from Destination Marlborough suggests that they also believe that there is an opportunity to improve the level of engagement with the Council on priorities. They noted that, in the past, they were effectively reporting on the business plan after it had been finalised. They have discussed with the Council changing the timing of discussions at Council Committee meetings and providing the Council with early drafts of the annual plan.

Overall, we believe the process for establishing and reviewing Council and delivery partner economic development priorities and for considering the mix of investment activities can be improved by: 1 The Council moving beyond the Smart and Connected framework and developing an overarching economic development strategy and plan for shaping the priorities for its investment and hence for its work with delivery partners (and with other agencies such as central government organisations). Several stakeholders we interviewed reiterated this perspective, noting they did not think there was a clear economic vision or clear economic objectives for the region and hence not a clear view on what economic development activities are most important. We understand the Council is in the process of discussing with central government how a ‘Top of the South’ Economic Action Plan could be developed across Marlborough and Nelson-Tasman and this would appear to provide a convenient opportunity to identify an agreed set of short-term and long-term economic development priorities. 2 Holding a broader strategic workshop or forum (including representatives from economic development partners, industry, communities, Māori/iwi and stakeholders) each year to review economic development issues and opportunities facing the region, what is being achieved with economic development activities and what changes in emphasis may need to be made. We have seen such a process work in other regions (e.g., Taranaki). 3 Council staff having discussions with each of the key delivery partners early in the annual planning cycle about priorities for the year, the mix of services to achieve these and related performance measures. These should form the basis of clear funding agreements or business plans (as appropriate) with each agency.

1.1.2 Is there a clear rationale and role for local government in supporting existing economic development activities and services? We have previously provided a paper on the role of local government in economic development for the Marlborough District Council (MartinJenkins, 2015). In summary, local government has a role in making long-term and strategic investment decisions that impact on the nature and structure of the economy due to the very nature of its activities. The Council undertakes planning and manages regulatory functions, infrastructure and services that impact on business and investment decisions. These functions can be considered broader economic development functions of local government and are well recognised. They are also consistent with the role of local government as defined in the Local Government Act 2002, i.e., that the primary role of local government is to meet the current and future needs of communities for good quality local infrastructure, local public services and performance of regulatory functions in a way that is most cost-effective for households and businesses. Local government of course gets involved in functions beyond these core roles. This includes direct economic development services and activities such as those being considered in this review. These initiatives aim to more purposely build the capability of businesses, industries and communities to respond to opportunities. We consider that these services are justified and will meet the public services definition in the LGA if they are based on: 1 Clear evidence that there is a significant problem or opportunity facing local businesses, industry or the economy.

2 The identification of market failures underpinning such problems, such as features of public goods, information and coordination problems or externalities, which result in private decisions that are less than desirable from a district, regional or national perspective. 3 An assessment that local government (or a delivery partner) can mitigate the problem and is best placed to improve on the market outcomes – relative to the private sector, non-government sector or central government. 4 An assessment that intervention by the local agency will succeed and that the benefits of doing so will exceed the costs. 5 A willingness and ability of stakeholders affected or benefitting from the activity to engage. These questions are discussed in more detail in Appendix 2. We consider each in turn in relation to the Council’s investment and engagement in economic development activities below.

Do current economic development activities and services meet these tests? A. Evidence of problems and opportunities As discussed earlier, activities are based on identified issues and opportunities. There is a reasonable base of research available on the significant economic problems and opportunities facing the region (e.g., the Smart and Connected Innovation Stocktake) and the Council has good levels of engagement with industry and communities to get regular input through Smart and Connected processes.

B. Market failure arguments are clear Based on market failure rationales, the case for local government economic support is strongest for the types of activities highlighted in Table 6. Although this appears to be a great deal of potential activities, it is important to emphasise that the focus for economic development activities should be on information provision, facilitation, coordination and promotion rather than necessarily direct provision of services or investment in projects (unless the public benefit arguments are clear). Actual investment and hands-on intervention in projects requires more detailed consideration and a higher test. It’s also important that, wherever practical, the Council’s activities aim to catalyse as much private sector and non-government co-investment as possible over time. This is to prevent an over-reliance on Council funding and involvement.

Table 6 also provides our assessment of the consistency of current economic development services against appropriate roles for local government.

Table 6. Consistency of economic development activities with appropriate roles of local government

What types of economic development activities are justifiable? How consistent are economic development services/activities in Marlborough with the rationales and appropriate roles?

Business development support – providing basic business information and advice (e.g., about relevant local Consistent: referral services facilitating access to networks and to other government regulation and processes), , and  Business Trust Marlborough facilitates business access to business mentors support. This is to overcome information problems (e.g., about where to find advice, about the quality of and angel investors and refers businesses to other providers of assistance. available advice or about the benefits that advice will bring), much of which has a particularly local or regional flavour.  The Council provides businesses and developers with information and advice about Council processes.

Skills support - promotion of the benefits of upskilling, signposting of education and training opportunities, Consistent: supporting job matching promoting job and education opportunities programmes and in the region – not  The Council has not been particularly involved in this area of activity, except typically training itself, unless for a limited time (to prove to the private sector that the training works). for a) supporting research into labour market issues in the wine industry and Businesses may under-invest in these activities due to a lack of certainty about the benefits that may result working with the industry to identify how the Council can support the (information problems) and due to concerns about trained staff leaving their business (knowledge spillovers). development of accommodation for workers, and b) supporting the Only Marlborough resource, which can be used to attract talent to the region.

Promotion of innovation – local government supported agencies can have a role in coordinating activities of Generally consistent: providing information on research and commercialisation expertise business and research organisations, and  MRC facilitates the food and beverage cluster, which is focused on improving available in the region. This can be to overcome a lack of awareness of relevant R&D support that exists in the coordination of innovation across firms in the cluster and linking participants to region (i.e., to overcome coordination and information failures) and to account for broader benefits associated available R&D expertise. with innovation activity. Local government can sometimes have a role in seed funding or co-investing in local innovation facilities if the public benefit case is significant.  The Council has committed co-funding support for the establishment of the NZ Research Institute for Viticulture and Oenology on the basis of job and R&D benefits to Marlborough and because a regional commitment needed to be demonstrated to central government.  The Council provides funding support for research projects through the Marlborough Research Centre and the long-term public and regional benefits of these projects (relative to private, industry and national benefits) is not always clear.

Investment attraction and promotion – encouraging and promoting inward investment to the region and Consistent: bridging information gaps and networks between inward investors and key organisations in the local economy .  The Council has not been particularly active in this area of economic Overseas investors’ may have limited knowledge about the local economy and investment opportunities that a development except through via its Smart Business Marlborough services – Council or its agency may be well placed to fill (i.e., to overcome information problems). Assisting existing offering advice on local government processes to businesses considering investors to expand or retain their investment in the region by facilitating regulatory approvals, to access skilled relocating to the region or expanding. It also worked with NZTE in developing staff or R&D expertise can also be warranted due to the broader benefits that investment can bring (e.g., new an investment profile for the region. and better jobs).

Internationalisation support – supporting the provision of information on markets, facilitating trade/diplomatic Consistent: visits facilitating connections and between local business and offshore networks. This can be warranted  The Council facilitates trade, education and political visits through its sister- because local government can have a natural advantage in its knowledge of the regional or local economy and city relationships. It has helped to link businesses with offshore markets ability to match this to offshore opportunities. Local government may also have links, networks and through the Ningxia relationship. relationships with offshore local governments that would be beneficial to firms, over and above firms’ own networks (e.g., through city to city relationships).

Industry development and major projects – local government can play a role in coordinating sector Consistent: resources and investment infrastructure planning in strategies and major projects in the region and supporting  The Council has provided support for the formation and coordination of or feasibility analysis. A Council or its agency may be seen as an impartial broker to help coordinate industry groups and the development of sector strategies and plans through investment across an industry. It may also be involved in related activities, such as regulating the use of or the Smart & Connected process. owning land or an asset that is sought by a particular industry. If the public benefit case is significant, this role can also involve seed funding or co-investment in major projects.

Destination marketing and management – activities such as regional promotion and destination marketing Consistent: can be justified due to the public good elements of tourism promotion and coordination problems, as individual  Destination Marlborough undertakes regional promotion and destination tourism operators cannot capture all of the benefits of marketing and because of the diverse nature of the marketing. It also works to attract business events to the region. industry (which may make it difficult to organise a cooperative marketing effort across all relevant businesses). Similar arguments can also warrant local government involvement in events and conference attraction and  The Council provides information and funding support for major events which investment in events infrastructure (e.g., businesses surrounding an events centre obtain benefits from visitors are geared towards benefitting the wider economy. The Council also owns the to an event but it could be very difficult to get them all to co-invest in the event). Local government can have a convention centre and has provided funding support to the theatre. role as it is often the provider and manager of infrastructure and services used by visitors (such as public  The Council-supported Visitor Economy Smart and Connected Group has spaces, parks, public transport), and hence is already involved in creating an environment that is attractive to developed a visitor strategy and growth plan for the region. visitors.

Town or community development – local government can be well placed to encourage individuals and Consistent: businesses to collaborate in the provision of district or community improvement activities and regenerative  The Council has provided support for the formation and coordination of property investment. This is to overcome coordination problems in the provision of collective services and community groups and their strategies and the development of the Blenheim because of broader (e.g., employment) benefits associated with these activities, which are not taken into Business Association. Although not strictly an ‘economic development activity’ account by private decision-makers. the Council also supports towns to collectively improve their facilities through the Small Townships Programme.

Strategy development and economic monitoring – local government has a role in providing leadership for Consistent: the economic direction of the locality and region. This provides clarity and certainty for business location and  The Council has previously supported research on industry opportunities and investment decisions. It also has role in ensuring that robust local economic development data and information challenges through the Innovation Stocktake and provides access to is available to inform strategy development and planning and enable decision-making. This includes measuring Infometrics economic profiles and other research on its website. and evaluating the achievement of strategies, plans and investment to identify where improvements or changes or direction need to be made. This is to overcome information problems and reflects the fact that local government often has better access to relevant information and is an impartial source of that information.

Overall, economic development services and activities provided by the Council and delivery agencies are largely consistent with the rationales.

However, there is a question about the ongoing role of the Council in providing funding support for long-term research projects through the MRC. The rationales for the Council supporting the food and beverage innovation cluster (to overcome coordination issues and to provide linkages to offshore markets), the Research Institute (as a regional funding commitment was required), and the collection of weather information (given the wider public benefits) are reasonably solid, but the rationale for continuing to directly support some of the current research projects is not as strong. For example:

 The benefits of phenology monitoring are captured by the wine sector. While there would have been a good rationale to help seed this research and demonstrate the benefit to the collective industry, we would assume that these benefits would have been demonstrated by now. Given this, it may be time for industry to fully fund this activity (e.g., through higher subscriptions). In addition, once the RIVO is established, we assume that MRC’s role in supporting viticulture R&D will need to change.

 Similarly, clearly there will be regional benefits from the Drylands Forestry research initiative and the Council funding helped to support the local coordination of the project, but the ongoing role for the Council in co-funding this research should be reconsidered as the R&D reaches the commercialisation stage.

As noted in the table above, the case for local government support for innovation is strongest when it relates to linking local businesses to research expertise, attracting R&D projects and expertise into the region, and in helping to seed the establishment of R&D capability. Recognising that the benefits of R&D flow beyond businesses, industries and regions, central government rather than local government is heavily involved in co-funding R&D projects and programmes with industry on a long- term basis.

This is not to say that the Council should not continue to support innovation activity through the MRC (or any other institution) as there can be good rationales for supporting the right types of activity. Rather, we believe that the Council should have a more substantive discussion with MRC about how the funding should be targeted over the long-term to support the evolution of MRC and the RIVO.

Is the Council or are supported delivery agencies best placed to provide the activities?

There appears to be no obvious ‘crowding-out’ of other providers of and partners in economic development support and indeed are close working relationships in some cases. Moreover, the Smart and Connected process is focused on drawing on the expertise and resources of industry and community representatives and organisations, rather than the Council leading activities.

Destination Marlborough, MRC and Business Trust Marlborough all work with and bring in other partners into initiatives where possible. For example:

 Business Trust Marlborough – is part of a consortium with the Chamber of Commerce and Nelson RDA delivering national assistance at a local level. They also developed a working relationship with Angel Investors Marlborough to refer businesses to their network.

 Destination Marlborough – has worked with a range of organisations on marketing and promotion initiatives, including Air New Zealand, Port Marlborough, Marlborough Airport, Bluebridge, Tourism New Zealand, King Salmon, the Picton Smart and Connected Visitor Economy Group and the Smart and Connected Aquaculture Group, amongst many others.

 Marlborough Research Centre – has a range of research and education collaborators, including Plant & Food Research, NMIT, Massey University, NZ Winegrowers and Wine Marlborough.

There were questions asked by some interviewees about why the Council established industry leadership groups in areas where there were already strong industry organisations (e.g., forestry and aquaculture). However, the Smart and Connected leadership groups draw on a broader set of stakeholders than are represented on existing industry group governance boards.

There were also differences in views expressed about whether Destination Marlborough or a local promotion organisation would be best placed to deliver local destination marketing activities in Picton. These views are based on concerns about a lack of promotion of Picton/Marlborough Sounds in marketing efforts in the past. Given the relatively small scale of the region, we do not believe there is a need for a separate local promotion organisation and that such promotion can and should be delivered by Destination Marlborough (this is discussed later in the report). In addition, we heard feedback that Destination Marlborough has recently put in greater effort to engage with Picton stakeholders on marketing initiatives.

D. Do the benefits of intervention exceed the costs? As is common across regions in New Zealand, there has been a limited assessment of the benefits compared to the costs of most economic development services in the region other than resident satisfaction measures and broad estimates of impacts provided for events. Assessing the benefits of economic development activities and attributing impacts to a service is difficult to do in practice, but mechanisms can be put in place to ensure better quality monitoring and impact reporting than is currently the case (this is discussed later in this report).

However, to the extent that national evidence suggests that the broad types of activities being delivered generally result in benefits greater than the costs and because there is no real evidence that any of the current activities are not working and should be eliminated altogether, we can assume that this test is likely being met (a more detailed assessment of what is known about impacts is covered later in this report).

E. Stakeholders are willing and able to engage. It is clear that the Council and its delivery partners engage with industries and organisations that are prepared to commit to projects and initiatives. As we noted, the recommendation from the Innovation Stocktake report when Smart and Connected was established was to develop industry strategies and leadership groups for a large range of sectors. However, the Council has taken a more measured approach and focused on industries that were ready to engage. For example, they have had discussions with the wine industry about establishing a Smart and Connected Group but the industry has been happy to work with the Council through the existing Winegrowers Association. Almost all of the initiatives that the Council or its agencies support require others to have provided co- funding and/or their own time/resources, which signals a commitment to engagement from stakeholders. Overall, we consider that economic development activities in the region supported by the Council are justified based on these tests, although there is a question about the mix of R&D activities that the Council should support in the long-term. However, in order to make a stronger argument that local government interventions are appropriate, the Council needs to improve performance monitoring and reporting in future (discussed later in this report).

1.2 Are there any gaps in economic development services?

Another way to consider potential gaps in economic development support is to assess whether there are any activities commonly delivered in other regions that are either not delivered or delivered differently in Marlborough.

1.2.1 How do economic development services in Marlborough compare to other regions? Councils in all regions of New Zealand support the provision of economic development services and activities, generally through economic development agencies (EDAs) and regional tourism organisations (RTOs). There are around 20 economic development entities across New Zealand and 30 regional tourism organisations (some EDAs and RTOs are the same entity). Depending on the regional context and priorities, economic development activities tend to span the spectrum noted earlier, i.e., business development support, skills support, promotion of innovation, investment attraction and promotion, international linkages support, industry development and major sectoral project support, destination promotion and events attraction, and town and community improvement activities. However, different activities are given more or less emphasis in each region depending on the context. Appendix 3 describes the activities of some comparable regions. Economic development activities supported through MDC cover the types of economic development services offered in most other regions. As with most other regions, destination marketing and promotion (including events) is a major area of activity. Marlborough is more active in facilitating industry development and community development than several other regions through the Smart and Connected processes. However, Marlborough is less active in business development support, investment attraction & facilitation, destination management (as distinct from destination marketing) and, as noted above, skills support activities. The question is whether these are genuine gaps. In relation to business development support, most other regions have an economic development agency or Council supported organisation acting as NZTE’s and Callaghan Innovation’s Regional Business Partner, facilitating access to capability development vouchers, R&D grants and business mentoring. Marlborough has business mentoring directly delivered through the Council supported Business Trust Marlborough. However, NZTE and Callaghan Innovation support is delivered through the Nelson Regional Development Agency (NRDA) and Chamber of Commerce. The region does not appear to be missing out on a sufficient level of business development support due to this. NRDA has delivered a good level of services into the region:  In 2015/16, NRDA engaged with 127 businesses in the region, facilitated over $229,000 of NZTE and Callaghan Innovation funding into businesses and achieved a net promoter score of 67  In 2016/17, NRDA engaged with 214 businesses in the region, facilitated close to $365,000 of NZTE and Callaghan Innovation funding into businesses and had a net promoter score of 80 As such, it does not appear that there is a gap in ‘public’ supported business development services in the region, even though the Council is not a major investor in this area.

In relation to investment attraction and facilitation services, it is not apparent that there is a major need or demand for these activities in the region. We did not receive any feedback from organisations we spoke to that businesses and projects find it difficult to secure investment or that the region needs to actively attract businesses from other locations to ensure future growth. The Smart and Connected research identified a need for small business investment facilitation but did not identify major investment or FDI attraction and facilitation as a gap. Several stakeholders did note that the region could do more to attract skills and talent to the region. As noted earlier, in other regions Councils and their economic development partners support initiatives such as talent attraction campaigns, job-matching websites and youth into employment schemes. We believe that the Council should consider this element of economic development activity as a potential area of focus for any future economic development strategy and action plan. Although destination marketing activities are well supported through Destination Marlborough and the events role of the Council, there is (as previously noted) currently limited effort going into tourism product and experience development in the region. Destination Marlborough is providing product development workshops for SME tourism businesses and has previously been involved in working with other stakeholders to prepare for the cruise season. MDC has previously supported the establishment of the Omaka Aviation Heritage Centre and supported the Coastal Pacific Trail feasibility assessment (and recently agreed to support the establishment and maintenance of the Trail). However, Regional Tourism Organisations and Councils in other regions are increasingly involved in working with communities and businesses to provide support for feasibility work and business cases on new tourism attractions and experiences and, when there is a good case to do so, co-investing in these products. We also note that product development is a major theme of the Smart and Connected Visitor Economy Growth Plan, which includes actions related to encouraging walkway and cycleway initiatives, developing experiences that open up access to Marlborough’s conservation assets and initiatives for visitors, and developing experiences that reflect the region’s maritime and regional history and Māori heritage. It appears to us that there is a gap in how existing activities engage with Māori/iwi/hapu on economic development opportunities. Māori/iwi will increasingly play an important role in shaping the economic growth of the region (noting that the Māori population has grown by 11 percent over 2006 to 2013). We have not seen any explicit reporting on engagement with Māori across any of the services. It is not clear how Māori are participating in Smart and Connected processes beyond sometimes having an iwi representative on a steering group, or whether Māori businesses and organisations are being adequately connected to networks and resources through existing activities. We were asked to consider whether the region should have a regional film office. As shown in Appendix 3, film offices are supported (at least in part) by local government in some regions such as Taranaki and Bay of Plenty (there are others in Auckland, Wellington, Otago-Southland and the Hawke’s Bay). Regional film offices attract and facilitate screen productions in a region and help with finding and accessing locations, film permits and other resources. The Council recently considered a paper on options for a film office and the paper noted that the benefits could include an increase in the number of productions in Marlborough (and flow-on benefits from the spend in the region), the ability to better control the environmental impacts from productions, increased tourism due to interest in film locations in the region, and creative business and employment opportunities. The options being considered include ‘do nothing’, developing a film office in Marlborough, or partnering with the Wellington film office. Unless it is likely there will be a reasonably consistent demand for the use of Marlborough locations for screen production, we do not consider there is strong rationale for establishing a full office in Marlborough at this time. Marlborough has good locations, but so do other regions of New Zealand. Marlborough does not have screen facilities or a large base of screen-related skills to leverage, unlike several other regions. We have not seen any estimates of the

potential pipeline of activity that the region could secure by having such an office. In our view the region would be better to leverage off the capabilities and efforts of an existing office such as Screen Wellington, at least initially. This would keep costs down, provide the region with screen production marketing opportunities through the efforts of Screen Wellington, while also building up the region’s networks and experience to support productions if they arrive. If such an arrangement proved successful and there was growing demand, the Council could consider a different arrangement at a later time. In terms of delivery models, a separate point to note from a comparison of regions is that although there is a different mix of organisational models across New Zealand, there has been a shift over time to single entities that combine economic development and destination marketing & management services (e.g., in Auckland, Christchurch, South Canterbury, Dunedin, Rotorua, Manawatu-Wanganui, Wellington, Gisborne, Nelson-Tasman and a merger of activities is being undertaken on the West Coast). This reflects clear commonalities across business, sector and destination marketing activities and a desire to have greater flexibility in making resource decisions across these activities. The Marlborough model is quite unique in having the Council directly involved in several areas of activity and having multiple delivery partners, although other Councils (e.g., Dunedin) do directly deliver economic development services as well. This reflects the benefits that can be achieved by having economic development activities, such as events and business information, closely aligned with related Council processes. We consider delivery options later in this report.

1.2.2 Are there any overlaps in economic development activities between the Council and delivery partners? Our review of plans and annual reports and discussions with stakeholders suggest that there is little overlap in economic development activities between the Council and its delivery partners or between the key delivery partners. The Council tends to be involved in economic development activities closer to its core roles (e.g., providing information on regulation and Council processes to support new developments and events, and on supporting industries and communities to plan for growth and achieve their aspirations). As noted, Destination Marlborough focuses on supporting regional marketing and promotion, Marlborough Research Centre focuses on supporting innovation and research connections, and Business Trust Marlborough focuses on small business advice, information and referrals. There are activities where the Council and delivery partner agencies are both operating, such as in marketing, events, and international linkages. Our observation is that generally the roles tend to be complementary rather than competing. There are several examples of joint work between the organisations in these areas:  The Council and Destination Marlborough have been involved in the establishment and servicing of the Smart and Connected Visitor Economy Group  The Council, MRC and Destination Marlborough are three of the core partners in the Marlborough Story and Only Marlborough identity and resources  Follow-ME (Marlborough Events) is hosted on the Destination Marlborough website but is operated by the Events Coordinator at the Council. The Council’s Events Coordinator and the Business Events staff in Destination Marlborough are operating a shared calendar to avoid timetable clashes across conferences and events  The Chair of Destination Marlborough is part of the Commercial Events Fund sub-committee with Council representatives

 The Events Coordinator works with Destination Marlborough staff on supporting and advising on specific events (e.g., British Lions Tour)  Business Trust Marlborough has referred several clients to the MRC and Destination Marlborough over the last two years  The Council, through its Smart Business Marlborough service, has referred several enquiries to Business Trust Marlborough over the last three years  MRC has worked alongside the Council in developing the relationship with Ningxia  Both the Council and MRC were involved in the concept development process for the RIVO. We heard from some stakeholders that there was room to improve the working relationship between the Council and Destination Marlborough and that there had, in the past, been some areas of duplication or divergence (e.g., in relation to branding). However, staff from both Destination Marlborough and the Council indicated that the relationship is productive. In their view the Only Marlborough Story (the overall regional identity) and ‘Brilliant Every Day’ consumer brand can be complementary rather than competing (branding is discussed later in this report). Even though the organisations appear to be working well together in relation to events, a question is whether the Council should be involved in attracting, advising on and providing funding support for major events, given that Destination Marlborough is also involved in attracting and promoting business events and conferences. We appreciate that the Council naturally has a role in providing advice to events in relation to Council processes (e.g., consents) and on the use of Council facilities but the other roles may fit better with an arms-length agency responsible for marketing and promotion (although it may not be efficient to split the advisory functions). We consider this further in a later section of the report.

1.2.4 Are economic development activities being developed and implemented in coordination with other organisations delivering related services? Stakeholders consulted indicated that there were mostly good working relationships between the Council/its delivery partners and other organisations involved in economic development activities in the region. Several noted that working relationships across organisations had improved over the last 2-3 years due to Smart and Connected processes. Some examples of joint work include:  The Smart and Connected processes have enabled existing associations, such as the Marlborough Forest Industry Association, Marine Farming Association, Havelock Community Association and (what was) the Renwick Residents Association and communities to improve their level of engagement with the Council on planning issues.  The Council involved NMIT in the development of the Ningxia relationship. As a result, NMIT now have MOUs with two universities in China with a small number of students enrolled in courses.  Destination Marlborough has worked with Tourism New Zealand on several marketing campaigns over the years. It is developing a more formal relationship with Wine Marlborough to identify the different marketing and promotion focus of each organisation and to identify opportunities for collaboration. It has also formed a close relationship with the Port of Marlborough to promote and service the cruise industry.

 MRC has developed strong relationships with several economic development partners, such as Massey University, including bringing University experts into the region. This has led to the University working with local businesses. There is a good working relationship between MRC and Wine Marlborough, supported by the co-location at the MRC hub. However, we were told there are further opportunities for Wine Marlborough members to use MRC’s services. MRC also works with NMIT, for example providing tutoring and research.  Business Trust Marlborough is part of the Regional Business Partner consortium with the Marlborough Chamber of Commerce and they meet regularly to discuss referrals. However, we also heard that Council supported economic development activities in Picton, through the Picton Smart & Connected Group and Destination Marlborough, have not always been well- coordinated with other local promotion and development efforts. In addition to the Picton Smart & Connected Group, the Picton and Marlborough Sounds Visitor Economy Group and Picton Business Group are involved in promoting and supporting community development projects, including providing visitor information and undertaking marketing initiatives. There is sometimes duplication of effort across the groups, for example, using social media to promote Picton and investment in signage5. Conversely, we consistently heard that cruise ship visitation is an exemplar area where Picton’s local promotion organisations are effectively working with each other, with Destination Marlborough and with the Council, for example, participating in a Cruise Ship ‘Think Tank’ and involved in welcoming and hosting visitors. We were told that this is because there is an obvious imperative and opportunity that focuses attention and because the division of responsibilities between the different groups is clear. Although improved cooperation is clearly possible when interests align, rationalisation of the Picton groups’ activities is desirable in our view to better leverage the collective resources and expertise of group members and to reduce the costs involved with engagement and, in some cases, delivery of projects. We believe an independently facilitated process is required to bring the different groups together and to identify how the collective interests can best be progressed in future. We consider this further when we discuss the effectiveness of Smart and Connected Groups. More generally, although there was consistent feedback that relationships and communication between the Council and other organisations involved in supporting economic development in the region were quite strong, we were told this was largely about operational matters rather than strategy and priority setting (other than through the annual plan submission process).

______5 The Picton Business Group was previously involved in developing and erecting the ‘Welcome to Picton’ signs and wanted the signs retained; Picton Smart & Connected and Destination Marlborough were involved in developing concepts for new signs with the ‘Heart of the Sounds’ tagline; and the Picton Marlborough Sounds Visitor Economy Group developed the “I Love Picton” photo frame on the foreshore.

2. ARE SERVICES EFFECTIVE AND PROVIDING VALUE FOR MONEY?

Summary What is being delivered? The Council and key delivery partners are delivering a large range of economic activities and initiatives. Some of the highlights over the last two years are:  There were close to 230 client engagements and around 100 mentor matches by Business Trust Marlborough over 2015/16 and 2016/17.  Destination Marlborough supported a range of marketing and promotional campaigns, hosted around 120 media outlets and provided training to over 2200 wholesale and frontline travel sellers over 2015/16 and 2016/17.  The Council produced close to 90,000 Follow-ME events brochures over the two years and the Events Coordinator assisted around 30 events per month offering advice, and information on dates and Council services.  The Council, with other stakeholders, developed and formalised the relationship with the Ningxia Region.  The Council and MRC supported the case for and helped secure the Regional Research Institute in Viticulture and Oenology.  A large range of industry and community development initiatives were progressed through the Smart and Connected Visitor Economy, Wood Sector, Aquaculture Sector, Picton, Renwick and Havelock Groups and the Blenheim Business Association. The Council has achieved positive but somewhat mixed results on its own key performance indicators over 2014/15 to 2016/17. Resident satisfaction with regional development services and tourism services is good but not markedly high. Satisfaction with MRC is higher. Positively, both MDC and Destination Marlborough have been achieving their business/work plan targets each year. However, high-level performance measures do not provide a good sense of how the collective economic development work programme is performing. What is known about the impact and effectiveness of services? As is common with economic development activities across regions, there is limited hard or evaluative information on the impact of different activities in Marlborough, with the exception of major events. Given this, we cannot definitively say that the benefits of the activities exceed the costs. However, our judgement is that this is likely the case and that economic development activities are effective. This is on the basis that:  Business Trust Marlborough has grown its level of client engagements, referrals, mentor matches and mentors over the last three years.  Relatively high proportions of businesses accessing Business Trust Marlborough support have been satisfied with the service and consider that the service has helped improve their business knowledge.

 There are several examples where the Smart Business Marlborough advisory service of the Council has made a difference to business decisions and developments.  The food and beverage innovation cluster has generated a range of new activities for the region, including the Premium Foods for China initiative and Massey University expertise working with local companies. The majority of cluster members indicated that mutual benefit was gained from the cluster.  MRC supported research projects have leveraged significant co-funding and resources from other organisations and have enabled better management decisions based on the research.  The development of the Ningxia relationship has facilitated wine industry, research and education linkages for local organisations.  Specific marketing initiatives implemented by Destination Marlborough have resulted in uplifts in visits and referrals.  Industry contributions to Destination Marlborough’s activities have increased over the last three years, which suggests that the private sector values the activities and considers they are effective.  The vast majority of the goals and related actions of the Regional Events Strategy 2013-2016 were completed, and good progress is being made on the actions in the updated 2016-2019 Strategy.  Events supported through the Commercial Events Fund are achieving good outcomes in terms of visitor numbers and spend from outside the region and the estimated return on investment from some supported events is very high.  The region has gained market share of business events since 2014 and the number of delegates and delegate days has grown strongly over the same period.  Stakeholders rate the events advisory service of the Council highly and there are several examples where the role has made a real difference to the success of an event.  A national study suggests that i-SITEs in Marlborough are facilitating relatively high levels of visitor expenditure compared to i-SITEs in other smaller regions.  Smart and Connected industry groups have resulted in some projects that otherwise would not likely to have occurred and have improved industry relationships with the Council, resulting in more constructive dialogue and input on environmental and planning issues.  Smart and Connected community groups have delivered a range of community improvement projects. We have also found several areas where the effectiveness of activities could be improved or where better information is required to assess impacts:  There is marked variation in the levels of community satisfaction with economic development and tourism services across different locations, suggesting there is variation in the reach and impact of services.  There is limited information collected about the effectiveness of the information and advice provided through the Smart Business Marlborough advisory service and the outcomes resulting from the service.  Destination Marlborough’s digital and social media performance was low relative to comparable RTOs when last benchmarked.

 As noted in the recent review of destination marketing activities, stakeholders consider that the region has too many brand messages, which confuse the visitor value proposition, and that these need to be integrated.  The quality of Commercial Events Fund reporting is variable and further guidance is required to ensure that consistent information is provided on the impact of the funding post-events.  The Council needs to clarify expectations about how it will engage with Smart and Connected Groups and to be upfront and transparent when working on issues that impact on the relevant sector or community.  Smart and Connected Groups should have greater opportunities to share information about work programmes in order to identify joint priorities and ways of improving group functioning.  Smart and Connected community groups find it difficult to maintain momentum on implementing their plans in the absence of having a dedicated resource to coordinate and drive activities. Because of the limited hard evidence available about outcomes and noting that in some cases it may take years for outcomes to result from interventions, it is difficult to suggest there are specific economic development activities that are not effective and that should be discontinued at this time. Are services delivered cost-effectively? There is also no evidence of major areas of inefficiency. Destination Marlborough’s expenditure and staff costs have grown over the last four years but so has its level of several outputs. It is around the middle of Regional Tourism Organisations (RTOs) in terms of council marketing investment per guest night. In addition, Destination Marlborough’s proportion of staff costs to total expenditure is about average relative to other comparable RTOs. However, in other areas of activity some minor efficiency gains may be able to be made by:  transferring decision-making on the Commercial Events Fund to Destination Marlborough  encouraging Business Trust Marlborough and the Chamber of Commerce to integrate their service offerings and offer a single front-door for business development assistance. Do the benefits of economic development activities exceed the costs? We consider that it is likely that the benefits exceed the costs, based on what is being delivered, the impact information that is available, industry co-funding and resourcing of several activities and feedback from stakeholders. However, we cannot state this definitively given there has not been a formal evaluation of activities or detailed estimates of impacts (other than for events). In order to better measure and assess performance, the Council should work with delivery partners to develop an agreed output and outcome framework that sets out the logic between the inputs being used, the activities being purchased and delivered, and the desired short-, medium- and long-term outcomes and associated performance measures. The framework would need to be realistic about what can be measured and the resourcing (staff time and funding) required to assess performance relative to the investment being made in economic development activities. The framework and measures could form the basis of a summary annual report on the full set of economic development activities supported by Council.

2.1 What outputs are being delivered?

There is a good range of information about the quantity of outputs being delivered by the Council and delivery partners through regular Council reporting to the relevant Council Committees. An update on the economic development work programme is provided at monthly Committee meetings and delivery partners report at least six-monthly (often with more regular updates provided by Council staff) to the Committee. Table 7 highlights the outputs reported by the Council and delivery partners over the last two years in relation to broad economic development service areas.

Table 7. Outputs from local government funded economic development activities

Service area 2015/16 2016/17

Business Business Trust Marlborough Business Trust Marlborough development  109 client engagements  120 client engagements

 199 referrals to other support  205 referrals to other support organisations organisations  58 mentor matches  43 mentor matches  28 mentors registered  2 mentor networking functions  2 ‘Kickstart Your Business’ workshops  25 mentors registered  Built relationship and association with Angel  2 ‘Kickstart Your Business’ Investment group. workshops. Marlborough District Council: Marlborough District Council  Large number of enquiries dealt with  Several enquiries dealt with through through the Smart Business Marlborough the Smart Business Marlborough service: service:  13 enquiries between June and  5 enquiries between April and September 2016 August 2015  10 enquiries between September and  2 enquiries between August December 2016 and October 2015  7 enquiries between December 2016  4 enquiries between October and March 2017 and 15 earthquake 2015 and February 2016 enquiries  4 enquiries between February  11 new enquiries between March and and March 2016 June 2017.  3 enquiries between March and April 2016  3 new enquiries between April and June 2016.

Destination Destination Marlborough Destination Marlborough management & marketing Consumer marketing: Consumer marketing:  Worked with Air NZ to develop a  Undertook the ‘Never been Better’ competition for a weekend in campaign Marlborough for Koru Club members  Participated in the Australia South Island  Supported the ‘Inspired Journey to Journeys campaign Marlborough’ campaign with Tourism  Invested in partnership with TripAdvisor to NZ and Positively Wellington Tourism drive Destination Marlborough content  Invested in a joint venture with through TripAdvisor visitors to the site Christchurch Airport and Tourism NZ  Promoted Marlborough through Whitcoulls to promote South Island Road stores as the film location of the Light journeys Between Oceans movie  Promoted a competition for a trip to  Worked to ensure the inclusion of 5 Marlborough with NZ Winegrowers Marlborough experiences in a ‘NZ Ultimate  Developed and launched Bucket List’ ‘Marlborough Now’ to package  Worked with Air NZ to promote a Instagram and twitter posts from competition to Airpoints members for travel visitors and display them to Marlborough, and to build Marlborough  Developed the visitor welcome content for their regional brand toolkit information displays and imagery with  Supported Port Marlborough to promote Marlborough Airport travel packages at the On-Water Boat  Developed an online marketing Show in Auckland campaign for the Havelock Mussel and Seafood Festival

Service area 2015/16 2016/17  Promoted travel packages to the  Delivered a Spring campaign with Marlborough Sounds at the On-Water Bluebridge to attract mountain bikers form Boat Show with Port Marlborough the Lower North Island  Promoted the St Clair Vineyard Half  Provided content to Sounds Air for their Marathon at Auckland Marathon Expo newsletter  Promoted Marlborough and the Wine  Partnered with King Salmon to bring 3 and Food Festival with NZ King social influencers to the region for the Wine Salmon and Food Festival  Delivered a PR and advertising  Provided editorial content to third party campaign to Wellington and media channels Christchurch to target and spring  Hosted 61 domestic and international travel media outlets  Hosted 58 domestic and international  Printed and distributed 75,000 copies of the media outlets. Marlborough Visitor Guide International marketing  Hosted the marlboroughnz.com website  Provided training to 1303 wholesale and facebook pages. and frontline travel sellers International Marketing  Participated in TRENZ 2016  Hosted 258 international travel sellers  Hosted 21 New Zealand and  Provided training to 960 wholesale and Australian based product buyers. frontline travel sellers Conference and incentive marketing  Participated in TRENZ 2017 with four local  Responded to 94 business event businesses enquiries  Planned and developed a programme with  Hosted 28 business event organisers Port Marlborough to host cruise ship captains and key crew on shore excursions  Attended two national trade events  Hosted 22 New Zealand and Australian  Secured 5 events from bid based product buyers. documents. Business Events Other  Secured leads and compiled bids for 14  Managed the Blenheim, Picton and conferences, and won 8 Havelock i-SITE information centres, attracting around 247,000 visitors  Hosted 45 key decision makers and event through the doors and making $3.1m planners to the region in sales  Attended three key trade events  Delivered industry workshops on  Supported a business events training and preparing for the cruise season, showcase for Marlborough operators understanding the China market, and  Undertook sales calls in Auckland, on the domestic visitor mix. Wellington and Christchurch. Marlborough District Council Other Only Marlborough  Managed the Blenheim, Picton and  Reviewed progress with Havelock i-SITE information centres implementation of Only Marlborough.  Produced a new Cruise Day product  Added Only Marlborough banners to brochure banner stock  Produced a self-guided walking trail map of  Developed a road signage proposal Picton using Only Marlborough and imagery  Contributed to the work of the Picton Smart for road signage branding. Launched & Connected Group, Aquaculture Group the “Welcome to…” road signage at and Visitor Economy Group. Marlborough airport Marlborough District Council  Integrated Only Marlborough into Council’s branding guide.  Installed Only Marlborough signage at entry points to Marlborough and in Blenheim

Service area 2015/16 2016/17 Events Developed signage for Renwick, Picton,  Reviewed conference and venue Wairau Valley, Rai Valley and Seddon utilisation in Marlborough  Produced and released a video clip to  Reviewed the Regional Events support applying the Only Marlborough Strategy and developed a new draft branding strategy  Developed more images for the website  Presented at the NZ Events Forum and haring in social media and publications  Attended the Big Day Out to talk to  Held two meetings with groups interested in travel agents about Marlborough learning about Only Marlborough and a Events meeting with existing stakeholders about how to promote the concept more widely in  Managed the Commercial Events the region. Fund – reviewed 9 applications over 2 rounds and provided funding support Events for 2 events – UCI World Amateur  Consulted on the draft Major Regional Cycling Qualifying Events and Events Strategy and finalised the Strategy Revelry (total: $41,500)  Managed the Commercial Events Fund –  Managed and promoted the Follow- reviewed 12 applications and provided ME events website and Facebook funding support to 4 events – Feast page. There were between 900 and Marlborough, Garden Marlborough, Ocean 2000 sessions on the website each Vine Hop and UCI World Amateur Cycling month over the year Qualifying Event (total: $62,250)  Produced the Follow-ME weekly  Produced and distributed 23,000 copies of newsletter the Winter Follow-ME Events brochure and  Managed the Events section of the 30,000 copies of the Summer Follow-ME Council’s website and toolkit and an events brochure Events Managers database  Managed and promoted the Follow-ME  Hosted a NZ Association of Event events website and Facebook page. The Professionals Regional Seminar Follow-ME website had between 1000-2000 sessions every month over the year. The  Supplied marketing material for a Facebook page had around 2000 likes each variety of events month over the year, with likes increasing  Provided advice and facilitated bids, from around 1950 at the start of the year to start-up, logistics and promotion for a 2150 at the end of the year large range of events (around 30  Produced the Follow-ME weekly newsletter events per month), including the Scout Jamboree, 75th Anniversary  Produced a Follow-ME What’s On Guide for celebrations for the Navy, the Marlborough Wine & Food Festival and International Sauvignon Blanc Classic Fighters event Celebration, Heartlanders Tour,  Managed the Events section of the Havelock Mussel and Seafood Council’s website and toolkit and an Events Festival, U19 International World Cup Managers database Qualifier Cricket, International Black  Facilitated a quarterly Event Managers Sticks Hockey Series meeting  Produced and distributed 36,000  Attended a New Zealand Major Events brochures for the Long Brilliant workshop in Auckland Summer Follow-ME campaign  Supplied marketing material for a variety of  Commissioned the Multi-Day events Convention Market Report.  Provided advice and facilitated bids, start- up, logistics and promotion for a large range of events, including the Scout Jamboree, NZ Association of Event Professionals Conference, Nelmac Garden Marlborough, Marlborough Wine and Food Festival, Saint Clair Vineyard Half Marathon, UB40 Concert.

Service area 2015/16 2016/17

Promotion of Marlborough Research Centre Marlborough Research Centre innovation  Co-invested in the following research  Co-invested in the following research initiatives: initiatives:  Meteorological services  Meteorological services  PHD Student stipend  PHD Student stipend  Industry seminars  Industry seminars  Phenological monitoring  Phenological monitoring  Dryland Forests Initiative  Dryland Forests Initiative  Wasp biocontrol  Pastoral Chilean Needle Grass  Supported the development of the research region’s relationship with Ningxia by  Landcare wasp control research participating in a delegation and  Supported the development of the region’s hosting a delegation relationship with Ningxia by participating in  Supported the case for Marlborough a delegation as the location for a Regional  Supported the Marlborough Food and Research Institute in Viticulture and Beverage Cluster: Oenology  Establishing closer connections with  Supported the Marlborough Food and Massey University Beverage Cluster:  Assisting relationship building  Undertook a pilot programme to between companies assist four companies to export to China (the Premium Foods  Supporting exports into China for China initiative) through the Premium Foods for China initiative.  Supported a product development ideation Marlborough District Council workshop.  Committed funding support for the Research Institute of Viticulture and Oenology.

Skills support Marlborough District Council Marlborough District Council  Co-invested in the Marlborough  Participated in the Wine Marlborough viticulture labour market study. labour market summit and related work programme.

Internationalisation Marlborough District Council Marlborough District Council support  Visited Ningxia with MRC and  Hosted a delegation of seven education, business representatives and research and wine industry representatives attended the Ningxia Wine Expo to from the Ningxia region discuss opportunities for the  Participated in the Ningxia Sister-City Marlborough-Ningxia relationship Forum with a representative from  Hosted two visits from the China Marlborough Schools and the wine industry Consulate in Christchurch  Hosted the Chinese Consult General  Hosted a delegation of six from the  Hosted economic and agricultural Ningxia region representatives from Ningxia.  Signed an MOU with the Ningxia Marlborough Research Centre region to facilitate exchanges and cooperation between the two regions.  Participated in a Ningxia Sister City delegation Marlborough Research Centre  Supported the Premium Foods in China  Participated in Ningxia Sister City initiative (noted in Promotion of Innovation delegations above).  Supported the Premium Foods in China initiative (noted in Promotion of Innovation above).

Service area 2015/16 2016/17

Industry Marlborough District Council Marlborough District Council development and  Supported the Visitor Economy,  Supported the Visitor Economy, Wood major projects Wood Sector and Aquaculture Sector Sector and Aquaculture Sector Smart & Smart & Connected Groups. Provided Connected Groups. Provided funding funding support for Education Nelson- support for Education Nelson-Marlborough. Marlborough. Wood Sector Group Wood Sector Group  Reviewed and updated the Sector Strategy  Reviewed progress over the previous  Held a wood sector family day 12 months  Progressed initiatives in the Wood Sector  Progressed initiatives in the Wood Strategy, including advice on regional Sector Strategy including the Scion roading issues and port logging activities. value stream project, wood residue project, forestry safety review project Visitor Economy Group and mapping forestry area project  Supported an industry event  Made a submission to the Annual  Progressed initiatives in the Visitor Plan. Economy Growth Plan. Visitor Economy Group Aquaculture Sector Group  Finalised the Visitor Economy Growth  Progressed initiatives in the Aquaculture Plan 2015-2025 Sector Strategy, including the community  Developed a new leadership group partnership project and innovation strategy project (Blue Mussels)  Progressed initiatives in the Visitor Economy Growth Plan.  Held a think tank on blue mussels Aquaculture Sector Group  Held a workshop on community perceptions of aquaculture in Marlborough.  Steering Group was formed Marlborough Research Centre  Held an event and interviewed stakeholders to provide input into the  Supported and facilitated the Food and development of an aquaculture sector Beverage Innovation Cluster (see strategy Promotion of Innovation above).  Finalised the Aquaculture Sector Strategy. Marlborough Research Centre  Supported and facilitated the Food and Beverage Innovation Cluster (see Promotion of Innovation above).

Community and Marlborough District Council Marlborough District Council town improvement  Supported the Blenheim Business  Supported the Blenheim Business initiatives Association and Renwick, Picton and Association and Renwick, Picton and Havelock S&C community groups Havelock S&C community groups  Adopted a Business Improvement  Commenced a process to establish a District Policy. Seddon S&C Group. Blenheim Business Association Blenheim Business Association  Held the BID poll  Worked on the Marlborough Mile concept,  Formalised its status as an CBD upgrades, Christmas opening and Association supported events, recycling and Easter trading  Made a submission to the Council on CBD improvement works and on the  Launched the “Beers and Ideas’ initiative Annual Plan  Developed a new website  Worked with the Council on plans for  Made a submission on the Marlborough the CBD redevelopment, including Environment Plan key public spaces.  Produced and distributed an email newsletter

Service area 2015/16 2016/17 Renwick S&C Group  Developed Christmas competition and  Set up the Steering Group and provided Christmas trees and a Giant working groups (and replaced the Reindeer in the CBD. Renwick Residents Association) Renwick S&C Group  Made a submission to the Long-Term  Progressed initiatives in the Renwick S&C Plan process and on the Annual Plan. Strategy, such as options for water supply,  Progressed initiatives in the Renwick communications, traffic management, S&C Strategy, such as options for village beatification (including domain water supply, communications, traffic upgrade) and wayfinding management, village beatification and  Worked on projects to improve the town cycleways centre ahead of the Scout Jamboree.  Reviewed and updated the Strategy. Picton S&C Group Picton S&C Group  Reviewed progress against the strategy  Confirmed the Strategic Plan for the  Progressed initiatives in the Picton S&C Group and updated the Plan. Strategy, including on the Bike/Walk, Picton  Made a submission to the Long-Term Wayfinding, library, public spaces, freedom Plan process camping, visitor economy and communications.  Progressed initiatives in the Picton S&C Strategy, including on the Havelock S&C Group Bike/Walk, Picton Wayfinding, library,  Progressed initiatives in the Havelock S&C public spaces, freedom camping, Strategy, including on the Boardwalk and branding and communications. pathway project and road signage. Havelock S&C Group  Made a submission to the Long-Term Plan and the Annual Plan  Progressed initiatives in the Havelock S&C Strategy, including on the Boardwalk project, Community Hub and identity  Established the Havelock Community website.

Investment No specific services or initiatives other Marlborough District Council Attraction & than general promotion through Only  Worked with MBIE and NZTE to produce a Facilitation Marlborough resources. regional investment profile

Strategy Marlborough District Council Marlborough District Council development and  Provided quarterly regional economic  Provided quarterly regional economic economic information. information. intelligence

Overall, there is a very large number of economic development activities and initiatives being delivered in the region. Some of the highlights from the table are that:  There were close to 230 client engagements and around 100 mentor matches by Business Trust Marlborough over 2015/16 and 2016/17.  Destination Marlborough supported a range of marketing and promotional campaigns, hosted around 120 media outlets and provided training to over 2200 wholesale and frontline travel sellers over 2015/16 and 2016/17.

 The Council produced close to 90,000 Follow-ME events brochures over the two years and the Events Coordinator assisted around 30 events per month offering advice, and information on dates and Council services.  The Council, with other stakeholders, developed and formalised the relationship with the Ningxia Region.  The Council and MRC supported the case for and helped secure the Regional Research Institute in Viticulture and Oenology.  A large range of industry and community development initiatives were progressed through the Smart and Connected Visitor Economy, Wood Sector, Aquaculture Sector, Picton, Renwick and Havelock Groups and the Blenheim Business Association. The Council has achieved positive but somewhat mixed results on its own economic development output related key performance indicators (KPIs) over 2014/15 to 2016/17 (Table 8 below).

Table 8. MDC economic development KPI measures and results

KPI 2014/15 2015/16 2016/17

Resident satisfaction with regional Almost achieved (6.3 Almost achieved Achieved (6.6 development service (1-10 measure) compared to 6.4 (6.2 compared to compared to 6.4 target) 6.4 target) target)

Resident satisfaction with tourism service Not achieved (6.8 Achieved (7.2 Almost achieved compared to 7.5 compared to 7.2 (7.0 compared to target) target) 7.2 target)

Resident satisfaction with Research Almost achieved (6.9 Achieved (6.9 Exceeded (7.5 Centre compared to 7.0 compared to 6.8 compared to 6.8 target) target) target)

% of funded economic development work Achieved (80 percent Exceeded (88 Exceeded (89 programme (2014/15) or Action Plan compared to 80 percent compared percent compared (2015/16 and 2016/17) targets achieved percent target) to 80 percent) to 80 percent)

Number of MRC published research Exceeded (81 Exceeded (118 Achieved (102 papers compared to 50+ compared to 100 compared to 100 target) target) target)

% of achievement of Destination Exceeded (94 percent Exceeded (93 Exceeded (92 Marlborough business plan key compared to 80 percent compared percent compared performance measures percent target) to 80 percent to 80 percent target) target)

% change in visitor nights in Marlborough Not achieved (-1.7 Achieved (6.3 N/A compared to national trends percent compared to percent compared 5.3 percent to 5.8 percent) nationally)

% change in domestic and international N/A N/A Not achieved (1 visitor spending in Marlborough percent compared to 6 percent nationally)

As shown, the Council has not always achieved its targets and the performance indicators have not shown a steady improvement over time. Resident satisfaction with regional development services and tourism services is good but not markedly high. However, satisfaction with the research centre is higher and the MRC has been meeting its research output target each year. Also, positively, both MRC and Destination Marlborough have been achieving their business/work plan targets each year. We note that a couple of targets reduced over 2014/15 and 2015/16, which resulted in their achievement (the ‘resident satisfaction with the tourism service’ target fell from 7.5 to 7.2 and the target for the research centre fell from 7.0 to 6.8). Looking at the resident satisfaction figures in more detail (Table 9) reveals lower satisfaction for economic development services, compared to broader regional development services and tourism services, and variation in satisfaction across the region:

Table 9. Resident satisfaction with Council services

Resident satisfaction 2014/15 2015/16 2016/17

Economic development Marlborough Sounds 68.0% 38.7% 55.0% Havelock 66.7% 66.7% 75.0% Picton 73.3% 55.9% 73.5% Western Wairau 40.0% 38.5% 66.7% Renwick 40.0% 53.3% 53.8% Blenheim vicinity 54.2% 46.5% 73.9% Blenheim 63.8% 54.9% 65.9% Awatere 45.5% 37.5% 53.8% TOTAL 60.7% 51.3% 66.4%

Tourism Marlborough Sounds 59.4% 71.0% 76.7% Havelock 40.0% 75.0% 80.0% Picton 61.1% 82.1% 63.6% Western Wairau 64.7% 64.3% 73.3% Renwick 68.8% 72.2% 57.1% Blenheim vicinity 66.7% 78.4% 83.7% Blenheim 78.4% 76.9% 72.0% Awatere 61.5% 83.3% 46.2% TOTAL 71.3% 76.6% 71.9%

Over 2014/15 to 2016/17, a lower proportion of respondents from Renwick and Awatere have been satisfied with economic development services than respondents from other regions. A relatively low proportion of respondents from the Marlborough Sounds have been satisfied with economic development services over 2015/16 and 2016/17. A higher proportion of respondents from the Havelock, Picton and Blenheim vicinity were satisfied than respondents form other parts of the region in 2016/17. A higher proportion of residents have been satisfied with tourism services than economic development services over the three years. Generally, lower proportions of residents from Renwick and Awatere have been satisfied with tourism services over the three years. The variation in satisfaction suggests there is variation in the reach or impact of the services (or the perception of reach and impact) across the region. We consider that MDC’s high-level KPIs are a reasonable mix of direct outputs (e.g., achievement of activities in MDC’s action plan, achievement of activities in Destination Marlborough’s business plan) and outcomes related to those outputs (e.g., satisfaction with services). However, there are a couple of indicators that we believe should be reconsidered:  Number of research papers published by MRC – we compared the KPI to the list of publications in MRC’s annual reports and noted that a majority of the papers are weekly or monthly publications, unintentionally overinflating what may be interpreted as the quantity of unique research being produced (for example, there are 30 weekly issues of VineFacts produced and 12 monthly meteorological summaries, which is around 40 percent of the total number of publications recorded in 2016/17). Better output indicators would relate to the completion of research projects funded by MDC and the activities of the food and beverage cluster.  Visitor numbers or visitor spend – although the region should certainly monitor visitor numbers and spend, it is very difficult to attribute destination marketing activities to visitor growth in the short- or even medium-term, as it is impacted by a large range of factors beyond the control of the Council or its delivery agencies (e.g., economic conditions and, of direct relevance, major events such as earthquakes). It would be better to track visitor enquiries and numbers resulting from or occurring around the time of campaigns that Destination Marlborough undertakes (this is discussed later in this report). Given MDC’s efforts to build the number of events in the region, we would have also expected to see an output measure related to the number of events advised and supported. Although these are reasonable high-level performance indicators to report on in the Annual Report, they do not provide much of a sense of how the collective economic development work programme is performing. In other regions, which typically have an economic development agency delivering most services, the agency reports on a large number of activities and measures as part of its annual reporting – in addition to the Council reporting – and this provides a good overview. While MDC’s delivery partners do report on their activities and a broader range of measures in their reports, the Council does not separately report in more detail on its own economic development activities (e.g., Smart Business Marlborough, Events, Only Marlborough) or the activities of the Smart and Connected industry and community groups. As such it is difficult to assess the level of performance of economic development activities without going through the large number of Council Committee reports. Certainly, it will be difficult for the public to determine how activities are performing. We discuss performance measures and reporting later.

2.2 What is known about the impact and effectiveness of existing services?

As is common with economic development activities across New Zealand, there is a large number of outputs being generated by the Council and delivery agencies but it is difficult to determine the impact of these outputs and the benefits being generated as there is limited information available on the outcomes that result from the activities. We assess what is known about different types of activities below.

2.2.1 What is known about the effectiveness of business development activities?

Business Trust Marlborough Business Trust Marlborough (BTM) offers one-to-one business consultations with an advisor, access to business mentors (matching businesses with local and Nelson-based mentors that are part of Business Mentors New Zealand’s network) and start-up business training. It has also recently partnered with an angel investment network and facilitates business access to the network. MDC provided $20,000 in 2014/15 and 2015/16 and $25,000 in 2016/17 to support BTM’s services. There is some information about the effectiveness of the business development services delivered by BTM. First, the Trust has grown its level of client engagements, referrals, mentor matches and number of mentors over the last three years and has been meeting its KPIs with the Council as shown in Table 10 below (although the KPIs appear to be low given the extent to which they have been exceeded). An increasing number of engagements suggests that businesses demand the service.

Table 10. Business Trust Marlborough KPI output measures

Outputs 2014/15 2015/16 2016/17

Client engagements 76 109 (43 percent increase; 120 (10 percent increase) exceeding the KPI of a 25 percent increase)

Referrals of clients 158 199 (26 percent increase) 205 (3 percent increase)

Mentor matches 33 43 (30 percent increase 58 (35 percent increase) (exceeding the KPI of a 20 percent increase)

Number of mentors 16 25 (56 percent increase 27 (8 percent increase) (exceeding the KPI of a 20 percent increase)

Business Mentors NZ also surveys clients about their satisfaction with Regional Partners’ facilitation of mentoring services. In the December 2016 and July 2017 reports, BTM received generally good results although they do point to variation in satisfaction over time and potentially consistency issues with service levels:

 100 percent of respondent mentor recipients surveyed that had been facilitated in Nelson- Marlborough said that the service was excellent or good in the 2016 report. This was a high result, with the average across New Zealand being 86 percent. In the mid-2017 report, 70 percent of respondents said the service was excellent or good, which was a relatively low result (the average across New Zealand was 80 percent).  75 percent of respondents in the December 2016 report said they were likely to recommend the service offered by BTM, compared to 82 percent nationally; 70 percent in the mid-2017 report said they were likely to recommend the service, compared to 79 percent nationally.  86 percent of respondents in Marlborough in the December 2016 report said that the programme assisted in resolving their business issues, which was higher than all regions other than Southland, Taranaki and Auckland North. 70 percent of respondents in the July 2017 report said this, which was lower than the national average of 80 percent. One caveat with these results is that there were small sample sizes. BTM has also surveyed its own clients over the last two years, with the following results (Table 11):

Table 11. Business Trust Marlborough client measures

Outputs 2015/16 2016/17

Percentage of respondents that would recommend the service to others 96 percent 100 percent

Percentage that found the service helpful or very helpful 92 percent 88 percent

Percentage that indicated they were able to make more informed 48 percent 58 percent business decisions

Percent that indicated they were able to identify more business 44 percent N/A opportunities

Percentage that indicated they had more knowledge of the business N/A 53 percent

Percentage that said they experienced an increase in turnover as a N/A 24 percent result of the service

These are positive results, with high proportions of respondents being satisfied with the service and a good proportion of respondents also indicating that the service had helped improve their business knowledge. BTM also provides a few examples of client feedback in its reports and on its website. For example:  “Working with [the business mentor] has been great – he has a good ear, good judgement and I have found the entire mentoring experience really helpful and of benefit to me personally and our organisation.”  “I am getting on really well with [the business mentor] and she is really motivating with great ideas which I am slowly implementing.”  “I had a one-hour business consultation with the Business Trust Marlborough client advisor that went well and was worthwhile for me…The suggestions [the business mentor] gave were helpful and/or through provoking for me. I have implemented some of these ideas…”  “I have only just arrived in the area and started setting up a business here. [Business Trust Marlborough] were able to connect me to all the right people in minutes. Fast, friendly and an invaluable kick-start.”

However, it would also be useful for the Council to see any less positive or constructive feedback provided to see if there are consistent areas being mentioned where BTM can improve. BTM indicated that they still have some way to go to ensure regional reach but have been increasing delivery into Picton and Havelock. Part of the issue is that many businesses do not yet know about the service as there is limited marketing by the Regional Business Partner or by Business Mentors NZ. The relationship with the Council is regarded as positive, with the Council often referring individuals and businesses to BTM. BTM representatives were also clear that the service would not have been available without Council support. From a strategic perspective, although BTM reports on their performance to Council Committees and have received additional funding to extend the manager’s hours, they indicated that they have not yet engaged the Council about the future of business development support in the region. Overall, the available evidence suggests that business development support delivered or facilitated by BTM is valued and is assisting businesses to improve their knowledge and business decisions. Given that MDC has only invested $65,000 over the three years, we consider it is receiving a good level of reach and service through this funding. However, as in other regions, there is no evidence to suggest that this investment is resulting in broader economic benefits (e.g. exchange of knowledge between businesses). This is consistent with evidence from national evaluations of this type of support, which indicate that business information and mentoring typically only benefit the businesses involved. For example, clients of the Regional Business Partner programme nationally perceive that it impacts on management capability, with around half of clients surveyed as part of a national evaluation of the programme reporting that it had moderately or greatly increased their ability to manage their businesses. Only a fifth said it had not at all increased their management ability. However, there is little evidence that this business support results in wider economic benefits for regions.

Marlborough District Council MDC provides business information and advice through its Smart Business Marlborough service. It offers a single point of contact for commercial and industrial enquiries and facilitates information and advice through the Council’s various functions and to external support services. Although the Council reports regularly to Council Committees on the number of enquiries dealt with each period, limited information is provided about the effectiveness of the information and advice provided or about the results that are generated from the provision of advice. Some results that have been reported in Committee reports include:  A film location enquiry to the service resulted in confirmation of Marlborough as a location for The Light Between Oceans movie. The Council coordinated regulatory and roading requests (August and November 2014).  A bank used the service to provide information for a client about its earthquake rating to assist in a decision about whether to purchase a building (March 2016).  A company received assistance related to their factory development and requirements for a café and shop (March 2016).  A company received resource consent advice in relation to the development of a new store (September 2016).  Business owners from outside the region that had sought advice had relocated to Renwick and taken over a business (March 2017).

 A business owner who had been impacted by the earthquake indicated that the information provided by the Council about available support from central government had allowed the business to continue operating (March 2017). Based on information supplied by the Council, in the 2016/17 financial year the Council received 31 enquiries which it handled through the Smart Business Marlborough service. Most of these related to business development or investment opportunities across a range of sectors (4 enquiries related to film, 7 related to tourism ventures, 4 related to manufacturing, 3 related to retail), although there were also requests for information on economic data and on proposed developments in the region. 15 of the enquiries could be handled by the Council itself, with 12 referred to other organisations (there was no information about how 4 enquiries were dealt with). There is limited information collected about what happened with the opportunities – there were no outcomes recorded for 26 of the enquiries. Four of the enquiries were dealt with but did not lead to a final result for the enquirer (e.g., because of changes in circumstances or because they were requesting information beyond what was available) and one of the enquiries was recorded as leading to a positive result for the enquirer. Council staff consider that the service is valued and has helped improve the Council’s relationship with the business community. On the face of it, it is likely that the service does benefit businesses that use it and, as noted above, there are several examples where the service has made a difference over the years. Moreover, we consider that this is basically a core role of local government, given that a significant part of the service is about helping businesses to find their way through the Council’s own processes. In future, it would be helpful for the Council to report annually on the number of enquiries dealt with and to provide more evidence about the impact that the advice has had and what happens with the opportunities that are being explored.

2.2.2 What is known about the effectiveness of innovation activities? Council funded support for innovation and R&D in the region is provided through the MRC. MRC uses the funding to support primary sector research projects and activities of the Food and Beverage Innovation Cluster. The Council has also recently committed $825,000 of funding support over six years from 2016/17 for the Research Institute for Viticulture & Oenology. We noted earlier that resident satisfaction with the MRC has been relatively high compared to satisfaction with regional development and tourism services. Food and Beverage Innovation Cluster The Food and Beverage Innovation Cluster was established in April 2013 and launched in September of the same year. It aims to help local food and beverage businesses develop their products, processes and markets by connecting the businesses to each other and to local and national research expertise. The cluster is a partnership between the MRC and the Riddet Institute and was established with the support of Massey University. MDC provided $90,000 in 2013/14 and then $75,000 in both 2014/15 and 2015/16 to support the cluster. The role of MRC is to assist cluster participants to scope ideas and opportunities, facilitate access to government and investor funding, provide links to researchers and research programmes, provide access to education opportunities and skills, and enable access to IP developed outside Marlborough. There is a quarterly meeting of a cluster leadership group to facilitate business collaboration. MRC provided the Council with six-monthly reports on the activities of the cluster. Performance criteria were also established and agreed by the Council and MRC as part of the funding arrangement. MRC was to report back on growth achieved by participants in the cluster and how sustainable the cluster was over the three years.

In 2016/17, MDC decided not to tag MRC funding to a specific purpose and to give the MRC Board the flexibility to allocate the funding as they saw fit. At the same time, the performance indicators were changed and there were no longer specific requirements to report back on the performance of the cluster. However, MRC continued to report on the cluster’s activities in its annual report. The reported outputs and outcomes that have been achieved over 2013/14 to 2015/16 in relation to the agreed performance measures are shown in Table 12 below:

Table 12. MRC F&B cluster outcome and output measures

Performance 2013/14 2014/15 2015/16 measure

Investment (public Too early to judge although $200,000 in the premium Expansion of Dry Foods and private) it was noted that investment foods to China project by initiative. Investment by was pending for a cluster industry and co-funded by companies involved in member. AGMARDT. Growth in Hill Premium Foods to China Laboratories footprint in the initiative. Increased investment region by 50 percent. in processing capability and retail facilities by cluster members to meet new market demand.

Employment growth A food technologist was Engagement of an in-market Additional employment noted employed as a result of the China development manager from previous reports were 3 cluster and Massey and a support analyst. An FTE factory employees. Also university engagement additional research associate noted that employment in increased from 1 day a in Plant & Food Research. cluster members had month to 2 days a week in increased as a result of new the region. market opportunities.

Revenue growth Estimated that additional MRC attributed a company’s Not specified. income growth attributable increase in revenue as a result to cluster involvement was in of a sales process and excess of $700,000. connections established by MRC.

Profitability Estimated that increased MRC attributed a company’s Not specified. profitability directly related to increase in profitability as a the cluster was result of a sales process and approximately $1m. connections established by MRC.

Number of 11 at launch, 19 first 12 8 new members. 6 new members. participants in the months. cluster

Funding secured to $35,000 sponsorship $37,500 sponsorship funding $37,500 sponsorship funding

operate the Cluster funding secured $179,000 from cluster $79,000 from cluster members services $34,000 cluster membership members. $200,000 for Premium Foods funding secured. for China.

Ability of cluster to Formative stages – reporting MRC expresses concern No comment made in Council continue operating noted that self-sufficiency about sustainability noting that or annual report. in subsequent years will take 3-5 years. the cluster needed further growth in membership and programmes, which in turn required more investment.

Positively, the number of cluster members increased over time and cluster members (and other organisations via sponsorship) were prepared to co-invest, which suggests the cluster initiative was valued. It is fair to say that, based on the reporting, the cluster has not yet resulted in major increases in investment, employment, revenue or profitability for cluster members, although there were some examples of these outcomes being achieved through specific projects. However, the issue with the outcome indicators is that it is very difficult to attribute the reported results to the actions of the cluster and, indeed, most of the reported outcomes were company outcomes rather than cluster outcomes per se. MRC noted this in its reporting. In terms of impacts, there are several examples of new activities that were facilitated or supported by MRC and the cluster:  Recruitment and placement of Massey University Food Technologist graduate into a Marlborough business (2013/14).  Heads of Massey University visiting Marlborough resulting in technology and production innovation initiatives being pursued for four companies (2013/14).  New products and ingredients innovation being supported by MRC for three companies (2013/14).  Partnerships developed with MPI, Callaghan, MBIE and Nelson Chamber of Commerce (2013/14).  Commercial arrangements developed between Sanford, NZKS and K9 Natural for new export products into pet food market (2013/14).  Assistance provided by MRC aided the purchase of Dry Food Limited by US investors (2014/15), which provided links for the company and others into markets for specialist ingredients for the health supplement and pet food industries.  A UK high end pet food company was linked into the cluster and committed to a research programme, involving Marlborough companies and organisations, to use green shell mussels and horticultural inputs for pet food production (2014/15).  Development of new associations and relationships for cluster members in the UK, China and US (2014/15, 2015/16).  Establishment of the Premium Foods for China initiative to develop markets for four companies in China, including securing AGMARDT funding of close to $150,000 (2014/15), supporting company participation in the programme (2015/16), and developing a relationship with the Tianjin local government and Science and Technology Exchange centre to assist companies in-market (2015/16 and 2016/17).  Supported the development of the relationship with Ningxia wine region (2015/16 and 2016/17), for example by coordinating and hosting a visiting delegation.  Worked with NZ Wine to develop the Research Institute for Viticulture and Oenology proposal, which was successful (2015/16). Several of these may have not have occurred without the cluster and the work of MRC.

A major initiative noted above has been the Premium Foods for China project. The project resulted in a number of outcomes for the four participating companies:  Sanford developed a three-year China Strategy  The Honey Company rebranded and relocated and expanded its production capabilities  Marlborough Garlic developed product packaging and expanded its production capabilities  The NZ Dairy Dessert Company invested in pilot manufacturing  Two of the companies also worked together to brainstorm product ideas and share market and technical insights. Overall, it appears that the cluster has resulted in genuine changes in company activities. However, it is less clear that the initiative has yet resulted in broader benefits for other businesses in the sector. MRC surveyed members and sponsors of the cluster in 2015/16 to assess their motivation for participating in the cluster, the quality of the engagement and opportunities and challenges. The most common motivations were closely linked with the key objectives of the cluster, i.e., to connect and work with other companies in Marlborough, to support a growth initiative and to get assistance to help companies grow. A third of both sponsors and members indicated that the cluster had been good or excellent, with around half of each saying it was average. In addition, 7 out of 10 cluster members said they considered that mutual benefit was gained from the cluster. Changes that cluster members were seeking included getting a better understanding about the capabilities, expertise, resources and activities of other cluster members and to leverage off the knowledge of other members for exporting. MRC held a workshop with members and sponsors to identify ways to improve collaboration and to implement joint projects. Hence, consistent with our views above, the cluster appears to have generated value for most members, although it will take time for more significant benefits to emerge. It is also positive that MRC took the opportunity to learn from the experience and to determine how to improve the initiative. Research Projects MDC has also provided MRC with $110,000 per annum to support primary sector research projects and has offset the land lease costs for the Rowley vineyard (worth around $25,000 per annum). The total investment altered in 2016/17, when the Council agreed to provide MRC with $250,000 in funding per annum (a $50,000 increase on the combined research project and food and beverage cluster support). MRC has used the Council funding to invest in a variety of projects, including Meteorological Services, Phenology Monitoring, Drylands Forestry, PhD student research, and industry seminars, amongst other initiatives. The MRC funding has generated a large number of outputs associated with these projects, as were summarised in Table 7. What is positive is that the research projects typically involve significant co- funding and/or involvement from other organisations, such as central government and industry, which is a clear indicator that they are valued. MRC has reported the following outputs and outcomes associated with some of the research projects:

 Meteorological services – this service makes weather data summaries accessible to residents of Marlborough. Monthly press releases are used for radio and newspaper reports and for Winepress, the Marlborough Winegrowers monthly magazine. MRC posts the summaries on its website each month, which are accessed by viticulturists and winemakers and others in the primary sector. The data is also used for Plant & Food Research Ltd’s research programmes with the wine industry. MRC notes that the data saves users a large amount of time they would otherwise have to spend themselves and allows those in primary industries to adjust management decisions based on the data.  Phenology Monitoring – MRC has supported the collection of phenological data on several sauvignon blanc vineyards over several years. It reported that the data has proven valuable to research projects and the wine industry. The data has been used for a weekly VineFacts newsletter which provides information on the timing of budburst, flowering, berry maturity and yields. The information allows viticulturists and winemakers to determine if the season is early or late and to adjust management decisions as a result. The collection of data has also enabled a climate modelling project.  New Zealand Dryland Forests Initiative – the aim of this project is to develop a sustainable hardwood industry in ground-durable eucalypts. The project has enabled several research projects and the establishment of trials by landowners in several regions, including in Marlborough, and will ultimately result in higher quality, durable timber and better management systems. We think it is time to reconsider the local government contribution going into the Phenology Monitoring and Dryland Forests project. The funding has helped seed and develop the projects but the benefits of the Phenology project should now be apparent to industry (suggesting full-funding from industry in future) and the Dryland Forests project is reaching the commercialisation stage. MRC recognises that these projects have reached a level of maturity where local government funding should no longer be required. The extent to which MDC’s funding has ensured research projects have been able to be improved has been difficult to determine based on the reporting. However, MRC was clear when interviewed that even if some of the projects may have occurred without MRC involvement, their support accelerated the projects and/or made the projects easier to implement. One outcome they noted that would have been unlikely to happen without their support was the development of the relationship with Massey University, which has resulted in Massey expertise working with local businesses. According to national evidence, innovation support is more likely to result in commercial success when, as is the case with MRC, it is directed at traditional (primary) sectors rather than in new or emerging industries. Evaluations of innovation and R&D initiatives also note that it is important to define the broader industry and economic benefits that are being sought at the front-end of the programmes to ensure they are targeting the right types of activities. We note that the Council agreed to a new reporting framework for MRC in 2017, which includes reporting on programme outcomes, new business development and an analysis and summary of MRC’s contribution towards regional growth. We were also able to observe the clustering of R&D activity that is facilitated by MRC at its Budget Street and Grovetown Park campuses. Budge Street includes a combination of MRC, Plant & Food Research, Wine Marlborough and NZ Winegrowers alongside NMIT. Grovetown Park includes AssureQuality, Hill Laboratories, the Ministry for Primary Industries, PF Olsen, GCH Aviation and Vector Free amongst others. There will be a range of benefits (e.g., informal knowledge sharing, reduced transaction costs) for tenants working alongside each other. The question for Council and MRC to consider is how the campuses should develop over the long-term to maximise the clustering and innovation benefits.

2.2.2 What is known about the effectiveness of activities focused on developing international linkages? MDC is involved in several sister city relationships, including Tendo City, Japan, which has focused on student exchanges and developing relationships in farming and fruit growing; Otari Village, Japan, which has focused in recent years on student exchanges; and Ningxia Hui Autonomous Region, China, which has focused on developing relationships in wine and education. With this review we focused on what has been achieved with the development of the Ningxia relationship. The work involved in developing the relationship is summarised below.

Developing linkages with Ningxia The Ningxia relationship developed following initial discussions and thinking in 2014 about opportunities for developing links for businesses, students and visitors between China and Marlborough. Ningxia is a premium wine-growing area in the northwest of China and is seeking to rapidly grow its planted area and, as such, has a need for expertise in grape growing and wine making. A Marlborough based winemaker had won a winemaking competition in Ningxia and he and Marlborough became well known in the region. In early 2015, a delegation from Ningxia visited Marlborough to look at wine and manufacturing opportunities. Marlborough was invited to send a delegation to Ningxia later that year and to participate in a wine expo. The delegation included four representatives from the wine industry, MRC and the Council. Discussions during the visit identified several opportunities for developing the relationship between the two regions, including in workforce skills for the wine industry, wine equipment, laboratory analysis, and specialist expertise. Marlborough then hosted a return visit of six representatives from Ningxia in early 2016, where they were briefed on Marlborough’s food and beverage sector, education and viticulture and visited MRC, NMIT and a winery. The visit included the signing of an MOU between the Mayor and a representative of the Ningxia People’s Congress in which the two regions agreed to work together to facilitate cooperation and exchanges. Following this, a delegation of education, research and wine industry representatives visited Ningxia in mid-2016 and visited wineries and education institutions. The visit identified several opportunities for more tangible exchanges and cooperation. Further visits between Marlborough and Ningxia representatives in late 2016 and early 2017 involved a sister school agreement between Marlborough Boys College and a Ningxia High School and an MOU between NMIT and a Ningxia tertiary institution. A Mayor led delegation to Ningxia in September 2016 saw the signing of a sister region agreement between the Council and the government of Ningxia.

Although the Ningxia relationship is still in the early stages, there have been some tangible benefits and it seems likely that the economic benefits will exceed the costs of maintaining the relationship. The financial costs for the Council are relatively small (estimated at around $20,000 per annum), although this does not include Council time or the costs incurred by businesses and other organisations in maintaining the relationship. Some of the benefits to date have been:  A wine-maker made a significant sale during one of the initial delegations  Wine representatives on delegations indicated they had gained useful intelligence on the Chinese wine industry

 Discussions are underway on a winery project in Ningxia with a Marlborough winemaker  There was a visit by eight students from Ningxia in early 2017. A study of the economic benefits of sister city relationships in New Zealand (NZIER, 2003) suggests that there can be genuine longer-term benefits to businesses and localities, including providing a gateway into new markets and product lines, reducing transaction costs in building business relationships, attracting foreign fee-paying students, facilitating joint research and development, and increasing tourism. The 2003 study also suggested some best practice guidelines to ensure that benefits are maximised. These include carefully identifying the target locality for the relationship, planning out the engagement, defining the roles of the Council relative to other organisations, including local businesses in activities, taking time to build trust, and reviewing and evaluating activities. In our view, the Council has followed most of these practices. It is clear that the Council and industry representatives put considerable time into developing the relationship with Ningxia and potential opportunities. There is a good fit between the interests and capabilities of the two regions. At the outset the Council confirmed with businesses that there was interest in exploring the relationship and the Council received advice from the Chinese consulate and Ministry of Foreign Affairs and Trade. There has been genuine business interest and engagement in the relationship – a local business group (Ningxia Working Group) has been formed by businesses interested in doing business in Ningxia, including education and wine industry representatives, to discuss opportunities and coordinate visits. It is likely to be of benefit for the Council to work with the business group to review how the relationship to date has worked and to identify future opportunities. There is also clearly a role for the Council in developing this relationship and the Council is not ‘crowding out’ the activities of other organisations. The early discussions with Ningxia representatives emphasised that the Chinese expected negotiations to be dealt with by local government.

2.2.2 What is known about the effectiveness of destination marketing and management (including events attraction) activities?

Destination marketing activities

Destination Marlborough As was shown in Table 7, an extensive number and type of marketing and promotional activities are delivered by Destination Marlborough including:  Marketing campaigns, e.g., ‘Never Been Better’, ‘Inspired Journey to Marlborough’, South Island Journeys, various competitions  Media and marketing collateral, e.g. visitor guide, welcome information displays at the airport, magazine content, marlboroughnz.com website, social media  Hosting media outlets, tourism product buyers, travel sellers  Representation at the annual TRENZ event and other trade events.

The impact of Destination Marlborough’s marketing and promotional activities and collateral have not been formally evaluated, although destination marketing activities were recently reviewed. The review indicated that Destination Marlborough is achieving its outputs – however, the report refers to outcome indicators that the organisation has been pursuing, such as visitor spend and visitor numbers rather than outputs. As noted, although we agree that visitor spend and numbers should be tracked, it is difficult to attribute destination marketing and management efforts to these outcomes in the short- to medium-term. Rather, the Council should be more interested in the achievement of key outputs and the impacts of those outputs each year. Destination Marlborough does report on a large variety of outputs in its annual reports and also occasionally reports on the impact of specific initiatives. Table 13 shows that Destination Marlborough has largely achieved all of its KPIs over the last three years. Many of the KPIs have altered from year to year and it is not clear that the current set provide a full overview of Destination Marlborough’s performance. Positively, in some cases Destination Marlborough appears to be developing stretch goals by increasing the targets over time. However, we note that some of the performance targets appear to be low as they are easily achieved each year, e.g., the minimum number of media outlets that visit the region, the minimum number of travel sellers that visit the region, and the number of wholesale and frontline travel sellers that receive training on the region. Some of the indicators used in the past have also not been particularly useful indicators of performance, e.g., the level of investment from MDC is maintained or increased; the organisation will achieve an unqualified audit opinion on its financial statements. We would suggest that the list of KPIs be reviewed to ensure that the targets are challenging and tell a consistent and comprehensive story about Destination Marlborough’s performance over time.

Table 13. Destination Marlborough’s marketing activity KPIs

Activity 2014/15 2015/16 2016/17

The Marlborough Story is reflected across all promotional Achieved N/A N/A activity and communication tools

75% of consumer marketing spend is focused on N/A Achieved N/A initiatives that drive visitors to Marlborough during spring (98%) and autumn

Autumn and spring domestic campaign platform created N/A N/A Achieved and distributed via Destination Marlborough owned channels and a minimum of two transport partners

Marlborough is promoted at two consumer events in New Achieved Achieved N/A Zealand

Marlborough is profiled in three Australian marketing Achieved Achieved N/A initiatives

A minimum of 30 (2014/15); 40 (2015/16, 2016/17) media Exceeded (79 Achieved (58) Achieved (60) outlets visit the region hosted)

A minimum of 25% of page views to MarlboroughNZ.com N/A Achieved Achieved result in a referral to a product or event listing (2015/16); (34%) referral to deal, product or event listing (2016/17).

Social media engagement grows 10% on previous year N/A N/A Exceeded

1:5 return media hosting investment to equivalent Exceeded N/A N/A advertising value

A minimum of 100 travel sellers visit the region Exceeded Exceeded Achieved (295) (259)

A further 800 wholesale and frontline travel sellers Exceeded Exceeded Exceeded receive training on Marlborough (931) (1303) (960)

Website traffic increases by 20% on previous year Achieved N/A N/A

Marlborough product sales maintained at a minimum of Achieved N/A N/A 38% of total sales

Level of investment from Marlborough District Council Achieved Achieved N/A toward regional marketing is maintained or increased

A minimum of $200,000 partner in-kind investment in Exceeded N/A N/A Destination Marlborough marketing activity is achieved

Attract private sector and industry partnership cash and N/A Achieved Achieved in-kind contributions to match Council’s destination ($1.6m) ($1.3m) marketing investment at a minimum ratio of $1 partner contribution to $2 MDC investment

Achieve an annual operating surplus with the objective of N/A Achieved N/A returning the Trust to a year end positive equity by June 2019

Destination Marlborough will achieve an unqualified audit Achieved Achieved Achieved opinion on the financial statements presented to the Board and Marlborough District Council

As noted, Destination Marlborough does report on the impact of a few specific marketing initiatives and these appear to be effective (although it would be desirable for there to be more of this type of reporting). For example, Destination Marlborough:  Planned and hosted the visit of a ‘megastar’ from China, which resulted in equivalent advertising value of more than $51 million in China and over 70,000 referrals to Marlborough content on MarlboroughNZ.com (2015/16).  Participated in the Australia South Island Journeys campaign, which resulted in a 10 percent increase in holiday arrival growth into the South Island for the December quarter. Marlborough was reported as having the most significant uplift in visits and referrals to the relevant section on Newzealand.com during the campaign as compared to prior to the campaign (2016/17).  Partnered with Tourism New Zealand to host a key Chinese media influencer as part of a PR campaign to build the region’s profile in China. The campaign was reported to earn up to $12.6 million in estimated advertising value (2016/17). In addition, businesses contribute and participate in several of Destination Marlborough’s initiatives, which suggest they value the activities and consider they are effective. For example:  In 2014/15, Destination Marlborough received around $186,000 in industry funding contributions to marketing and estimated that it attracted total industry investment of around $600,000.

 In 2015/16, the organisation received close to $198,000 in industry funding contributions (advertising and partnerships) and estimated that total in-kind and direct industry contributions were valued at $1.6 million.  In 2016/2017, the organisation received close to $241,000 in industry funding contributions to marketing and estimated that total in-kind and direct contributions were valued at $1.3 million. Positively, the value of direct industry contributions has increased over the three years. The Review of Destination Marketing report (Jeffery, 2017) indicated that stakeholders (in the region and external to the region) were largely positive about the role of Destination Marlborough, particularly larger operators in Destination Marlborough’s Trade Partners Group. The report did note that smaller operators within Picton were not as positive, although did not explain what the performance concerns were. The report recommended that Destination Marlborough investigate the potential to establish a ‘small operators trade partner’ role. As was shown in Table 9, a relatively low proportion of residents from Picton (64 percent) were satisfied with tourism services in 2016/17. Our discussions with Picton stakeholders indicated that concerns with Destination Marlborough’s performance have been based on views that the RTO has focused much of its marketing efforts on Blenheim and the region as a wine location and undertakes relatively little marketing and promotion of the Marlborough Sounds. Destination Marlborough does not report on its activities at a sub-regional level so it is difficult to judge the reality of this. However, a review of Destination Marlborough’s most recent annual report suggests that much of its marketing is on promoting Marlborough and its tourism assets as a whole and that there has been a reasonable balance of promotion of locations and different attractions – while several have involved wine, several others have focused on other features of the region. Examples of Picton and Marlborough Sounds relevant campaigns and initiatives undertaken over 2016/17, for example, include: the work with Port Marlborough to promote travel packages to the Marlborough Sounds at a Boat Show in Auckland; the Spring Campaign with Bluebridge to attract mountain bikers from the lower North Island, which included imagery of the Sounds; work with Tourism New Zealand on the 15 year anniversary of the Lord of the Rings to promote Pelorus locations; the development of a programme with Port Marlborough to host Cruise Ship captains and key crew when they were in port; the development of new self-guided walking trail map of Picton; and management of the Picton i-SITE, including renovations. We also note that the Destination Marlborough Board includes a representative from the Sounds and a co-opted member from Picton so we would assume that these members are able to provide input into and feedback on how Destination Marlborough is working in the Sounds. We were also told that Destination Marlborough has increasingly engaged with Picton stakeholders over the last 6-9 months, with a focus on leveraging value from cruise ships, and that the relationship between local Picton promotion organisations and Destination Marlborough has improved. We do not consider there is a need for a new structure or local tourism organisation to support Picton to achieve its visitor aspirations. The region is small enough that the RTO should be able to deliver relevant activities across the region and engage with the key communities. However, the RTO and the Council should consider adopting performance measures related to the extent to which marketing supports different locations in the region and the level of engagement with local promotion groups. This will also be consistent with the Visitor Growth Plan goal to ensure strong centres and communities. In addition, as we suggested earlier and consider further in discussing Smart and Connected Groups, it will be easier for Destination Marlborough to engage with Picton if the activities of the various promotion groups are coordinated and rationalised to enable clear and consistent views to be expressed.

Several stakeholders also believe that there has been a disproportionate focus by Destination Marlborough on attracting international rather than domestic visitors. It is true that domestic visitor expenditure has grown relatively slowly at just over 1 percent per annum over the last five years (a rate less than a third of the national rate of growth) while international visitor expenditure has grown by 6 percent per annum – although this has also been a lower rate than growth nationally. However, there is also no doubt that the Christchurch and Kaikoura earthquakes have impacted on domestic visitor numbers and spend into the region (and, as discussed, it is difficult to attribute changes in visitor spend directly to Destination Marlborough’s activities). As noted in Appendix 1, there was a drop in visitor expenditure in Marlborough between 2011 and 2012 (of $16 million) and between 2016 and 2017 (of $9 million). We cannot gauge Destination Marlborough’s spend on domestic versus international markets with accuracy over time (international marketing expenditure is not clearly separately identified in financial reports6). Again, a review of activities in annual reports suggests that there has been quite a mix of domestic and international marketing efforts over the years as summarised in Table 7. However, some stakeholders questioned whether the organisation should have done more to target new domestic markets following the Christchurch earthquake, given the importance of Canterbury as a source of visitors. We note that Destination Marlborough did secure funding of $150,000 from MBIE following the Kaikoura earthquake to implement the ‘Never been Better’ campaign to regions that still had easy access to Marlborough (e.g., Nelson, Wellington, Auckland). They are also proposing a campaign in Canterbury to leverage off the reopening of SH1. We suggest that investment in domestic versus international marketing be reported on in future. The review report also indicated that some stakeholders believed that Destination Marlborough’s digital and social media presence could be improved. We were surprised that digital media performance measures (e.g., website users, page views) have not been typically reported on. We note that the 2017/18 business plan does have a target measure for social media engagement to grow 10 percent on the previous year (although whether this is from an existing low base is not clear). The RTO benchmarking survey (MacIntyre, 2016) compares website and social media traffic across RTOs. Destination Marlborough’s results were relatively low:  Its website received 5,404 average monthly unique visitors, which was the fifth lowest of all RTOs. In terms of comparable RTOs, this was less than the 13,000 monthly visitors achieved by Nelson RDA, 48,500 achieved by Destination Coromandel, 5,560 achieved by Visit Whanganui, 11,900 achieved by Tourism West Coast and 13,650 achieved by Destination Wairarapa. But it was higher than Tourism Eastland (4,364) and Venture Southland (3,200).  Its facebook page received 10,131 likes, which was less than Destination Coromandel, Visit Whanganui, Venture Southland and Destination Wairarapa, but higher than Tourism West Coast, Nelson RDA and Tourism Eastland. New measures for assessing social media performance should be considered as a part of refreshed performance framework.

______6 International trade marketing expenditure is specified in Destination Marlborough’s financial statements but the figure for consumer marketing expenditure includes spend on both domestic and Australia campaigns.

Identity and branding MDC’s contribution to marketing comprises the Only Marlborough identify, website and resources. Only Marlborough was developed from ‘the Marlborough Story’ which aimed at creating a strong and consistent story about the region which would be told by businesses and the community. The Story and Only Marlborough were launched in November 2014, following a year of work by the Council in partnership with the Chamber of Commerce, Wine Marlborough, MRC, Destination Marlborough and the community. Apart from managing the Only Marlborough website, the Council has also encouraged industry and community organisations to use the resources and develop consistent messaging. This has included providing training sessions. The effectiveness of Only Marlborough can be determined by its use, and feedback about the quality of the resources available and the strength of the brand and identity. Based on reporting to Council Committees and information supplied by the Council, it appears to have a reasonable level of take-up by organisations:  By the end of June 2015, there were 160 registrations on the Only Marlborough website. The number of registered users increased to 254 by June 2017. There are also currently over 500 active followers of the Only Marlborough Facebook page.  The five partner organisations have promoted and used the resources, for example through wine industry profile videos, social media and signage by Wine Marlborough; publications and conference imagery at the TRENZ Conference by Destination Marlborough; and in communications by the MRC. MDC fully integrated the identity into their branding guide by February 2016 and applied the identity to banners and road signage.  Several organisations have adopted the messaging and imagery such as St Clair Family Estate, Winstanley Kerridge, Watery Mouth, Core Advice, River Queen, the Cranky Goat Ltd cheese company, the St Clair Vineyard Half Marathon, Marlborough Wine and Food Festival, and Marlborough Museum. In terms of the strength of the identity, the review of destination marketing (Jeffery, 2017) found that branding of the region was fragmented and that there were multiple brand messages being conveyed through a combination of Only Marlborough, Destination Marlborough’s ‘Marlborough - Brilliant Every Day’, the Picton community’s desire to be known as ‘The Heart of the Sounds’ and others. The review suggested that consolidation should be considered in future (Jeffery, 2017). Our interviews reiterated this finding. We were told by several stakeholders that branding is currently confusing. Some indicated that they preferred the Only Marlborough branding and messaging while others preferred Brilliant Every Day. Several also thought that momentum with Only Marlborough had been lost and that the Council was no longer promoting the use of the resources. In our view it is likely to be possible to integrate the messages within a common framework (e.g., potential to use Only Marlborough as the overarching story and set of resources to position Marlborough for visitors, talent, businesses and investment, and to have related but consistent messaging that highlights different features of Marlborough whether that be from an industry (e.g., tourism, aquaculture) or location perspective (e.g., Picton, Havelock, Blenheim, Renwick and Seddon). Consistent with our earlier comments, several stakeholders suggested that Destination Marlborough should do more to support destination management opportunities, not just marketing opportunities.

Events Events support is delivered by a combination of MDC and Destination Marlborough. MDC provides advisory, information, facilitation and funding support for major events and Destination Marlborough provides marketing, advisory and bid support for conventions and business events. Marlborough District Council MDC has a Regional Events Coordinator who develops and oversees the Regional Events Strategy, manages the Follow-ME Events Calendar and newsletter and the events toolkit on the Council’s website, manages the Commercial Events Fund, and provides information and advice to event organisers. The Regional Events Strategy was initially developed in 2013 and was updated in 2016. It specifies the Council’s and region’s aims for events and the role of the Council and other partners in supporting events. The vision is for the region to host quality events all year round, that are interesting and enjoyable for visitors and the community; for events to be good for the economy, society and environment; and for events to showcase what it is to live in Marlborough. The Strategy’s aims are to support and grow existing events and attract new events, to maximise the economic benefits from events, to achieve a balanced events calendar, to showcase Marlborough through events, to support and encourage event organisers, to host environmentally sustainable events, and to create legacies from events. The Council’s roles are to provide facilities (e.g., parks, reserves, buildings and land), funding (e.g., community grants, commercial events funding, bid funding), promotion (e.g., the Follow- ME events website, newsletter, social and print media), and regulatory functions (e.g., alcohol licensing, food permits, resource consents, traffic management and noise control). The 2013 Strategy had a series of goals and related actions and Table 14 shows the degree to which they were achieved.

Table 14. Achievement of Regional Events Strategy 2013-2016

Aim Goal and Measure Status

Retain, grow, One or more major events held each Achieved develop and year (audience at least 5000) attract new One or more additional major events by Achieved - secured the Scout Jamboree in 2016 events 2016.

Maintain the number of Regional and Achieved Niche Events

By December 2014 one or more new The Events Coordinator assisted in acquiring several events Regional or Niche Events held in winter to Marlborough including the U19 International Cricket World and/or shoulder seasons Cup Qualifier, Tactix Trans-Tasman Netball games and International Black Sticks Hockey Series

Council funding of all Community Events Achieved to be reviewed by December 2015

Economic Develop a robust measure of visitor Achieved – Council adopted the Infometrics toolkit for contribution of spend around Major, Niche and estimating visitor spend for events events Regional Events in Marlborough by Economic impact reports were commissioned for Classic December 2015 Fighters and the Marlborough Wine and Food Festival

Aim Goal and Measure Status

Marlborough retailers and hospitality will MDC initiated quarterly Event Managers meetings to discuss coordinate promotions around all major and share info, update event managers and event sector events personnel

Balanced Marlborough will launch a new Events Achieved – The events calendar Follow-ME was established programme of Calendar containing all event information with an events newsletter, trade publications, toolkit and events in one place by June 2014 associated social media Winter and Summer Events brochures have been published

Marlborough will develop an interim Achieved – established in July 2013 Event Planner to assist the community by Sept 2013

Four or more Regional or Niche events Achieved – Saint Clair Vineyard Half Marathon, Forrest are held in the winter or shoulder Graperide, Marlborough Book Festival, Garden Marlborough seasons

Marlborough will develop an interim Achieved – established in July 2013. A dedicated Events Event Planner to assist the community Section with a specially designed Tool Kit to assist event by Sept 2013 organisers was established on the Marlborough District Council website

Showcase the Marlborough will host at least 25 events Unknown Marlborough outside the Blenheim urban area by region June 2014.

All major events will be included in Achieved Destination Marlborough’s International Marketing Campaign by June 2014

Align Council Create a MDC Events Partnership There is a dedicated Events Section with a specially operations with Programme by 2015 designed Tool Kit to assist event organisers on the event provision Marlborough District Council website A commercial events fund was established

Events funding has been streamlined within Council with funds adjusted to receive maximum applications from events

Proud hosts Establish an event specific database by An Event Managers database has been developed with 68 with a strong June 2014 members, along with two NZAEP Seminars which have been event volunteer secured for the Marlborough region and upskilling of local base event organisers

Safety and All major events have completed waste Love NZ and the Packaging Forum recognised five Environment minimisation/recycling plans prior to the Marlborough events with grants to initiate recycling at their Sustainability event events

A new grant was received from the Glass Packaging Forum by the Marlborough Wine and Food Festival to recycle glass and cardboard. They achieved 86% recycling rates (the national average at events is 70%)

Aim Goal and Measure Status

All major and regional events have MDC developed a risk analysis tool as part of the overall completed a safety risk analysis prior to toolkit the event

The vast majority of the goals and related actions were completed. The updated regional events strategy largely maintained most of the aims from the initial strategy (with a few tweaks) but added a new aim of Creating Legacies and removed the aim to be proud hosts with a strong event volunteer base. The updated strategy has been in place for around 18 months and good progress has been made on most elements of the strategy that were to be implemented in-part or in-full by this point (Table 15).

Table 15. Progress with Regional Events Strategy 2016-2019 (focusing on goals to be achieved by November 2017)

Aim Goal and Measure Status

Support, attract Develop bid criteria for a new event to be established in Achieved and grow new Marlborough in the shoulder seasons by March 2017 events Work with event organisers to provide support and Occurring information to assist in their events (ongoing)

Actively promote the Commercial Events Fund and Bid Fund Occurring in order to attract and grow existing events (ongoing)

Develop targets and a strategy to increase business events Achieved (by Destination in Marlborough by June 2017 Marlborough)

Promote Marlborough’s venues and facilities to attract Occurring quality events year-round (ongoing)

Work with event organisers to create complementary events Occurring (e.g., Wine and Food around existing Premier and Niche Events (ongoing) Artisan Market Day, Feast Marlborough, Aquaculture Week)

Maximising Develop a matrix of Marlborough events on the new Achieved in November 2017 economic framework using the Value-Added tool by December 2016 (delayed due to staff change) benefits Events are included on all business association, Chamber Achieved and ongoing and S&C Groups meeting agendas to discuss and realise opportunities by January 2017

New Easter Trading legislation to be implemented to Achieved maximise visitor spend in the region by April 2017

Event organisers contact the Blenheim and Picton Business Occurring Association to grow partnerships with business and events (ongoing)

Event organisers to add additional events or reasons to Occurring encourage level of stay through the Commercial Events Fund

Aim Goal and Measure Status

Event organisers to contact relevant Smart & Connected Occurring Groups to grow partnerships with events

Balanced events An MOU will be established with the Theatre, Convention Achieved calendar Centre, Stadium & Council to actively reduce event clashes by June 2017

All Premier event dates will be listed on Follow-ME at least Achieved and ongoing two years in advance by December 2016

All event organisers will list their events on Follow-ME Occurring (ongoing)

Develop further marketing opportunities for Follow-ME Occurring (ongoing)

Showcase Implement a year-round publication of Marlborough Events Achieved (printed event guides are Marlborough available around the mid to upper South Island by June 2017 produced quarterly)

At least three Marlborough events will apply to the NZAEP Events are actively encouraged to New Zealand Event Awards (annual) enter but 1 event entered in 2016; 1 event entered in 2017 (4 events plan to enter in 2018)

Encourage event organisers to host events around the Occurring Marlborough region (ongoing)

Council’s Event Direct value added will become the preferred economic Achieved Provision impact methodology to be used when considering funding by December 2016

A Premier and selected Niche and Regional Stakeholders Achieved forum will be established by June 2017

Actively promote the Commercial Events Fund and Bid Fund Occurring in order to attract and grow existing events (ongoing)

Regularly review Council processes regarding events and Occurring streamline where possible (ongoing)

Environmental All event rubbish and recycling scheme will be established Not achieved but under discussion Sustainability when Marlborough branded bins are available (by July 2017)

Environmental sustainability will be a requirement of the Achieved Commercial Events Fund by August 2017

Work closely with the Packaging Forum to stay aware of Occurring trends, new information, technical improvements and grants (ongoing)

Event organisers should consider recycling, products and Occurring efficient energy practices at their events (ongoing)

Creating When considering funding from the Commercial Events Occurring Legacies Fund, priority will be given to those events that create legacies

Aim Goal and Measure Status

Event organisers to meet with business groups and Smart & Occurring Connected groups to discuss potential legacy projects and mutual benefits (ongoing)

Commercial Events fund

MDC provides funding support for events on a contestable basis through the Commercial Events Fund. The Fund is available for events that are run on a commercial basis (not conferences, trade shows, community events) and that support the goals of the Regional Events Strategy. Up to $75,000 is allocated per annum (with a guideline of 30 percent to existing events, 70 percent to new events). There are two rounds of funding a year. Decisions are made by a Council Sub-Committee and are based on a range of criteria including the ability of the event to attract visitors, estimated economic benefits, when the event is being held (to ensure spread), the event’s ability to showcase Marlborough, environmental sustainability, organiser capabilities and event potential. These are the right types of criteria in order to effectively judge the likelihood of the event generating additional activity in the region. The Council has provided funding support for 12 events over 2014/15 to 2016/17, from 43 applications. It has awarded close to $176,000 of funding out of the $860,000 that was applied for. Each application has to estimate how many visitors will attend the event and the proportion expected from outside the region, as well as how the event will meet the criteria. The Events Coordinator estimates the expected return on investment from the event using an Infometrics events toolkit. For example, the following returns were estimated for events that the Council supported over 2015/16 to 2016/17 (Table 16):

Table 16. Estimated economic impacts from Council supported events (2015/16 to 2016/17)

Event Investment Estimated direct economic Return on impact – value add to GDP7 investment

Revelry $20,000 $110,500 5.5

UCI World Amateur Cycling Qualifying Event $26,500 $75,927 2.9

UCI Gran Fondo qualifier 2017 $23,250 $50,618 2.2

Feast Marlborough $15,000 $432,600 28.8

Garden Marlborough $4,000 $304,600 76.2

Source: Marlborough District Council

______7 The estimates only include spending by visitors from outside of the region (given that local participants may simply be substituting their spending on the event for spending they would have made on other activities and purchases in the region). They also focus on the direct effects rather than also including the much more difficult to attribute industry and earnings effects and hence are more likely to be a good estimate of the overall impact of the events that have been supported – assuming that the estimates of attendees, days visited and daily spend are accurate.

There is a large variation in the estimated return on investment across the events, although some are very high (e.g., Feast Marlborough and Garden Marlborough). It is also important to note that simply referring to the return on investment over-inflates the impact of the Fund as it assumes that all of the economic benefits result from the Council support, i.e., that an event would not have gone ahead without this investment (which presumably is not the case in every circumstance). The estimated return should relate to the impact that the Council investment has had on the event (i.e., if it was going ahead anyway, did Council support allow it to be larger, attract more people etc.). On the other hand, the funding support provided by the Council is typically only a small proportion of the total funding required to establish, organise, host and promote the event. Post-event reports are also produced by the event organisers and recipients of the funding, providing information on estimated visitor numbers, other impacts and the ‘difference’ that the event organisers attributed to the funding. For example:  Revelry – provided visitors that were participating in and supporting the Vineyard Half Marathon with a reason to stay an extra night in the region and in a shoulder season. The organisers indicated that the event would not have been able to be established without the funding.  International Sauvignon Blanc Celebration – close to 380 people attended the main event with over 470 attending the gala dinner. A significant proportion of the audience was from out of the region. The event included 78 offshore wine companies who sent at least one representative to the event. New Zealand wineries that attended also bought in people from outside the region. The organisers indicated that the event allowed them to focus on running the event rather than having to continue to pursue funding options.  Marina2Marina – Commercial Events Funding allowed the organisers to advertise the event to a wider audience, including in Wellington. There was a large increase in participant numbers from around 240 in 2014 to close to 370 in 2015. The number of participants from outside the region increased to over 25 percent of all entrants, with 8 percent from Wellington. Based on a survey, around half of the entrants stayed in Picton for at least two nights, with many spending on services in local cafes, restaurants, shops and at other attractions.  Garden Marlborough – the Commercial Events Fund support allowed committee members to attend and display at the Melbourne International Flower & Garden show, with a view to attracting more Australian visitors to the Garden Marlborough event. 6 percent of total ticket sales came from Australia, including tour groups. The tour groups stayed for 3 nights in the region. Given the relatively small amounts of funding involved, these reported outcomes look reasonable – particularly that the funding appears to have made a genuine difference to event organisers and has supported increased numbers of visitors from outside the region. However, the quality of reporting has been variable and we would suggest that further guidance be provided to successful applicants on the information that needs to be collected and how to report on results. In the first three years of the Fund, the Council did not award the full amount of funding that was available to events that applied – it awarded $72,600 in 2014/15, $41,500 in 2015/16 and $62,250 in 2016/17 (unspent funding can be carried over to the following year/s). We reviewed a sample of the applications and assessments to see whether the process was too onerous or if the hurdle was too high. We consider that the criteria have been appropriately applied and note that decisions have particularly focused on whether and how the funding will add value to the event and how the event will generate additional spend. We also note that $143,000 in funding has been awarded in 2017/18. A stakeholder that had applied for the Fund more than once (and was not always successful) considered that the application and reporting process was not overly costly or difficult. The smaller value of qualifying applications in the first few years is likely partly due to event organisers becoming used to the process and requirements of the Fund.

Some stakeholders did question the weighting of the funding towards new events. In their view the extension of an existing event could result in just as significant benefits to the region as a new event (and, indeed, economic impact assessments and post-event reports on ‘event extensions’ such as Feast Marlborough suggest that this is the case). However, one of the objectives of the Fund was to increase the spread of events throughout the year and this naturally suggests a focus, at least initially, on new events. Moreover, the 30:70 intended apportionment is used as a guide and the intention has been to retain flexibility depending on the applications received. However, stakeholders are certainly aware of the preference for new events and over time we would suggest that the guidance be altered to provide for a higher proportion of funding to be allocated to existing events (e.g., perhaps 50:50). Economic Impact Reports Events is an area of economic development activity where there has been some more sophisticated evaluation of outcomes, with economic impact assessments being undertaken for two events:  The Classic Fighters Omaka event in 2013 attracted 13,090 visitors from outside the region who came specifically for the event, with each staying an average of 2.08 nights. The event was estimated to generate an additional $3.21 million of regional exports including spending by visitors. The additional spend generate an estimated $1.89 million in GDP, representing a return of investment of 621 percent (Vuletich, 2013).  The Marlborough Wine & Food Festival in 2015 attracted 2,830 visitors from outside the region who came specifically for the event, with each staying an average of 2.65 nights. The Festival was estimated to generate an additional $1.33 million of regional exports including spending on organising the Festival and spending by visitors. This additional spend was estimated to generate $796,000 in GDP, representing a 321 percent return on the investment into the event (FreshInfo Co, 2013). These are very high levels of return on investment, which demonstrate the potential impact of well- directed local government co-funding of events. National evidence suggests that support for major events does result in net economic benefits to the economy, although often not as high as commonly thought as some visitors to the event may have simply substituted the visit for another planned trip at another time in the year (so it is not new spending per se), or the event may simply displace attendees from another event (or visitor activity) in the region if there is more than one occurring at the same time. However, the economic impact estimates for the above two events correctly ignored spend by local residents that attended the event and also took account of the fact that some visitors had altered their planned trips to Marlborough to come to the event. National research also indicates that events with the greatest international visitor contribution provide the greatest overall net benefit. On average, smaller ‘regional’ events do not generate the level of benefit that major events do, and recurring events do not generate the same benefits as one-off events. Greater net economic benefits tend to result from off-peak and shoulder season events compared to peak season events. These last three points suggest areas where the region may get the greatest impact from events funding in future. The review of destination marketing report (Jeffery, 2017) suggested that more funding be allocated to the Commercial Events Fund to help attract one iconic event in the low season. The report also suggested that other provincial regions are investing more in commercial events. A review of the Major Events Funds of Nelson, Taranaki, Manawatu and Thames-Coromandel suggests that this is typically the case. Given the Fund is generating additional benefits to the region and good estimated returns, we suggest that the Council consider increasing the Fund over the next two years (for example by $25,000 each year to make the Fund $125,000 per annum by 2019/20) and undertake a full evaluation of the Fund in three years.

Later in this report we discuss efficiency issues related to the Council Sub-Committee making decisions on applications. Advisory Role As noted earlier, the Events Coordinator provides advice and information on event proposals, Council services and the Follow-ME website to around 30 events per month and also facilitates networking of event managers in the region. We received very positive feedback about this service, consistent with the findings of the review of destination marketing (Jeffery, 2017). The quarterly event manager meetings are regarded as valuable as there is a great deal of information sharing about event opportunities, which enables more effective coordination. The Events Coordinator has assisted several event organisers with bidding for new events and with dealing with regulatory issues associated with events, such as liquor licensing. For example, the Advisor has supported:  The Blenheim Volunteer Fire Brigade to successfully bid for Marlborough to host the United Fire Brigade Association South Island Fire Fighters Combat Challenge by providing advice on venue locations, compliance and sponsorship documentation.  Nelmac Garden Marlborough to work through compliance issues associated with the evening function at the event.  Marlborough Book Festival coordinator on signage, liability and compliance issues.  New Zealand Winegrowers on a submission to the Ministry of Health on how an intended law change would impact Marlborough events and venues.  The bid for and the organisation of the New Zealand Scout Jamboree. The Scout Jamboree that was held in Renwick in December 2016 is a particularly useful and significant example about the added value that the events advisory service provides. New Zealand Scouts were originally considering three locations in the South Island as potential locations for the Jamboree. We were told that the reception and information about the opportunities in the region (e.g., venues, attractions) that decision-makers received from Marlborough was significantly better than information provided by other locations. They were particularly impressed that the Council had taken the time to understand what Scouts New Zealand was wanting to achieve and tailored the proposal to this. Scouts New Zealand have used the proposal as a model for other regions pitching to host a Jamboree. Scouts New Zealand found the facilitation role provided by the Events Coordinator to be an efficient and effective way of working through multiple Council requirements. This included dealing with infrastructure issues that arose (e.g., water installation) and responding quickly to questions about the ability of the region to continue to host the event following the Kaikoura earthquake. We did hear that there is still room to improve the sequencing and coordination of events through the advisory role. An example was provided where a Blenheim CBD event could not take place because Main Street had been booked for a different event (and there was the opportunity to hold both events). Destination Marlborough Destination Marlborough is the region’s Convention Bureau and has a specific role in working with the conference and exhibitions sector to bid for and host events and to refer organisers to local venues and service providers. This includes providing advice on and financial support for bids, and marketing and promoting business events. The role was part-time until 2016/17 when additional funding was made available to increase it to a full-time service.

The organisation reports on event related KPIs in its annual report as shown in Table 17. It generally achieves or exceeds the performance targets. Again, these measures are of mixed use in measuring performance. Certainly, hosting event planners, facilitating business leads and compiling bids should lead to an increase in events, but we would expect to also see measures related to the extent to which these convert into events.

Table 17. Destination Marlborough’s Event KPIs

Activity 2014/15 2015/16 2016/17

Five Marlborough events are featured within marketing Achieved N/A N/A campaign activity

Facilitate promotional activity that targets increasing ‘out of N/A Achieved N/A region’ awareness and visitation around four regional events

A minimum of 25 (2014/15); 30 (2015/16) conference Achieved 90% Achieved Achieved organisers/45 business event planners (2016/17) visit the region

A further 75 conference organisers receive training on Exceeded N/A N/A Marlborough

The Marlborough Convention Bureau facilitates a minimum N/A Achieved Exceeded of 75 conference business leads on behalf of bureau members (2015/16); generates a minimum of 150 business event leads or referrals

A minimum of five regional conference bids compiled and N/A N/A Exceeded submitted

Destination Marlborough’s business event activity has also not been evaluated although the organisation has reported on the estimates of the economic value generated by events it has helped secure. For example:  In 2014/15 Destination Marlborough generated 3 bid documents and won 1, worth an estimated $625,000 in economic value.  In 2016/17, Destination Marlborough compiled bids for 14 conferences and won 8 conferences involving 2,100 delegates and 5800 delegate bed nights, worth an estimated $1.8m in economic value. We can also get a sense of its impact through the national survey of convention and exhibition activity (noting that the survey provides estimates and may not capture all data). Given that Marlborough is the third smallest of the 13 locations surveyed, in the year ended June 2017:  The region punched above its weight in relation to multiday events and trade shows and exhibitions. The region received 3 percent of all multi-day events (by delegate days), which was the 9th highest (ahead of Hawke’s Bay, Taupo, Dunedin and Nelson and just behind the Bay of Plenty) and 4 percent of all trade shows and exhibitions, also the 9th highest (ahead of Rotorua, Taupo, Hawke’s Bay and Queenstown, and just below Nelson).  The region underachieved in relation to delegate days and incentive events. The region received 2 percent of all delegate days across New Zealand, which was the second lowest out of the locations, above Taupo but below Nelson and Hawke’s Bay, and 3 percent of all incentive events, the lowest in New Zealand (although on a par with Taupo).

Positively, the region has gained market share of events since 2014, with the number of events growing on average by 20 percent per annum (compared to slow growth nationally of 1.5 percent per annum), although most of this growth came over 2016/17. Only Taupo had stronger growth. In addition, Marlborough’s volume of delegates and delegate days has grown very strongly, particularly over 2016/17. The estimated number of delegates increased from 33,200 to 63,000 over 2014 to 2017 and the number of delegate days grew from around 45,400 to 88,200 over the same period. The destination marketing review (Jeffery, 2017) suggested that Destination Marlborough should work with venues in the region to adopt collective KPIs (e.g., win 10 bids per annum for multi-day conferences of more than 100 delegates) and undertake joint marketing. Given that Destination Marlborough achieved 8 wins in 2016/17, that KPI may well be achievable. We received feedback that Destination Marlborough should target business events in the shoulder and winter seasons as there may be accommodation and attraction capacity constraints in the peak seasons. i-SITEs MDC, through Destination Marlborough, supports 3 i-SITEs in Blenheim, Picton and Havelock (the Havelock i-SITE was established as a pilot in 2015/16). i-SITEs provide information to visitors on attractions, accommodation, shopping, transport and amenities in the region and facilitate bookings for attractions, transport (including rentals) and events. i-SITEs also sell retail goods, such as stamps, phone cards and maps. They operate 364 days of the year (excluding Christmas). Destination Marlborough has reported on i-SITE sales KPIs in its annual reports over the last three years:

Table 18. Destination Marlborough’s i-SITE activity KPIs

Activity 2014/15 2015/16 2016/17

i-SITEs maintain a minimum sales conversion rate of Not Achieved N/A N/A 13.5%.

Marlborough i-SITEs achieve sales turnover of $3 million N/A Achieved Not Achieved (2015/16); $3.1 million (2016/17) ($3.1m) ($2.6m)

Although the i-SITEs have struggled to meet their sales targets, the Kaikoura earthquake would have impacted on the result from 2016/17. In addition, these targets are relatively limited. In other regions, we have seen KPIs related to not only sales but also visitors in the door, bookings and visitor satisfaction with the i-SITEs. A national study on i-SITEs in 2015 provided some data on how Marlborough’s i-SITEs compare to other regions (McIlrath and Gordon, 2015). In 2014/15 Marlborough i-SITEs generated a total of $2.58 million in commissioned based sales. This compared well to other smaller regions, such as Nelson ($1.87 million in sales), Tasman ($1.56 million in sales), Hawke’s Bay ($2.29 million in sales), Manawatu-Wanganui ($1.21 million), West Coast ($2.58 million) and Southland ($1.11 million). It was estimated that 4.0 percent of visitor expenditure in Marlborough flowed through the i-SITEs. Again, this compared well to comparable regions, including Northland (1.9 percent), Hawke’s Bay (2.1 percent), Manawatu-Wanganui (0.6 percent), West Coast (1.7 percent), Southland (0.6 percent), but was slightly less than Nelson-Tasman (4.7 percent).

There has not been an evaluation of the impacts of the i-SITEs in the region. Our research in other regions suggests that i-SITEs help visitors at the trip planning stage and encourage visitors to participate in more local activities and stay for longer. i-SITEs can also provide useful information on the state of the tourism market (as an early barometer of visitor trends). The 2015 study (McIlrath and Gordon, 2015) estimated the additional spending that i-SITEs in New Zealand generated in their region. In Marlborough, the i-SITEs were estimated to generate an additional $3.4 million spend in the region, across accommodation, attractions, events and transport. This was higher than some smaller regions such as Nelson ($2.7 million), Tasman ($0.9 million), Southland ($2.6 million), but was less than Manawatu-Wanganui ($6.1 million), West Coast ($4.8 million) and the Hawke’s Bay ($10.6 million). In terms of broader economic impacts, the 2015 study estimated that Marlborough i-SITEs generated $4.9 million in GDP and 76 jobs within the region. The GDP impact equated to $8.5 per $1 of local government spending on the i-SITEs. Overall, it appears that i-SITEs are generating positive impacts for Marlborough.

2.2.2 What is known about the effectiveness of sector development activities? Sector development activities are primarily delivered through Smart and Connected support for industry groups and strategies, although the Council also supports the development of international education and, as already discussed, MRC has also supported the Food and Beverage Cluster over the last few years.

Smart and Connected Industry Groups and Strategies The concept of industry leadership or steering groups came out of the Innovation Stocktake that was undertaken as part of the work for developing the Smart and Connected vision and framework over 2012-2013. During that process, industry workshops with business leaders were held to identify a vision for their sector, potential goals, challenges and potential projects. As noted earlier, the Stocktake report then recommended that industry groups be formed to take the initial work and develop strategies and implementation plans for the various sectors. The Council has provided support for three sectors to develop strategies and sector steering groups. The formation of the strategies and groups have followed the Smart and Connected process, which involves:  A review of data and research that has been undertaken.  A series of interviews with key decision makers in the sector to identify the major issues facing the sector.  An industry event/workshop attended by sector, Council and other public and private organisations to confirm support for the vision and to identify strategic priorities that an industry strategy and plan would need to address. Expressions of interest are sought at the workshop to form a leadership or steering group to develop and oversee a strategy and plan.  A sector strategy/plan is developed.  An annual review of progress against the strategy and plan is undertaken and an update is provided to the broader sector community through an annual event. An independent consultant undertakes the interviews, facilitates the workshops and helps the leadership group to develop the strategy and plan. The steering groups comprise business representatives and Councillors.

The Wood Sector steering group and strategy was the first ‘cab off the rank’ and was established in early 2014, quickly followed by the visitor economy strategy in late 2014 (although a visitor economy leadership group was not finalised until 2015). The aquaculture group was established in 2016. Progress against the sector strategies and plans have varied across the groups. Table 19 summarises the priorities of each group (which have been updated over time) and their achievements.

Table 19. Smart and Connected sector group priorities and achievements

Group Strategic priorities or goals Key achievements

Wood Sector Fostering Innovation – develop initiatives that Assisted investment in Marlborough by Australasian maximise the value of residue from wood, e.g., wood casing plastic product company wood chipping projects; work with Scion and other experts to identify opportunities to improve Consideration of wood chipping business case efficiencies in the supply chain

Innovative Regional Marketing – investigate Forest industry forum held international niche markets for Marlborough wood

Safety, Training and Investment – support the No major achievements as yet development of a more effective approach to training and assessment

World-class Infrastructure – work with MDC on Mapping of forestry estate in Marlborough to infrastructure initiatives of relevance understand investment requirements, including barge site

Communication – engage with Marlborough’s Forestry industry community field day (with the communities and industries to develop a social Marlborough Forest Industry Association) license for the sector Advocated for wood in local projects, such as the Picton Library Identified a detour option for trucks with the Renwick Smart & Connected Group

Regulation – strengthen the relationship with Input into Marlborough Environmental Plan MDC and work together to understand the key discussions and advising Council on roading issues impacting on the sector and ensure the matters. Submissions to Annual Plan. sector has the opportunity to provide input into relevant decision-making processes

Visitor Leadership and Unity – develop a Grow Marlborough forum transitioned into Smart & Economy communications programme to promote the Connected leadership group vision and activities to the community, hold regular networking events, create a destination Visitor Growth Plan developed management programme

A Growing Visitor Economy – support the Ongoing Marlborough Story, advocate for agreed new major projects in the region

Connected locally and nationally – identify Ongoing opportunities for building on the events/conference schedule with partner regions; partner with NMIT and schools to encourage relevant education offerings

Strong Centres – develop a Smart & Connected Picton Smart & Connected Group and plan strategy for the Picton Community; Marlborough established to adopt a Business Improvement District policy to enable the Blenheim CBD to pursue a BID MDC adopted a Business Improvement District policy Blenheim Business Association established

Group Strategic priorities or goals Key achievements

Aquaculture Harmony – develop a community partnership Active participation by the Havelock Community programme; create a balanced scorecard; and Association in working groups and at industry implement a Marine Farming Week events Positively influenced company initiatives including Sanford’s Field Day, Omega Seafood’s local employment initiative, NZ King Salmon’s school education programme

Value and Innovation – develop a regional Delivery of successful aquaculture think-tank in innovation strategy, value and innovation 2016 database, cooperative marketing Creation of Blue Mussel working group with the following projects: blue mussel dish served at Arbour restaurant; collaboration on hydrolysed blue project; Cawthron research indicating how and where to farm to minimise blue mussel impacts; Sanford progressing blue mussel pet food project; inquiry for blue mussels from China

Supportive Regulatory Environment – King Representatives of the group have been involved in Shag research, outstanding landscapes/natural the MEP working group established by Council character project, Bay by bay management project, contribute to Marlborough Environment Plan

It appears that many of the proposed initiatives or actions in the sector strategies have been achieved although there is no hard information about the impact of the actions. However, given that a large number of industry representatives and other stakeholders have committed time to the projects, we can assume that they receive value from them. Feedback we received suggested that some projects (e.g., in the wood sector) would have likely happened anyway but that the group helped accelerate progress. In other cases, the group indicated that a project would not have proceeded without Smart and Connected, for example, the blue mussel initiative under the aquaculture group. Feedback from stakeholders suggested that more progress has been made with the wood sector and aquaculture groups, with a view that momentum was maintained because the groups were able to draw on the services of a strong industry association (Marlborough Forest Industry Association, Marine Farming Association). The Visitor Economy Group has not met for several months and we understand that there is work underway to focus the group on major challenges facing the industry such as accommodation for workers, education and infrastructure. The review of destination marketing report (Jeffery, 2017) suggests that the membership of the Group be reviewed and that it adopt clearer terms of reference, which is sensible given that the role of the group is being rethought. A major benefit of the groups has been an improved relationship between industry and Council and other stakeholders. Wood sector and aquaculture sector group representatives noted that relationships between their industry and the Council has been tense in the past due to disagreements about environmental and regulatory issues. Both said that the groups had changed the level of engagement with the Council, which was now much more constructive. The aquaculture group indicated that they did not think that progress would have been made on environmental planning issues relevant to aquaculture in the absence of the group. However, there was also feedback that the engagement with the Council did not always meet expectations in that the groups were not always given advance notice of issues or initiatives the Council was considering that impacted on their respective industries. The groups naturally expect the relationship to be transparent both ways.

There were also comments made that there isn’t a great deal of information sharing across the various Smart & Connected industry and community groups (there is some sharing of information between specific groups). Representatives indicated that they would benefit from learning more about what each group is delivering (which may be relevant to more than one group) and to get a collective understanding about what processes work well or do not work well. Representatives also noted that it wasn’t always clear how the work of their group was contributing to a larger economic work programme or strategy. Feedback suggests that there are some common opportunities and issues across groups, such as skill shortages and labour demands, which may be better tackled at a regional or collective level. We note that there are lessons that have been learned that could improve the effectiveness of the groups or any future sector groups. For example, the aquaculture group ensure that all of their working groups meet on the same day as their steering group, which enables oversight and coordination across the workstreams (and encourages good levels of participation). In our view, the Council should establish an information sharing forum across the groups. A practical way may to be start with the Groups’ Chairs and for the Chairs to determine how the forum should operate and how often.

Education Nelson-Marlborough The Council began supporting Education Nelson-Marlborough in 2015/16, in partnership with Education New Zealand, NMIT, Nelson City Council and Nelson EDA. It is providing $10,000 per annum over three years to enable Education Nelson-Marlborough to attract greater numbers of international fee-paying students into the Top of the South. Twelve schools are participating in the initiatives, including three from Marlborough – Marlborough Boys College, Marlborough Girls College and Queen Charlotte College. The initial support was geared to help Education Nelson-Marlborough to establish a regional delivery structure, undertake some initial marketing initiatives and to develop industry capability. Given this, it is too early to determine the extent to which Education Nelson-Marlborough has impacted on student numbers in the Marlborough region. However, the organisation has delivered on its initial business plan, including:  Appointing a regional project manager and establishment of a governance group and advisory group.  A visit to China and partnership discussions with local schools, an Education Group, Heads of Tourism and relevant Ministries.  The development of new branding, marketing collateral and a website.  The development of a share calendar of market visits and agents working with providers. Education Nelson-Marlborough is developing offerings for Japan and Korea as well as China. MDC was regarded as supportive from the outset and recognised the potential that international students (and their visiting families) could bring to the region. This is a new area of activity but it has the opportunity to be more significant for the region in future, particularly given the region’s capability in viticulture. This should be considered during the development of a regional economic strategy and action plan. It may also be worth considering how to attract domestic as well as international students to the area. However, there may be capacity constraints to hosting students in the region (e.g., accommodation and homestays required).

2.2.2 What is known about the effectiveness of community and town development activities? Community and town economic development activities are also primarily delivered through Smart and Connected support for community groups and strategies.

Smart and Connected Community Groups and Strategies The concept of community groups developing their own strategies and plans also partly came out of the Smart and Connected process, with the Council agreeing to piloting an approach to support communities in early 2013 on the basis that the Smart and Connected framework and vision required communities to support its implementation. The Council had also been working with several communities through the process to develop the Growing Marlborough urban growth strategy. Havelock was regarded as being well advanced in identifying a community vision and was selected as the first community that a facilitator would work with to develop an implementation plan to support the community’s aspirations. Havelock also had an existing community association that could form the basis of the leadership or steering group. The pilot commenced in December 2013 and followed a similar process to the wood industry group process, except that the community group identified some initial priorities to pursue before the plan was developed. The Smart and Connected community plan processes typically involve:  A series of interviews with community leaders to identify the key issues facing the sector.  A community workshop to confirm support for the vision and to identify strategic priorities that the community could pursue.  Agreement on a community leadership group.  The community plan is developed.  Sub-groups/working groups identified to implement particular priorities and related actions.  Annual review of the plan and governance.

MDC’s Annual Plan process for 2014/15 resulted in funding for additional community group plans to be developed. Picton (2014) and then Renwick (2015) were selected and Blenheim CBD businesses also sought a Smart and Connected process to help them establish a Business Improvement District (BID) for the CBD. As with the Smart and Connected sector groups, progress against priorities and the community plans have varied across the groups. Table 20 summarises the priorities of each group (which have been updated over time) and their achievements.

Table 20. Smart and Connected community group priorities and achievements

Group Strategic priorities Key achievements

Havelock Initial priorities:  A restructuring and fresh governance structure for the Havelock Community Association was  A new organisation for community undertaken governance  Successful application made to the Department of  Securing funding for a Community Internal Affairs Community Development Scheme Development Advisor which provided a grant of $250,000 over three years to employ a community development resource. An advisor was appointed

Group Strategic priorities Key achievements

Following development of the Community Plan, All but one of the projects successfully completed: the priorities were:  Visitor information centre – ran a two-year trial of A. Infrastructure: a Havelock i-SITE with Destination Marlborough and secured MDC funding for an additional year  Construct the Havelock Community of operations. Boardwalk to connect Havelock Marina to Queen Charlotte Drive  Beautification, e.g., decorating the township with mosaic tiles, water fountain  Create opportunities for enhancing and beautifying Havelock  Family facilities  Discuss options with Port Marlborough to  Family activities create a low-cost solution to improving access to the marina  Signage  Online presence (www.havelock.co.nz) B. Identity:  Broadband access, e.g., at the Hub  Refresh the Havelock brand and promote the new identity  Branding and promotion – imagery and captions about Havelock’s identity were identified to feed  Refresh the gateway signage into Havelock into signage and increase signage in and around Havelock  Community Hub – Community Association  Increase opportunities to access visitor assumed responsibility for the operation of the information Hub. Hub includes Havelock Community Association, Havelock Vision 2020 Trust, i-SITE C. Activities: centre, and Pelorus FM Community Radio Station  Implement a programme for maintaining  Track maintenance walking tracks around Havelock Boardwalk project still being progressed. The  Strengthen family facilities and the local Havelock Community Association has worked with the community network through increasing Link Pathway Trust and MDC and reviewed route opportunities to meet and fostering a culture options for the pathway; completed a land boundary of collaboration survey and worked through a preferred route and track specifications; consulted with the community and D. Connectedness: agreed on a preferred option; undertook more detailed  Development of the Havelock Community route design; and prepared the environment report and Hub other documentation required for the resource consent application  Look for opportunities to improve broadband and cellphone access around Havelock

Picton A. Community:  Communication plan developed to ensure community is aware of projects. Website and  Publicise events and decisions of community other media developed significance; build communications, encourage diverse participation on working  Submitted to Long-Term Plan on the Picton groups and projects; report regularly to the Library/Service Centre, Long Quay, Picton Community Foreshore and Waste Minimisation Plan. Identified way of working with Council to provide B. Business: input into the foreshore plan, Long Quay and  Encourage entrepreneurs with initiatives; lower High Street Plan work with Picton Business Group to  Held a Picton Foreshore Day to clean up the encourage businesses to work together for Foreshore mutual benefit; work with Destination Marlborough to attract visitors; encourage a  Put in a submission to the Annual Plan on thriving retail sector freedom camping C. Promotion & Awareness; Heritage:  Worked with the Council on an education campaign on reusable shopping bags  Encourage new attractions/events; help promote Queen Charlotte Track, Link  Developed a proposal for the Picton Wayfinding Pathway, other walk and cycleways; work project. with Te Atiawa to better promote unique Māori heritage; 250-year commemoration of  Developed a proposal and submission for funding Cook’s landing; strong Picton identity within for upgrading the Picton to Waikawa marinas the Marlborough Story; work with Destination walkway Marlborough and operators to better promote Picton

Group Strategic priorities Key achievements D. Infrastructure:  Worked with Council on identifying areas along the Marina2Marina track to be upgraded  Actively engage in infrastructure planning for Picton; attractive, clean Picton environment;  Helped organise the Cruise Ship Think Tank Picton signage – arrival and wayfinding

E. Environment:  A Centre of excellence for Conservation; initiate education in the community; work with Council towards a clean town and Sounds; initiate and support projects towards a pristine environment

Renwick A. Community focus: Community focus  Provide places in Renwick for the community  Annual Christmas Tree festival to enjoy – improve the Renwick playground, develop a dog park, run community events  Working closely with MDC to deliver a dog park for Renwick B. Village Beautification: Beautification  Improve the look and feel of High Street, plant more trees, develop a village centre  Have developed a landscaping plan for the village and are working closely with MDC to C. Wine Connection: implement this plan. Successfully applied to Small Townships Fund  Make Renwick the place to experience the wine-growing region.  Planter boxes made and displayed D. Family:  Installation of information panels though the village  Position Renwick as Marlborough's leading community with strong family values  New Welcome to Renwick entrance signs E. Water:  Confirmed draft plans for domain upgrade  Identify initiatives that the Renwick Wine connection community can embrace to help avoid future water restrictions. Work constructively in  Hosted Renwick Harvest Party partnership with Marlborough District Council  Wine-themed flags down High Street to help guide their investments into water infrastructure Water F. Traffic management and infrastructure:  Encouraged MDC to review how water is rated throughout Marlborough  Support the Heavy Vehicles Project in Renwick; look for further opportunities to  Helped to ensure Renwick did not have any improve traffic management in the future for water restrictions during the 2015 summer by Renwick actively promoting water efficiency in Renwick G. Bike Walk: Infrastructure  A path along SH6 from Rapaura Rd to  Engaged in productive discussions with the Newman Rd (Wairau River stopbank) and logging industry and identified a detour option under bridge to Conders Bend MTB Park; Link Alma St north to Foxes Island Rd and Bike Walk out to Vintage Lane; Cycle lanes in village  Cycle path beside SH6 from Foxes Island Road H. Communications: to Rapaura Rd  Have a multi-faceted communications plan  New signage along Rapaura Rd to warn involving different media to ensure we motorists of the cyclists and to allow cycling on connect with as many Renwick residents as the hatched shoulder possible Communications  Have set up a Facebook page, a website and an email mailing list

Group Strategic priorities Key achievements

Blenheim Goal 1 – Strong Organisation:  Original BID poll was not successful but the Business Blenheim Business Association was formed Association  Establish and maintain a strong representative board for Blenheim Business  Submitted on several issues to the Council, Association; Recruit a BID Manager; Create including Easter trading, business zoning and on an effective online presence; Develop a the Marlborough Environment Plan comprehensive customer database for the Blenheim CBD; Publish a quarterly  Worked with the Council on new plans for CBD newsletter; run bi-monthly networking events; upgrade introduce an associate membership offer  Established Beers & Ideas evenings to network Goal 2 – Marketing, Events & Promotions: with business community  Develop a unique brand identity for Blenheim  Developed a market type of event in the CBD to CBD; Develop a Blenheim CBD marketing be held before the Wine & Food Festival campaign; Develop a strategy to ensure a  Developed the Marlborough Mile concept – art coordinated approach for raising Blenheim works displayed throughout the CBD to CBD’s profile with social media; work with showcase and tell the story of industries, history Follow-ME to communicate an events and natural resources in Marlborough schedule that ensures attendance at regular activities in the Blenheim CBD  Developed and updated website, other social media and newsletter Goal 3 – Partnerships:  Provided displays in CBD at Easter and  Build a strong partnership at governance Christmas level with Marlborough District Council to enhance the influence of input into decisions  Have employed a half-time coordinator affecting the Blenheim CBD; Build a strong working relationship with Destination Marlborough; Partner with selected events; Develop relationships with the Marlborough Conventions Centre, The Marlborough Civic Theatre and the Millennium Gallery Goal 4 – The Ultimate Al Fresco Experience:  Create a unique al fresco experience; Look at options for encouraging innovative and fresh hospitality initiatives within the CBD

Again, a long-list of actions have been commenced or achieved across the Groups but there is no evidence available about the impact of the completed projects. Like the Smart and Connected industry groups, the community groups also indicated that a major benefit of the process has been improved engagement with the Council. We think it is likely that some actions would not have been achieved in the absence of the groups (e.g., several actions in Blenheim were instigated by the Business Association). However, we were also told that the Smart and Community process has not always helped to accelerate actions and that progress on some actions in the plans have been slower than anticipated. Based on the feedback we received, there are several inter-related reasons for this:  A large number of actions have been identified in each community plan. This has spread resources and effort thinly over the actions.  Our observation is that volunteer fatigue is emerging across the community groups. Participants have devoted a considerable amount of time to the groups. They appreciate the approach that the Council has taken to encourage ‘bottom-up’ input into economic development activities, but there was consistent feedback that the groups are not appropriately resourced to implement the strategies and plans they have developed. Representatives from the Havelock group said that having a full-time community development advisor (funded by the Department of Internal Affairs), acting effectively as the programme manager for the Smart and Connected plan, was of

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significant benefit. In contrast, the Picton and Renwick groups have only had the services of an administrator for 4 to 5 hours a week.  Views were expressed that the Council has not consistently engaged in a way that the community groups envisaged. They pointed out that the groups have been organised to provide a collective voice to Council on community issues and opportunities but that the Council has not organised itself to respond in the same way. They noted that, at times, they are passed between different parts of the Council to progress an issue (and sometimes given different advice) and that some areas of the Council did not have a good level of understanding of the Smart and Connected work programme (so did not prioritise their issue). Some had also experienced occasions where they were coming up with options to implement projects, e.g., for beautifying their town centre, and discovered the Council had developed different options and was seeking to progress those. As discussed earlier, the effectiveness of the Picton Smart and Connected Group is also complicated by the community having another two groups that are advocating for and supporting Picton’s development – the Picton Marlborough Sounds Visitor Economy Group and the Picton Business Group. In our view an important function of the Smart and Connected Groups and hence an indicator of their effectiveness is that they are able to provide ‘one voice’ on economic development issues and opportunities facing their communities. The Council faces additional costs (time, incomplete information) when there are multiple groups undertaking similar activities. Multiple groups will also result in resources (funding, expertise) being spread even more thinly across projects. As per our earlier suggestion, coordination and rationalisation of the groups’ activities, through a facilitated process, is desirable. There were also mixed views expressed about having Councillors on Smart and Connected steering groups. On the one hand, some believe that this can constrain free and frank discussion (e.g., if the group has an issue with the Council). On the other hand, some said that Councillor representation helps to ensure that the Council knows what is happening and that Councillors can also communicate immediate advice about Council policies and programmes of relevance. It would be useful to test whether these arrangements should continue with each of the groups (e.g., some groups may prefer to invite Councillors to certain meetings or discussions than have them as formal members of the steering group). Questions were also raised about how steering group members were selected and that this wasn’t always transparent.

2.3 The overall effectiveness of economic development activities

Like most other regions in New Zealand, there is limited hard information available about the effectiveness of the Council supported economic development activities. There has not been a formal evaluation of any of the services. However, the collected evidence and feedback from stakeholders points to areas that are achieving positive results and areas where improvements are required. On the positive side, our review has found:  Business Trust Marlborough has grown its level of client engagements, referrals, mentor matches and mentors over the last three years.  Relatively high proportions of businesses accessing Business Trust Marlborough support have been satisfied with the service and consider that the service had helped improve their business knowledge.  There are several examples where the Smart Business Marlborough advisory service of the Council has made a difference to business decisions and developments.

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 The food and beverage innovation cluster has generated a range of new activities for the region, including the Premium Foods for China initiative and Massey University expertise working with local companies. The majority of cluster members indicated that mutual benefit was gained from the cluster.  MRC supported research projects have leveraged significant co-funding and resources from other organisations and have enabled better management decisions based on the research.  The development of the Ningxia relationship has facilitated wine industry, research and education linkages for local organisations.  Specific marketing initiatives implemented by Destination Marlborough have resulted in uplifts in visits and referrals.  Industry contributions to Destination Marlborough’s activities have increased over the last three years, which suggests that the private sector values the activities and considers they are effective.  The vast majority of the goals and related actions of the Regional Events Strategy 2013-2016 were completed, and good progress is being made on the actions in the updated 2016-2019 Strategy.  Events supported through the Commercial Events Fund are achieving good outcomes in terms of visitor numbers and spend from outside the region and the estimated return on investment from some supported events is very high.  The region has gained market share of business events since 2014 and the number of delegates and delegate days has grown strongly over the same period.  Stakeholders rate the events advisory service of the Council highly and there are several examples where the role has made a real difference to the success of an event.  A national study suggests that i-SITEs in Marlborough are facilitating relatively high levels of visitor expenditure compared to i-SITEs in other smaller regions.  Smart and Connected industry groups have resulted in some projects that otherwise would not likely to have occurred and have improved industry relationships with the Council, resulting in more constructive dialogue and input on environmental and planning issues.  Smart and Connected community groups have delivered a range of community improvement projects. Overall, a significant number of outputs and projects have been delivered across all areas of economic development services. Industry and community representatives have committed a significant amount of time and resources to a range of activities. In our view the majority of economic development activities are having a positive impact and are often achieving additional or accelerated outcomes. The review has also found several areas where the effectiveness of activities could be improved or where better information is required to assess impacts:  There is marked variation in the levels of community satisfaction with economic development and tourism services across different locations, suggesting there is variation in the reach and impact of some services.  There is limited information collected about the effectiveness of the information and advice provided through the Smart Business Marlborough advisory service and the outcomes resulting from the service.

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 Destination Marlborough’s digital and social media performance was low relative to comparable RTOs when last benchmarked  As noted in the recent review of destination marketing activities, stakeholders consider that the region has too many brand messages, which confuse the visitor value proposition, and that these need to be integrated.  The quality of Commercial Events Fund reporting is variable and further guidance is required to ensure that consistent information is provided on the impact of the funding post-events.  The Council needs to clarify expectations about how it will engage with Smart and Connected Groups and to be upfront and transparent when working on issues that impact on the relevant sector or community.  Smart and Connected Groups should have greater opportunities to share information about work programmes in order to identify joint priorities and ways of improving group functioning  Smart and Connected community groups find it difficult to maintain momentum on implementing their plans in the absence of having a dedicated resource to coordinate and drive activities. Because of the limited evidence currently available about outcomes and noting that in some cases it may take years for outcomes to result from interventions, it is difficult to suggest there are specific economic development activities that are not effective and that should be discontinued at this time.

2.5. Are services delivered cost-effectively? Delivery arrangements As identified earlier in this report, there are two areas of current delivery that we consider could be delivered more efficiently in future: 1. Commercial Events Fund As previously noted, decisions on the allocation of the Commercial Events Fund are made by a sub- committee comprising the Mayor, two Councillors and the Chair of Destination Marlborough. Although this provides a robust process, it appears to us to be adding a layer of transaction costs that are not necessary given the relatively small amounts of funding being considered (e.g., in several cases under $10,000). We would expect the Destination Marlborough Board to have sufficient commercial and visitor economy expertise to make these decisions. One of the reasons for using an external agency such as Destination Marlborough is for such decisions to be made using broader expertise than is available and that is arms-length from Council. Given the need to ensure higher quality public rationale arguments for the investments, MDC officials’ advice should still be provided as part of the process. 2. Small business advice and referrals In our view it is not particularly efficient – for clients or for the Council – to have both Business Trust Marlborough and the Chamber of Commerce involved in assessing business needs and referring businesses to available support in the region. Although there is a current delineation between the Chamber and Business Trust Marlborough’s focus (and they are both part of the Regional Business Partner consortium with Nelson RDA and meet regularly to share information on referrals and opportunities), it would be more efficient to have a single front-door for business development assistance (and would also result in some, albeit minor, savings in their overhead, e.g., no need to have or service two governance groups). We understand the two organisations have discussed co- locating and working more closely together but the Trust is concerned about losing a distinctive Marlborough identity if their services were merged with the Chamber. We think this is manageable.

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As the Council is the main funder of the Trust, it has an important influence on the Trust’s future and is effectively supporting the current split of functions across the two organisations. We believe the Council should encourage the Trust and Chamber to explore combining their functions and to come back to Council with a proposal for how this can be best achieved and what the long-term future of business development support could be in the region. Beyond these two areas, our observation, which was also noted by some stakeholders, is that Council staff involved in economic development are stretched over a range of services and are often delivering several activities with relatively limited time and resources available.

Is Destination Marlborough efficient? Given Destination Marlborough receives the lion’s share of Council economic development investment each year, we reviewed their cost information in more detail. Destination Marlborough’s expenditure has increased over the last four years (see Figure 4 ) from $1.44 million to $1.75 million or an average compound increase of 6.6 percent per year.

Figure 4. Destination Marlborough’s expenditure 2013/14-2016/17

Total Expenditure $1,800,000

$1,600,000

$1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$0 2014 2015 2016 2017 Source: Destination Marlborough Annual Reports

As is shown in Figure 5, which shows the expenditure areas of Destination Marlborough, the increase is largely due to a combination of an increase in spend on consumer marketing and on i-SITEs, although there was a relatively large increase in conference marketing expenditure between 2016 and 2017 (albeit from a small base).

Figure 5. Components of Destination Marlborough’s expenditure 2014-2017

I-Site Interational trade marketing Consumer marketing Conference marketing Other

$1,000,000

$800,000

$600,000

$400,000

$200,000

$0 2014 2015 2016 2017 Source: Destination Marlborough Annual Reports

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Within this expenditure, employee costs have grown from around $585,000 to $756,000 over the four years (a compound average increase of 8.9 percent per year) and Board expenses have increased from $13,700 to close to $27,900 (a compound increase of close to 27 percent per year). In order to judge efficiency, we can compare the increase in expenditure to the increase in outputs and related results that have been achieved and how Destination Marlborough’s employee and Board expenses compare to other similar sized RTOs. The available evidence is somewhat mixed on the level of outputs and results. On the one hand, Destination Marlborough has:  Delivered an increase in business event activities and outputs from the additional Council funding in 2016/17. For example, in 2014/15 Destination Marlborough helped generate 3 conference bid documents and won 1 with an estimated value of $625,000. In 2016/17, it helped compile bids for 14 events resulting in 8 wins worth an estimated $1.8 million in economic value to the region.  Increased activities related to facilitating cruise ship visits over the period, including new cruise day brochures and other collateral.  Increased the publication and distribution of the visitor guide over the period.  Increased industry funding contributions to marketing over the period.  Extended i-SITE services to Havelock as part of a trial period. On the other hand:  The number of travel sellers receiving training has fluctuated over the period.  The number of travel sellers and media outlets visiting the region has also fluctuated.  The value of i-SITE sales has fallen over the period. The level of travel sellers and media outlets visiting the region is, however, influenced by the activity of Tourism New Zealand. In addition, it is likely that a decline in some output levels in 2016/17, such as a fall in the value of i-SITE sales, are due to the Kaikoura earthquake and changes in visitor flows. Overall, there is no clear evidence of a reduction or increase in efficiency. Another rough measure of efficiency is the level of staff resource that is required to deliver the range of destination marketing support or the proportion of staff costs to total expenditure. Destination Marlborough is around average on this measure relative to comparable medium RTOs as shown in Figure 6 below, with staff costs representing 47 percent of its total expenditure.

Figure 6. Proportion of staff costs to total expenditure across selected RTOs, 2015/16

Lake Wanaka Tourism

Tourism West Coast

Destination Marlborough

Destination Wairarapa

Destination Coromandel

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Source: MartinJenkins calculations

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Moreover, although Destination Marlborough’s proportion of staff costs is higher than Lake Wanaka Tourism and Tourism West Coast, neither of those RTOs manage i-SITEs, which tend to be staff intensive. Both Destination Wairarapa and Coromandel manage i-SITEs. In terms of Board expenses, the average Board cost for comparable RTOs in 2016 was around $37,300 (MacIntyre, 2016) and Destination Marlborough’s cost is well below that average. The efficiency of Destination Marlborough’s regional marketing activities can also be roughly assessed by considering visitor expenditure and nights per dollar invested, relative to other comparable agencies. Again, this is only a rough measure as visitor expenditure and nights are affected by a range of activities beyond destination marketing support. Destination Marlborough is regarded as a ‘tier 3’ or medium RTO based on its scale (budget). The average Council investment in regional marketing activities per guest night for tier 3 RTOs in 2015/16 was $0.64 (MacIntyre, 2016). Marlborough was above average at $0.98 but around the middle of ranked RTOs.

Figure 7. Council marketing investment per guest night, selected RTOs, 2016

$4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50

$0.00

Nelson Nelson RDA

Northland Inc Northland

Visit Whanganui Visit

Venture Southland Venture

Tourism West Coast Tourism West

Hawke's Bay Tourism Bay Hawke's

Destination Wairarapa Destination Destination Coromandel Destination Destination Marlborough Destination Source: Based on MacIntyre, 2016.

In 2016 the region achieved $511 of visitor expenditure per $1 of Council investment in visitor promotion and marketing compared to a tier 3 RTO average of $703 (MacIntyre, 2016), so was below average on this expenditure measure but again was around the middle of the RTOs when ranked.

Figure 8. Visitor expenditure per dollar of Council marketing investment, selected RTOs, 2016

$1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200

Nelson Nelson RDA

Northland Inc Northland

Visit Whanganui Visit

Venture Southland Venture

Tourism Coast Tourism West

Hawke's Bay Tourism Bay Hawke's

Destination Wairarapa Destination Destination Coromandel Destination Destination Marlborough Destination Source: Based on MacIntyre, 2016.

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These figures should be regarded as indicative as different Councils and RTOs appear to include or exclude different types of expenditure as marketing investment when answering the survey. Overall, there is no evidence to suggest that Destination Marlborough is inefficient.

Is there potential for increased co-funding? We also considered whether economic development services could be delivered more cost-effectively (particularly from MDC’s perspective) if there was a greater level of co-funding from other parties. Across all of the activities there appears to be a significant level of co-funding from the private sector already. In 2016/17, co-funding comprised:  49 percent of Destination Marlborough’s budget, including i-SITE revenue and industry contributions. If we exclude i-SITE revenue, the proportion is 21 percent.  48 percent of Business Trust Marlborough’s budget.  Over 70 percent of MRC’s budget. Beyond funding, there is also clearly a significant amount of industry and community time and expertise or in-kind contributions, for example to support Smart and Connected processes. Based on reviews we’ve undertaken in Nelson, Taranaki, Northland and Waikato, this is a relatively high level of industry and non-Council funding. As a comparison and focusing on Destination Marlborough, in 2016 the average industry contribution to RTOs was 8 percent (MacIntyre, 2016). Given this, we do not think there is significant potential for increasing private sector co-funding of economic development activities in the region, beyond any individual projects. However, as stated earlier, the proposed ‘Top of the South’ economic action plan will provide the region with a good opportunity to make the case for co-investment from central government for priority actions.

2.6 Assessing whether the benefits of economic development activities exceed the costs

The absence of any formal evaluation findings on economic development activities in the region or substantive assessments of impacts (other than for events) means we cannot definitely state that the benefits of these activities exceed the costs. However, we consider that this is likely, based on what is being delivered, the impact information that is available, industry co-funding and resourcing of several activities and feedback from stakeholders. This situation is not unique to Marlborough and most other regions and Councils undertake relatively little evaluation and provide limited evidence about the benefits of their economic development activities relative to costs. This is because evaluating the effectiveness of economic development activities is difficult and requires investment in staff time and capability and typically external expertise. Key issues are:  Changes in outcomes (e.g., a business’s R&D levels or jobs, visitor expenditure in the region) cannot simply be attributed to an intervention because they will be influenced by a range of other initiatives and external factors, including changes in economic conditions, changes in demands in key markets, competition, changes in resources, and local and national policy and regulatory conditions.

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 A particular activity may impact on a range of outcomes (so there isn’t a one-to-one relationship), and outcomes will also influence each other (e.g., an initiative might initially help increase the R&D of a business and its levels of employment, but the increase in R&D will improve the performance of the business over time and lead to further increases in employment). However, assessing the benefits of economic development activities can be improved by more clearly identifying the linkages between outputs, immediate impacts and short- to medium-term outcomes, and by capturing better feedback from business, industry and community representatives about their views on the changes that have resulted from activities. Performance measurement and reporting We have commented throughout this report on the limitations of the existing key performance indicators associated with different activities. Interestingly, the Council has actually proposed a broader set of measures for Smart and Connected and Smart Business Marlborough activities as part of its economic development implementation plan. For example, the Council proposed the following outcomes and measures for Smart and Connected and Smart Business Marlborough:  Evidence that the Smart and Connected Groups are sustainable, operating effectively with a relevant and up-to-date strategy.  Evidence of progress that each Smart and Connected community and industry strategy is being implemented. Number and percentage of priorities being progressed in each strategy.  Participation in Smart and Connected events and promotion, evidence of joint initiatives.  Awareness of Smart and Connected within the Marlborough community.  Response to Smart Business Marlborough enquiries within five working days.  Number of enquiries handled annually and tracking of outcomes and referrals.  Adoption of Only Marlborough by community and industries. These are the types of outcomes and measures we would expect to see reported on. We suggest that the Council work with delivery partners to develop an agreed output and outcome framework that sets out a logic about how the range of activities delivered by each organisation contributes to desired outcomes. The framework should reflect the following components:  inputs – what resources are being used  activities – what initiatives are being undertaken and services are being provided using the inputs  outputs – the application of activities to different participants (i.e., the direct product of those activities)  outcomes/impacts – what changes/benefits occur as a result of the outputs, including: - short-term (changes in awareness, knowledge and learning, motivations, access to resources). These are observable in the first 1-2 years and generally directly attributable to the activities. Examples might include visitors having better awareness of attractions in the region, businesses having improved access to skills, increased collaboration between businesses in the region, and businesses experiencing reduced costs for undertaking certain activities.

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- medium-term (changes in behaviours, practices, investments). These will occur over 2 to 5 years. They might include increased investment by an industry that is supported by an initiative, or an increased exchange of expertise between organisations involved in an initiative. - long-term (sustainable changes in investments and business performance and economic impacts). These may take up to 5 to 10 years or longer. They include changes in levels of business growth and visitor expenditure growth, and ultimately changes in regional employment and GDP. The framework will need to be realistic about what can be measured and the resourcing (staff time and funding) required to assess performance relative to the investment being made in economic development activities. However, we believe developing and applying such a framework is manageable. Changes in short- term and medium-term outcomes could be assessed by asking additional questions in client satisfaction surveys or through the use of a client panel (for example, selecting 100 representative organisations across economic development activities from which a sample could be selected on an annual basis to answer an online survey). Many of the likely long-term and economic outcome measures will be available from regional and national research. An example of the types of short-, medium- and long-term outcomes that such a framework could contain in relation to destination marketing and management activities are shown in Figure 9 below (this is indicative only).

Figure 9. Example hierarchy of outcomes for destination marketing and management activities

Long-term outcomes Changes in performance from 5 -10 years plus Example outcomes:  Growth in estimated domestic and international visitor nights and visitor expenditure  Growth in average length of visitor stay

Medium-term outcomes

Changes in perceptions, Example outcomes: behaviours, investments and  Increased awareness of Marlborough as a visitor services over 2-5 years, destination resulting from changes in the  Increase in use of tourism website and other social media actions and immediate channels outcomes  Increase in domestic and international vistiors  Increase in industry participation in marketing  Increase in commissionable tourism products in the region  Increase in events in shoulder seasons  Increase in non-local visitor participation in events and conferences

Short-term outcomes

Example outcomes:  Community and industry organisations have better access Changes in the availability of to information, capability and resources to develop information and resources in tourism products the first 1-2 years, directly  Domestic and international visitors/potential visitors/ attributable to the actions promoters have better information about visitor attractions and amenities in the region  Increase in event enquiries  Increase in visitor enquiries  Increase in reach of marketing  Improved information about the region as a visitor destination  New conferences and events are attracted to the region

Destination marketing and management activities

 Destination marketing and promotional campaigns  Producing regional visitor attraction collateral  Providing support to attract conferences and events  Supporting the development of new commissionable products/new tourism infrastructure  Hosting international wholesalers, media, tours  Offshore sales calls

Performance measures and methods of collecting these can then be identified for reporting on outcomes, as shown in Table 21 below:

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Table 21. Example performance measures

Activity and outcome Example performance measures

Destination marketing and management

Outputs

Marketing campaigns Number of campaigns and number of organisations participating

Marketing collateral Number of visitor guides produced and distributed

Trade hosting Number of international wholesalers, media etc. hosted

Events Number, type and location of events supported by the Council and Destination Marlborough Supporting tourism product development Number of feasibility studies and business cases contributed to

Number of bids supported; number of successful Support to attract conferences and events bids

Short-term outcomes (e.g., tracked and reported on annually)

Increase in visitor enquiries Website users I-SITE enquiries and users (including comparisons during campaigns relative to same periods in previous years)

Increase in event enquiries Requests for information about event opportunities and facilities

Improved information about the region as a visitor Visitor satisfaction with marketing collateral destination (survey based) Increase in reach of marketing Estimated size of markets reached Equivalent advertising value

New conferences and events are attracted to the region Number of successful bids supported Improved industry and community organisation access to Industry/community satisfaction with Destination information, capability and resources to develop tourism Marlborough’s information (survey based) products and experiences

Medium-term (track annually but do not expect major changes except after 2-3 years)

Increased awareness of Marlborough as a visitor Visitor awareness (survey – domestic and destination international)

Increase in use of tourism website and other social media Number of unique users of website, number of channels social media users Increase in domestic and international visitor numbers Visitor numbers (from national estimates)

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Activity and outcome Example performance measures

Increase in industry participation in marketing Industry co-investment in marketing collateral Industry co-investment in marketing campaigns Increase in major regional events, including in shoulder Number of major events in shoulder seasons seasons

Increase in non-local visitor participation in events and Proportion of non-Marlborough participants that conferences attend events and conferences

Increase in tourism products/experiences Number and value of tourism products and experiences facilitated by Destination Marlborough and the Council

Long-term (track annually but do not expect major changes except after 5+ years)

Increase in visitor nights Commercial accommodation nights – annual and off-season

Increase in visitor expenditure Regional visitor expenditure estimates – annual and off-season; domestic and international

Increase in average length of stay Average length of stay in commercial accommodation

Developing such a framework would also help to establish an approach for monitoring and evaluating progress towards intended impacts and outcomes. We would suggest that the framework and measures form the basis of an annual summary report on the full set of economic development activities. As discussed earlier, it has been difficult to assess what has been achieved across the range of economic development services because the information is currently dispersed across Council and delivery agency annual reports and a large number of Council Committee papers. Such a summary report would also meet the demands we have heard expressed by some of the public for information about what is being achieved with the Council’s investment in economic development.

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3. HOW SHOULD THE SERVICES BE DELIVERED?

Summary Does the existing delivery model need to change? Determining how economic development services should be provided and whether activities should be delivered directly by the Council or through delivery partners requires consideration of:  Economies of scale and scope that are possible - economic development services that are targeted at a common client base, aimed at addressing similar issues and opportunities and achieving common outcomes should generally be delivered together to ensure efficiency and effectiveness.  The type of service – including whether a service is significant in scale and potential risk, requires commercial insight, or is straightforward to contract for.  The context – including whether services are of high strategic importance to the Council (i.e., they give effect to key Council plans and policies); whether the Council has a particular advantage in providing the services due to capability or related activities; whether there are existing potential providers of the activities; and/or whether there has been a history of good or poor performance by external agencies. What are the options for delivering economic development activities in Marlborough? Based on the findings of the review and the requirements of a s17A assessment, potential options for the delivery of economic development activities in the region include:  The Status Quo – not changing any aspect of governance, funding or delivery of services.  Enhanced Status Quo – continuing with a combination of delivery by the Council and by delivery partners but adopting a range of service and delivery improvements.  Expanding the role of Destination Marlborough – expanding its role to take on broader economic development functions that are currently delivered by the Council and others.  Inter-regional Model – having a service level agreement with the Nelson Regional Economic Development Agency to deliver business development, industry development and destination marketing and management activities in Marlborough – essentially a ‘top of the South’ EDA.  Establishing an Economic Development Agency – setting up an organisation in Marlborough to deliver business, development, industry development and innovation activities (either a new organisation or built around an existing provider). These options were assessed against a range of criteria, including practicality, effectiveness, cost of change, responsiveness and ability to leverage resources of others. What is the recommended model? Based on the assessment and taking into account the considerations above, we do not believe that a major change in the current arrangements is warranted. Instead, we have identified that the best approach is to enhance the status quo:  The Council provides programme management support to, opportunities for improved information sharing across, and enhances engagement with Smart and Connected community groups.

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 The integration of destination branding messages and initiatives.  Business Trust Marlborough works with the Chamber of Commerce to provide an integrated business development service.  Destination Marlborough manages the Commercial Events Fund and has a greater focus on destination management activities. The Commercial Events Fund should be increased in scale.  The development of skills attraction and retention initiatives in consultation with industries  A facilitated process to encourage Picton community and promotion groups to integrate and rationalise local economic development activities. These delivery improvements should be implemented in conjunction with:  The development of a regional economic development strategy and plan for the region, to balance the current bottom-up development of priorities and actions with top-down direction setting.  Improved Council and delivery partner engagement in setting priorities and communicating outcomes each year, including through: - An annual strategy forum with a range of stakeholders. - Early engagement between the Council and delivery partners in the annual planning cycle to confirm priorities for the year ahead. - Improved reporting by the Council and partners on economic development activities. This should be based on an agreed output and outcome framework, improvements in the collection of performance information and the release of a summary report on activities each year. The Council should also formally evaluate its economic development activities, based on the performance framework, in 3-4 years. What are the key benefits and costs of change? Key benefits associated with the recommended arrangements include:  Improved visitor outcomes over the long-term resulting from increases in event activities, tourism products and experiences.  Increased ability of community groups to implement their plans and hence likely greater commitment to economic development at the local level.  Reduced Council and community costs involved in engaging on economic development matters in Picton.  Greater likelihood that economic development activities will focus on significant, collective opportunities facing the region.  Improved ability to leverage central government resources (e.g., from having an overall plan developed with central government partners).  Relatively little disruption to Council or delivery partner operations and delivery as a result of implementing changes.  Improved measurement of economic development activity performance and impacts and subsequently a better ability to make appropriate changes to resource and investment decisions.  Increased opportunity to identify efficiencies in delivering activities across the Council and delivery partners as a result of earlier engagement each year. Key costs and risks associated with the recommended improvements include:

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 An increase in Council and delivery partner staff time required to develop and agree on priorities, including participating in the annual strategic forum and early engagement in the planning cycle.  An increase in Council and delivery partner time required to develop the outcome and output framework and improve reporting, including the annual summary report. This may divert resources away from delivery in the short-term and there will be financial costs associated with a new approach and annual reporting.  Time and costs associated with developing the regional economic strategy and action plan.  Costs associated with implementing the extension to the Commercial Events Fund and programme management support for Smart and Connected community groups.  A limited ability to achieve economies of scale and scope due to delivery through multiple partners. Our estimates of the financial costs of the improvements are around $145,000 in the first year and $310,000 from year 2 onwards. However, some of these costs could be offset in the medium-term as there may be reduced funding requirements for innovation and branding initiatives. In our view the proposed changes should represent a relatively low net increase in costs in the medium-term and, overall, we consider the benefits of the proposed improvements will outweigh the broader potential costs and risks.

3.1 Does the existing model need to change? Our assessment is that the economic development activities are reasonably effective and efficient, but we have identified several areas that can be improved:  Improved prioritisation of activities and resourcing  Improved performance measurement and reporting  Coordination and integration of brand messages  Improved engagement with Smart and Connected Groups and resourcing to support the implementation of their plans  Engagement with Picton community groups on development and marketing opportunities, with an initial focus on integrating the existing activities. We have also identified a few areas where additional activities would be warranted:  Increased resourcing for commercial event opportunities  Initiatives to support skills development, attraction and retention  Initiatives to support tourism product and experience development. The question is whether the current model of delivery supported by Council should change in order to address these areas of improvement, for example, for some services currently delivered by Council to be delivered by other parties (or vice-versa). To assess this, we first consider the types of services that should be delivered together and whether services should be delivered internal to or external from the Council.

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3.1.1 What services should be delivered together?

Services that are mutually reinforcing, which reflect common issues and opportunities, which are targeted at achieving common outcomes and involve a common client base should generally be delivered together for both efficiency and effectiveness reasons unless there are good reasons why that is not possible. That is why the following economic development services are generally delivered together in other regions of New Zealand:  Regional visitor and events attraction, promotion and marketing – these activities involve marketing the advantages and amenities of the region, domestically and internationally, to attract additional spending into the region.  Business development and innovation support. These services are typically focused on business opportunities and are aimed at building capability and connecting businesses to networks, in order to increase productivity and value added.  Skills support, investment attraction and industry development support. These services are focused on improving business and industry access to resources they need to produce goods and services.  Strategy development and economic intelligence and monitoring. These activities require analysis of and access to a wide range of data and research. In some cases, all of these activities are delivered together by the same agency (see Appendix 3), reflecting commonalities across broader groups of clients and opportunities (e.g., industries that benefit from business development support may also require and benefit from skills, sector development and investment attraction support). Examples of this are in Auckland (ATEED), Taranaki (Venture Taranaki), Wellington (WREDA), Nelson-Tasman (NRDA), Christchurch (ChristchurchNZ.com), Southland (Venture Southland) and Dunedin (Enterprise Dunedin). In other cases, regional visitor and events attraction and promotion are delivered separately from the other services reflecting the emphasis that the region or locality places on the importance of tourism in the economy (e.g., Bay of Plenty, Taupo). Within visitor promotion and marketing activities, i-SITE information services are sometimes delivered separately (e.g., via Councils or via independent organisations) as they can be more customer service oriented than developmental in nature. Town and community improvement initiatives are typically delivered separately to other economic development services, often in partnership with town and business associations, reflecting a specific group of stakeholders and location specific set of opportunities (rather than regional opportunities or needs).

3.1.2 Are services best delivered in-house or externally?

In thinking about whether economic development services or activities are best delivered within a Council or through an external agency, the following questions can be considered:  Are they of high strategic importance to a Council, i.e., do the activities give effect to key Council plans, objectives and policies and hence require close coordination and integration with other Council activities? Are there strategic relationships involved that a Council wants to maintain?

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The answer for many economic development activities, for example business development and innovation support and destination marketing, is no, as they tend to be operational in nature. That’s not to suggest the activities are not important – rather they are not core to a Council’s business or as critical to a Council’s long-term plans and goals in the same way that resource management and infrastructure investment is, for example. The exceptions tend to be:  The development of economic strategies, including related engagement with industries and communities. This is because such strategies and engagement are an important input into Council planning and resourcing decisions.  Collection and dissemination of economic and industry intelligence, which can be core to the effective functioning of Councils. However, the extent to which an initiative is of high strategic importance to a Council will depend on its priorities and existing level of involvement in economic development activity.  Are the activities significant in scale and scope and do they involve major risks that need to be managed, i.e., is there a need for frequent Council decision-making? If there is a high level of risk and significant expectations attached to activities, for example for initiatives involving significant levels of investment, there may be a desire for greater control over what is provided and for the outcomes. In these circumstances there may be a preference to manage the risk in-house. However, again, the answer is no for most economic development services. The exceptions can be industry development or innovation initiatives which involve investment in significant assets (e.g., research or innovation centres) and investment attraction efforts which involve decisions on significant land/properties or facilities.  Are decisions on activities commercial in nature and should they be arms-length from Council? The answer for many economic development activities is yes. In several cases decisions (e.g., on funding support to businesses, on marketing initiatives, on events) benefit from commercial and entrepreneurial insight. In some cases, the business community would expect decisions to be free from any perceived political influence. Again, the exception is typically strategy development activity or investment in significant projects or assets.  To what extent does the Council have an advantage in providing the activities? Who has access to the best information to guide implementation and the ability to organise and secure resources from industry? A Council may wish to consider providing the activity itself if it has particular advantages in doing so (i.e., it can provide the service more efficiently or effectively than other providers). For example, economic development activities that assist business, industry or community organisations to work through Council processes or understand regulatory or planning requirements are better delivered by the Council than an external agency. In most other cases, much of the information and networks required to be effective in economic development is derived from the private sector, so private sector organisations or arms-length agencies with a private sector Board may have a better ability to obtain this information (although this could also be obtained through an advisory board to Council). Similarly, although this may not be the reality, it can be perceived by the private sector that an external agency, with a private sector Board, has more credibility and impartiality. Some businesses may not be willing to work on economic development initiatives directly with a Council if they have existing issues with other Council activities (e.g., consenting). Conversely, some industry groups may prefer to work with a

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Council directly as the Council may control the levers they want to influence (e.g., infrastructure, regulation). Are the activities complex? If there are difficulties in specifying the nature of the outputs required or if there is likely to be a need to frequently change the outputs, it is unlikely that the activities will be able to be contracted out efficiently or effectively.  To what extent are there existing potential providers of the activities? If there are existing potential providers of the activities (e.g., business advisory companies, industry associations), it may be preferable to contract directly to these providers as they may already have the skills and networks to deliver effectively and efficiently. If there is no real existing or potential provider, then delivery by the Council or one of its organisations will likely be required (at least initially). These questions and answers suggest that generally most economic development services should be delivered by an external agency except for those that involve facilitating business and industry access to or understanding of Council processes, or regulatory or infrastructure issues. There is also a good case for strategy development support and economic intelligence gathering and analysis to be undertaken by Council/s. Although this provides general guidance, the answers are context dependent. As we noted, an activity in one region may be of high strategic importance to a Council because it is a major priority for that Council but may not be a priority for a Council in another region. Smaller regions, such as Marlborough, may not have a large base of industry associations or advisory organisations to draw on for external provision of services, whereas there may be a vast array of possible providers in large regions. A Council in one region may have decided to make funding decisions about a programme rather than let an external agency take responsibility if there were potential conflicts of interest due to the make-up a Board. In some cases, Councils have taken on direct delivery of programmes for a period of time because of poor performance of an external agency. Examples of economic development delivery arrangements in a selection of regions and district is provided in Table 22 below. Some take-outs are:  The delivery of the bulk economic development activities in several regions of New Zealand occurs through external agencies, for example Northland, Taranaki, Gisborne, Nelson-Tasman.  There are a few examples where a significant amount of services is delivered by business units within Councils, e.g., Dunedin, Thames-Coromandel.  The split of functions across external agencies and Councils differs across regions. For example, Northland Inc is the main deliverer of economic development activities in Northland, However, Whangarei District Council plays a significant role in supporting and promoting events and has a joint role with Northland Inc in investment attraction and facilitation. In contrast, in Timaru, the EDA/RTO delivers most support, with the Council playing a limited direct role. We thus need to consider the above questions and Marlborough’s context in thinking about the pros and cons of different delivery models.

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Table 22. Economic development delivery arrangements in a selection of districts and regions Region Organisation Relationship Key economic development activities with Council/s

Northland Northland Inc CCO of NRC Regional destination marketing and management, Business development support, innovation support, investment attraction & facilitation

Northland Regional Council Regional economic strategy & action plan, co-investment in major industry and tourism projects, economic monitoring

District Councils District marketing, district events, community and town development initiatives; investment facilitation (Whangarei), i-SITEs, sister city relationships

Thames- Destination Coromandel CO of TCDC District destination marketing and promotion, i-SITEs Coromandel

Council Business Unit Business broker services, investment facilitation, youth employment

Western Bay of Priority One Independent Business development support, cluster facilitation, supports film office, supports international education promotion, Plenty investment attraction, skills attraction, innovation support, economic and industry monitoring

Tourism Bay of Plenty CCO District destination marketing and promotion, events attraction and i-SITE

Tauranga City Council Supports film office and international education promotion, sister city relationships

Nelson-Tasman Nelson Regional CCO Destination market, event promotion, i-SITE, business development, cluster facilitation, investment attraction, Development Agency workforce development, China market development, economic monitoring

Nelson City Council Events funding support, international education support, sister city relationships

Timaru Aoraki Business and CCO Supporting town centre enhancement, workforce development, industry facilitation, youth transitions, supporting Tourism sister city relationships, district promotion

Timaru District Council Sister city relationships

Dunedin Enterprise Dunedin Business Unit Business development, destination marketing, events attraction, sector development, economic monitoring

Sources: Annual Plans and Annual Reports of EDAs, RTOs and Councils

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3.3 What arrangements could be effective and efficient options for delivering economic development activities in Marlborough? Section 17A of the LGA requires that we consider the following options in considering delivery improvements:  Governance, funding and delivery by the Council (e.g., bringing all delivery in-house)  Governance and funding by the Council with delivery by a CCO  Governance and funding by the Council with delivery by another local authority or authorities  Governance and funding by the Council with delivery through another organisation (i.e., contracting out all delivery). Practicable options are not necessarily practical. Practicable simply means that an option can be implemented – it does not mean that it is sensible. We can immediately discount the option of delivery by another local authority as there isn’t one in Marlborough and it would be less efficient and effective to have local services delivered by a Council from another region (and it is highly unlikely that another Council would want to do this anyway). We discounted the option of bringing all services in-house to the Council given that several are not well aligned with core functions of the Council and the Council would not have any advantage in providing them. We also discounted the option of contracting all economic development services to one or more organisations as at least one service – Smart Business Marlborough advice – requires an in-depth knowledge of Council processes, policies and personnel which would not be able to be provided as effectively or efficiently externally. Given the regional context and the preceding analysis, in our view practical options for consideration are the following: 1. The Status Quo, i.e., not changing anything related to governance, funding or delivery of economic development services (although performance measurement and reporting would be enhanced). This would be potentially on the basis that the current arrangements are not ‘broken’ so there is no need to make any major changes. 2. Enhanced Status Quo – this would mean that the Council would continue to deliver some services internally and would continue to ‘contract’ for destination marketing, business development and innovation services but that it would implement the service and delivery improvements suggested earlier in this report related to business development services, destination management services, support for Smart and Connected community groups, and skills attraction & retention services. 3. Expanding the role of Destination Marlborough. This would involve expanding the role of Destination Marlborough to be a broader economic development agency, with a view to achieving some economies of scale. Effectively this would involve setting up an economic development team in Destination Marlborough that would be responsible for business development (e.g., becoming the Regional Business Partner with Nelson EDA), industry development (i.e., facilitating Smart and Connected industry groups), ‘Only Marlborough’, and major events as well as its current destination marketing and management activities.

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4. Inter-regional Model. This could involve having a service level agreement with Nelson Regional Economic Development Agency (NRDA) to deliver destination marketing and broader economic development services in Marlborough. This could be on the basis that NRDA is an effective agency and already has some reach into Marlborough through the Regional Business Partner programme. In practical terms this would mean NRDA would take on the functions of Destination Marlborough and Business Trust Marlborough as well as Smart and Connected support. It is likely that NRDA would have a presence in Marlborough and essentially become a Nelson-Marlborough EDA. Obviously this model is dependent on NRDA and Nelson City Council being willing to expand the functions of the EDA into another region. 5. Establishing an Economic Development Agency. This would involve setting up an organisation to deliver non-destination marketing economic development activities in Marlborough. That is, it would take on the business development role of Business Trust Marlborough, Smart and Connected activities, and innovation activities. Destination Marlborough would remain as a separate delivery organisation. The EDA could be established as new or be built around an existing provider such the Chamber of Commerce or MRC.

What are the pros and cons of different options?

The pros and cons of different options can be assessed on the following criteria:  Practicality – will the model be able to be implemented and will the changes be relatively easy to make, with minimal disruption to existing services? For example, you would not want some activities to stall because of a change process.  Effectiveness – will the model be likely to be effective in delivering the required services and required areas of improvement and in achieving economic development objectives?  Representation of and responsiveness to economic development needs and communities of interest. For example, is the model likely to be responsive to the needs of different industries, to Māori/iwi, to different communities?  Likely costs of change – the costs need to be considered relative to likely efficiencies that would be possible and the level of investment in services.  Capacity to deliver services – will the model ensure that activities are delivered or administered by an organisation with the capacity to deliver the required range of services?  Accountability to key funders and alignment with funders’ priorities – to what extent is the model likely to ensure accountability to Councils and other funders?  Ability to attract/retain the right expertise to deliver the services (at governance and staff levels). For example, experts might be attracted to a model that has a greater scope of services.  Ability to leverage the resources of others (e.g., central government funding, private sector funding). For example, central government agencies like NZTE and Callaghan Innovation are more likely to want to fund a regional partner that has full regional reach rather than funding a range of agencies. Our assessment of the five options is provided in Table 23 below, including a rating of the options on a 1-10 scale.

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Table 23. Assessment of options for enhancing the delivery of economic development services

Criterion Extra 1. The Status Quo 2. Enhanced Status 3. Expanding 4. Inter-regional 5. Economic weighting Quo Destination Model Development Agency Marlborough

Practicality 10% 10 9 6 3 4

Effectiveness 25% 5 8 6 7 7

Representation and 20% 7 8 5 4 6 responsiveness Costs 10% 10 7 4 5 2

Capacity 10% 5 5 6 7 6

Accountability 10% 7 7 5 4 5

Ability to attract 5% 5 5 6 8 7 expertise Ability to leverage 10% 5 5 6 8 7 resources Unweighted total 54 53 44 46 44 Weighted total 66 69.5 55 56.5 57

What are the major  No costs involved  Limited disruption to  Potential economies in  Will be able to leverage  Potential economies advantages of this  No disruption to existing services long-term capability and over long-term resources option? existing services  Low cost – some costs  Existing organisation  May attract greater to Council from and arrangement with  May attract greater levels of expertise increased resourcing to the Council on which to levels of expertise  If built around an Smart & Connected build  Greater ability to share existing agency, it is and skills initiatives costs and achieve likely to be able to  Addresses identified economies over time leverage capability and areas that can be resources  Will enable joint improved projects with Nelson

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What are the major  Will not improve the  Limits the ability to  Some disruption to  Implementation costs  Likely disruption of existing situation and identify greater services from transfer services in short-term disadvantages of  May take time to get deal with the issues efficiencies over the this options  Costs of transition and balance of delivery  Costs involved in that have been long-term building up capability of across regions establishing agency identified Destination  Will take time to get  Some lessening of Marlborough agreed and accountability.  Some lessening of commenced accountability  Level of influence may  Will require build-up of be limited depending capability in sectors on accountability beyond tourism arrangements

Note 1 = rates low on that criteria, 5 = moderate, 10 = very high (note that 10 represents a very low cost and 1 represents a very high cost on the rating for likely costs of change)

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On the basis of equal weighting of criteria, option 1 – the status quo – ranks the highest but only slightly over the enhanced status quo. We then applied a greater weighting to the effectiveness and representation & responsiveness criteria, given that these are the key criteria and relate to opportunities for improvement. Option 2 – enhanced status quo – then ranks the highest. In more detail, the pros and cons of the highest-ranking options (other than the status quo) are discussed below. i) Enhanced Status Quo As noted, this option would see the Council continuing to provide Smart Business Marlborough services and support for Smart and Connected activities, contract for business development and innovation services, and contract Destination Marlborough for destination marketing services. However, the following improvements would be implemented:  The Council provides programme management support to, opportunities for improved information sharing across, and enhances engagement with Smart and Connected community groups.  The integration of destination branding messages and initiatives.  The Council seeks to have an integrated business development service delivered through Business Trust Marlborough and the Chamber of Commerce.  Destination Marlborough’s role extends to responsibility for the Commercial Events Fund and supporting destination management activities. The Commercial Events Fund should be increased in scale.  The Council develops skills attraction and retention services in consultation with industries.  The Council works with Picton community and promotion groups to integrate and rationalise local economic development activities in the area. A major benefit of this option is that this is a relatively straightforward option to implement given the improvements are incremental rather than radical and they clearly address the opportunities identified. There should be little risk to the ongoing delivery of services. Ultimately this should improve the effectiveness of existing services. Although there are costs involved in implementing this option, they will be relatively small compared to transferring a range of services or setting up a new organisation. However, these improvements will require some new funding and/or reallocating funding from other services. Another potential downside of this option is that it limits the ability to achieve economies of scale as services will continue to be delivered by a range of organisations. It also means that the Council will need to devote time to process enhancements and become involved in more services which, in the short-term, may place pressure on already stretched staff resource. ii) Establishing an economic development agency This option would see Destination Marlborough continue to deliver destination marketing services and for a new economic development entity to be established to deliver business development, industry development and innovation services. A practical way of doing this is would be for the entity to be built around an existing provider of services in the region, such as MRC or the Chamber of Commerce.

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A major advantage of this option is that it would allow Destination Marlborough to continue to deliver their services without any disruption. They could also be resourced to extend the level of destination management and events promotion services they provide. Another advantage is that the new entity would build off the services of an existing provider, which already has capability to deliver business development or innovation services and has existing networks into the region. It will also ensure that broader economic development services are given sufficient focus, rather than having to balance the establishment of these services with destination marketing services. Building the entity around the Chamber or MRC, which have leveraged resources from private sector and government organisations, may also enable the entity to more easily secure non-Council funding support in future. However, building a new entity will entail establishment costs associated with negotiating with the potential provider; consulting with stakeholders to confirm service offerings; transferring services and, potentially, staff; recruiting any new staff required; and establishing accountability arrangements and documentation. In addition, it will take time for the new agency to build up the capability to deliver some services at least as effectively and efficiently as the Council or other partners. As noted, the Council and current delivery partners are doing a reasonable job in delivering services. It is doubtful that a new provider would perform as well, as least in the short- to medium-term. iii) Inter-regional model This option would see MDC establish a service level agreement with NRDA to deliver all economic development services (including destination marketing services) in Marlborough. Potentially this could see the EDA being a joint CCO of both Nelson City Council and MDC, i.e., becoming a Nelson- Tasman EDA. In practical terms, this could involve Destination Marlborough becoming the Marlborough service hub of the EDA and the EDA expanding business development and other services into the region. A major potential benefit of this option is the possibility of leveraging the resources and expertise of NRDA, which may have a greater capacity to deliver some types of services. Having such a significant EDA across the top of the South Island may also attract experienced and expert staff. A joint EDA will also better enable Marlborough and Nelson to undertake joint initiatives where appropriate, such as marketing and skills attraction. It may also find it easier to seek co-investment from central government, which is likely to be more willing to engage with a larger entity. However, this option is dependent on both Councils and NRDA agreeing to the model, and it may take some time to get the concept agreed, e.g., a public consultation process will also likely be required. There will also be establishment costs associated with transferring services and recruiting any new staff required for the new entity, and developing joint accountability arrangements (e.g., joint Shareholders’ Agreement, joint Statement of Intent). Depending on the accountability arrangements established, MDC may have less of an influence on an inter-regional agency. We consider this option may be worth reconsidering in a few years, initially for the delivery of business development and industry development activities, particularly if there is an integration of Business Trust Marlborough and Chamber activities. iv) Expanding the functions of Destination Marlborough As noted, this option would see the RTO continue to deliver destination marketing and management services but for its services to be expanded to include business development, innovation and industry development activities.

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The major benefit of this option is that there is an existing organisation that has resources and relationships on which to build. Effectively there would be an extension of Destination Marlborough’s funding agreement with the Council. However, the organisation does not have staff or governance capability in broader economic development services and this would need to be acquired and developed over time (it may be possible, however, to transfer some current capability in the Council and other partners to the organisation). There will be a risk to the delivery of destination marketing services while the RTO’s activities are being extended, as management time will need to be devoted to securing the additional capability and building up the additional services. Based on previous examples where economic development services have been merged with RTOs, it is highly likely that destination marketing services will dominate the organisation, at least in the first few years. This is natural, given that the organisation has existing experience and capability with these services. Business development, innovation and industry development services are likely to remain a ‘poor cousin’ for some time.

3.4 What is the recommended option? Overall, our assessment of the pros and cons of the options and the Marlborough context suggests that the best option is to make the recommended service improvements to the existing model of delivery, rather than making any substantive changes to arrangements. There should be a continuation of service delivery directly by the Council and through contracted partners. However, to address all of the required areas of improvement that have been identified, the process changes we recommended earlier in this report should also be implemented (noting that these could be implemented under any delivery model): 1. To ensure that economic development services are focused on the most significant priorities and opportunities for the region in future, and to balance the current bottom-up processes for setting priorities with top-down direction-setting, the Council should work with partners and stakeholders to develop a regional economic development strategy and plan for the region. This will need to take into account existing local strategies and plans, such as the Visitor Growth Plan and Regional Events Strategy, and the proposed ‘Top of the South’ economic action plan process. 2. The current model can also be enhanced by improving Council and delivery partner engagement in setting priorities and communicating impacts/outcomes each year. These were discussed earlier and include: a An annual strategy workshop or forum involving representative Councillors, the Chief Executive and senior management of the Council, delivery partners’ Boards and senior management, and leaders from industry, business, community and iwi organisations. b Early engagement between the Council and delivery partners in the annual planning cycle to confirm priorities for the year ahead. c Improved reporting by the Council and partners on economic development activities. We have suggested the Council and delivery partners develop an agreed output and outcome framework and put in place processes to collect the required performance information. This should form the basis of an annual summary report on the range of activities. In addition to this, we would suggest that a full evaluation of economic development activities be undertaken in three to four years’ time (i.e., assessing the extent to which impacts are being achieved).

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3.5 What are the key benefits and costs of change?

Key potential benefits associated with the recommended improvements include:  Improved visitor outcomes over the long-term resulting from increases in event activities, tourism products and experiences.  Increased ability of community groups to implement their plans and hence likely greater commitment to economic development at the local level.  Reduced Council and community costs involved in engaging on economic development matters in Picton.  Greater likelihood that economic development activities will focus on significant, collective opportunities facing the regions.  Improved ability to leverage central government resources (e.g., from having an overall plan developed with central government partners).  Relatively little disruption to Council or delivery partner operations and delivery as a result of implementing changes.  Improved measurement of economic development activity performance and impacts and subsequently a better ability to make appropriate changes to resource and investment decisions.  Increased opportunity to identify efficiencies in delivering activities across the Council and delivery partners as a result of earlier engagement each year.

Key costs and risks associated with the recommended improvements include:  An increase in Council and delivery partner staff time required to develop and agree on priorities, including participating in the annual strategic forum and early engagement in the planning cycle.  An increase in Council and delivery partner time required to develop the outcome and output framework and improve reporting, including the annual summary report. This may divert resources away from delivery in the short-term and there will be financial costs associated with a new approach and annual reporting.  Time and costs associated with developing the regional economic strategy and action plan.  Costs associated with implementing the extension to the Commercial Events Fund and programme management support for Smart and Connected community groups.  A limited ability to achieve economies of scale and scope due to delivery through multiple partners. We have made some estimates of potential financial costs associated with the suggested improvements, shown in Table 24, based on the costs of existing activities and costs of similar activities in other regions. We have assumed that decisions on the funding of destination management and skills activities will be subject to the priorities that emerge from the regional economic action plan and hence will not be implemented until 2019/20, other than some initial investigative work. We have assumed that other costs (e.g., associated with developing the strategy and performance reporting) will be absorbed within the existing allocation.

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Table 24. Potential costs associated with implementing improvements Activity 2018/19 2019/20 2020/21

Commercial Events Fund $25,000 $50,000 $50,000

Support for Smart & Connected Community groups programme $75,000 $75,000 $75,000 management (assumes 1 FTE across groups)

Increased delivery of destination management activities (e.g., - $100,000 $100,000 support for 2-3 feasibility studies or business cases per annum)

Implementation of skills attraction and retention services $25,000 $75,000 $75,000

Improved performance management and reporting (including $20,000 $10,000 $10,000 annual summary report)

TOTAL $145,000 $310,000 $310,000

We emphasise that these are estimates only, particularly given that funding support for skills attraction & retention services and destination management activities will depend on any initiatives that emerge from consultation and development of the regional strategy and plan. We have already noted that the Council’s overall spend on economic development activities is around average and what we would expect for the size of the regions. The above increase in overall funding may be warranted (it’s another 15 percent on the current budget from year 2) but it would be beneficial in the long-term for the Council to identify less effective areas of activity and to reallocate resources away from these to activities with a more significant impact. Otherwise the Council and ratepayers will end up continuing to increase levels of funding towards economic development activities over time. In the absence of more accurate performance measures it is difficult to identify areas that are clearly not performing. However, we have raised questions about the Council’s long-term investment in innovation activities, particularly once the RIVO is established, and for supporting the large number of brand messages. These are two areas where savings could be possible over time (which could be in the order of $100,000-$120,000 per annum). In addition, we also noted that funding of Destination Marlborough is about average relative to comparable regions, so an increase in support for destination management efforts could potentially be funded through a reduction in marketing funding. How that might be achieved will need to be discussed with Destination Marlborough. In our view the proposed changes should represent a relatively low net increase in costs in the medium-term and, overall, we consider that the benefits of the proposed improvements will outweigh the broader potential costs and risks.

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4. HOW SHOULD THE IMPROVEMENTS BE IMPLEMENTED?

4.1 Key opportunities and recommendations The key opportunities for improving economic development arrangements that have emerged from this review are summarised below as well as related recommendations for addressing them.

4.1.1 Strategy and priority setting

Findings  Smart and Connected has usefully identified economic development priorities for sectors and communities through a ‘bottom-up’ process. Cross-cutting priorities are emerging from the engagement.  There has not been an explicit attempt yet to address these cross-cutting or region-wide priorities.  It is not clear that the levels of investment going into different economic development activities reflect the relative importance of the relevant opportunity or challenge facing the region as a whole.  The Council largely relies on formal (Council Committee, business plan and annual report) processes and the advice of delivery partners to determine how their funding will be allocated across economic development activities.

Recommendations  The Council move beyond the Smart and Connected framework and develop an overarching economic development strategy and plan to shape the priorities for economic development investment and the related activities of the Council and delivery partners.  The Council hold an annual strategic workshop or forum with a range of partners and stakeholders, including industry, iwi, community and central government representatives, to review what is being achieved through economic development activities overall and what, if any, changes in emphasis and activities are required each year.  Council staff and key delivery partners engage early in the planning cycle each year about delivery priorities, the mix of activities to achieve these and related performance measures. These should form the basis of clear funding agreements or business plans with each partner.

4.1.2. Opportunities for improving services

Findings  Economic development activities supported by the Council and its delivery partners, i.e., Destination Marlborough, Marlborough Research Centre and Business Trust Marlborough, cover most of the spectrum of economic development services that are relevant to the region. The Council is not yet active in supporting skill and talent or destination management initiatives. These activities are relevant given skill and visitor demands facing the region.

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 Māori/iwi are participating in some Smart and Connected Groups but it is unclear how Māori are engaging in other activities and whether Māori organisations are being adequately connected to networks and resources through economic development services.  Economic development activities delivered by the Council and its delivery partners are generally well coordinated with other organisations delivering related services (e.g., Chamber of Commerce, Wine Marlborough, industry associations, Tourism New Zealand). However, there is some duplication of effort in Picton across multiple community and promotion organisations.  There is an opportunity to establish a regional film office. We do not consider there is a strong rationale for establishing a full office at this time. Although the region has good locations, it does not have a strong offering relative to other locations that also have a base of capability and facilities.  There is little overlap in economic development activities across the Council and its three major delivery partners. There are several examples of joint economic development work across the organisations in areas where there are common services.  The Council has recently increased its level of support for innovation through MRC and the establishment of RIVO. The long-term role for the Council in funding research projects through the MRC may need to be reassessed given the support being provided for the RIVO.  The earlier review of destination marketing activities (Jeffery, 2017) identified that branding in the region was fragmented and that Destination Marlborough’s digital and social media presence could be improved. This review supports those findings.  The Commercial Events Fund is generating increasing amounts of applications. The Fund is relatively small compared to other small regions. The destination marketing review recommended that the region do more to attract major events.  Progress on the Smart and Connected plans is mixed across the groups. More progress has been made in groups that have had the services of a programme coordinator or industry association to manage implementation.

Recommendations  Demand for and resourcing of skills and talent activities and destination management activities should be explicitly considered as part of the proposed regional economic development strategy and action plan.  The Council should engage further with iwi/hapu in the region to assess how economic development activities can best connect Māori to networks and resources to support their aspirations.  The Council should seek the agreement of the Picton Marlborough Sounds Visitor Economy Group, Picton Business Group and Picton Smart and Connected Group to an independently facilitated process to identify the best approach for coordinating and rationalising activities and engagement across the groups.  The Council should work with MRC to reconsider the appropriate mix of investment to support innovation through the Centre and RIVO once the Institute is established.  The Commercial Events Fund should be increased in scale (e.g., an additional $25,000 in 2018/19 and 2019/20 to increase the fund to $125,000 per annum).  The Council should provide a programme management resource to the Smart and Connected Groups that require it.

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 If the Council wishes to support regional film promotion activities, it should explore a partnership with an existing regional film office, such as Screen Wellington, to test the level of demand for such a service over time.

4.1.3 Opportunities for getting greater value from investment

Findings  There is no evidence of major areas of inefficiency in Council or Destination Marlborough delivery of economic development activities.  There are higher than necessary transaction costs involved in using a Council Sub-Committee to make decisions on relatively small amounts of funding for the Commercial Events Fund.  Both Business Trust Marlborough and the Marlborough Chamber of Commerce deliver business advisory and referral services in the region. They work together and refer clients to each other’s services but it would be more efficient if there was a single front-door for business development assistance in Marlborough.  There is a significant level of co-funding from the private and non-local government sector in economic development activities. A considerable amount of in-kind contributions is also made.  Smart and Connected Groups indicated they would benefit from learning more about what each is delivering and to get a collective understanding about what processes work well or do not work well. There some common opportunities and issues across Groups which may be better tackled at a collective or regional level.  The Council’s engagement with Smart and Connected Groups can also be improved. Engagement with the Council did not always meet expectations in that groups were not always given advance notice about issues or initiatives the Council was considering that impacted on their respective industries or communities. There have been some instances of the Council not coordinating its own engagement or advice to Groups.

Recommendations  The Board of Destination Marlborough should be given responsibility for making decisions on the Commercial Events Fund.  The Council and Destination Marlborough, in consultation with industry and community stakeholders, should integrate and rationalise current branding messages and initiatives within a common framework.  The Council should encourage Business Trust Marlborough and the Chamber of Commerce to explore integrating their functions and how business development support should be provided in the region and to come back to Council with a proposal for how this can be best achieved.  The Council should convene the Smart and Connected Group Chairs to discuss how best the Groups can share information and work on collective issues or opportunities.  The Council should clarify expectations about how it will engage with Smart and Connected Groups and be upfront and transparent when working on issues that impact on the relevant sector or community.

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4.1.4 Assessing and reporting on activities and impacts

Findings  MDC’s current economic development KPIs are a reasonable mix of direct outputs and outcomes related to the outputs. However, the indicators on the number of MRC published research papers and on visitor numbers and spend are not particularly useful annual performance measures.  Current reporting on economic development activities occurs through a combination of the MDC Annual report (high-level), delivery partner six-monthly and annual reports, and regular updates to Council Committees. It is currently difficult for stakeholders and the public to get a good overview of the collective economic development work programme and how it is performing because monitoring and outcome information is dispersed over such a large number of reports.  At an activity level, there are several areas where the collection of performance monitoring information can be improved: - Smart Business Marlborough enquiries and the outcomes that result each year should be tracked. - In some cases, minimum performance targets for Destination Marlborough appear to be low and easily achieved. - There is no reporting of relevant activities by location, so it is difficult to judge the reach of economic development services across the region. - Although there is a good level of information collection and performance reporting for the Commercial Events Fund, the quality of post-event reports by successful applicants is variable. Similarly, there is inconsistent annual reporting on successful business event bids by Destination Marlborough. - There is limited performance information reported on in relation to destination website and social media use or i-SITE activities. - Information reported on Smart and Connected Group activities focuses on progress on different actions, not on the impact of those actions.  There is limited information currently available on the impact of economic development activities, except for client views on the impact of Business Trust Marlborough support, and estimates calculated on the economic impacts of major events.  There has not been a formal evaluation of any economic development activities in the region.

Recommendations  The Council and delivery partners should develop an output and outcome framework that sets out the logic between the resources being used for economic development, the activities being delivered and outputs, and the desired short-, medium- and long-term outcomes and related performance indicators.  The Council should develop and adopt a monitoring plan, which should specify how performance information will be collected, to consistently measure and report on economic development activities.  The Council should prepare an annual summary report on the performance of the full range of economic development activities, based on the framework and measures.  The Council should formally evaluate economic development activities, based on the performance framework and information collected, in 3-4 years.

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4.2 Sequencing It is important that the implementation of these recommendations be appropriately sequenced to ensure that there is minimal disruption to the ongoing delivery of services, that adequate resources are available to implement recommendations at any time, and that appropriate time is taken to ensure that the changes result in the desired outcomes. In addition, key recommendations will need to be aligned with Council planning processes. We make the following observations about sequencing:  The suggested increases in economic development resourcing (e.g., for Smart and Connected support, for the Commercial Events Fund) could be included in the Long-Term Plan and be implemented from 2018/19.  The Council should instigate discussions with Business Trust Marlborough and the Chamber, and the Picton community and promotion groups, as soon as is practical.  Assuming the Top of the South economic action plan proceeds, our experience is that it takes 12- 15 months to complete the process. If this is kicked off in second quarter of 2018 (calendar year), a new strategy and plan is unlikely to be in place until the beginning of 2019 at the earliest.  The Council and delivery partners can begin to implement new approaches for engaging to discuss economic development priorities, for example scheduling a strategic workshop with stakeholders, towards the beginning of the 2019/20 planning cycle.  The Council could commence the development of an initial output and outcome framework early in 2018/19, with a view to finalising this before the end of the calendar year. This will need to be updated once the proposed economic action plan is completed. A first summary annual report could be completed at the end of 2018/19.

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APPENDIX 1: MARLBOROUGH ECONOMIC AND INDUSTRY TRENDS

General regional economic trends In 2017, Marlborough’s real GDP ($2010) was estimated at close to $2.25 billion. Estimates indicate that the Marlborough region achieved real GDP growth of 1.4 percent per annum over 2007-2017, below the national 2.0 percent per annum growth rate.8 Over 2012-2017 real GDP growth in the region has also been lower than New Zealand’s at 2.3 percent per annum compared to 3.2 percent per annum. Growth in the region has been below some comparable regions and districts such as Northland (2.9 percent per year over five years), Tasman (3.5 percent per year) and Thames- Coromandel (2.4 percent per year), the same as Gisborne, but above Nelson (1.5 percent per year), West Coast (-4.2 percent per year) and the Far North (2.2 percent per year).

Figure 10. Growth in real GDP in Figure 11. Compound annual growth in real Marlborough GDP for Marlborough and New Zealand

Real GDP ($2010m) Real GDP growth $2,500 3.50%

3.00% $2,000 2.50%

$1,500 2.00% $M

1.50% $1,000 1.00%

$500 Compound average annual growth 0.50%

0.00% $0 2007-2017 2012-2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Marlborough New Zealand

Source: Infometrics regional database

Employment growth (filled jobs) has been just below the New Zealand average over the long-term – at 0.9 percent per annum over the last decade compared to 1.2 percent per year nationally. This was stronger than most comparable regions and districts such as Northland, Thames-Coromandel, Gisborne, Hawke’s Bay, West Coast, Nelson and Tasman. There was stronger growth in jobs in Marlborough over 2012-2017 at 1.7 percent per annum, but this was slower than job growth nationally (2.1 percent per year).9 However, again, this was stronger than several comparable regions and districts, including Northland (1.6 percent per year), Gisborne (0.9 percent per year), Hawke’s Bay (0.9 percent per year), West Coast (-2.0 percent per year), Nelson (0.2 percent per year) and the Far North (1.3 percent per year), although was lower than Tasman (2.4 percent per year) and Thames- Coromandel (1.9 percent per year). Unemployment was low at 2.9 percent for the year to June 2017 compared to 5.0 percent nationally. It has been consistently below the national average over the long- term.

______8 Real GDP estimates from Infometrics economic profile for Marlborough on MDC’s website. Note that these differ from the Statistics New Zealand GDP figures, which are nominal and that are also provisional for 2015 and 2016. 9 Infometrics economic profile.

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Figure 12. Growth in employment in Figure 13. Compound annual growth in Marlborough employment for Marlborough and New Zealand

Employment Employment growth 30000 2.50%

25000 2.00%

20000 1.50%

15000

1.00% FILLED JOBS FILLED 10000 0.50%

5000 Compound Compound avverage annual growth 0.00% 0 2007-2017 2012-2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Marlborough New Zealand

Source: Infometrics regional database

The region’s population was estimated at 46,200 in 2017. Population growth has been below the national average over the last ten years at 0.5 percent per annum (compared to 1.3 percent per year), and has remained below the national average over the last five years at 0.74 percent per annum (compared to 1.7 percent per annum nationally).10 Marlborough’s population growth rate has been below comparable regions and districts such as Northland (1.3 percent per year over 10 years), Hawke’s Bay (0.7 percent per year), Nelson (1.4 percent per year) and Tasman (1.0 percent per year) and was the same as Gisborne’s. The region is expected to have limited, if any, population growth over the long-term. Statistics New Zealand’s medium level population estimates suggest 0.3 percent per year growth over 2018 to 2028 and no growth over 2028 to 2038. Moreover, the young and working age population is expected to decline over the next two decades while the population of over 65-year olds is expected to grow quite strongly (by 2.7 percent per year over 2018 to 2028).

Figure 14. Population estimates for Marlborough for different age groups

0-14 years 15-39 years 40-64 years 65 years and over

18000

16000

14000

12000

10000

8000

6000

4000

2000

0 2018 2023 2028 2033 2038

Source: Statistics New Zealand subnational population projections (medium projection)

______10 Ibid.

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In comparison, New Zealand’s population rate is expected to grow by 1 percent per annum over the next 10 years and 0.7 percent per annum over 2028 to 2038. While growth in the population of over 65-year olds drives much of this growth, there is still expected to be some growth in young and working age populations. Marlborough’s decline in the working age group population is expected to be more pronounced than most other comparable regions, with a larger compound decline expected than in Nelson, Gisborne, Hawke’s Bay and Northland and a similar decline expected in Tasman. Estimated productivity in the region is lower than nationally at around $89,320 compared to $97,700 in 201711 and has grown relatively slowly over the last ten years (GDP per FTE in Marlborough has grown by 0.5 percent per annum over 2007-2017 compared to 0.9 percent growth per annum nationally). However, estimated productivity is higher than most comparable regions including Nelson, Tasman, Hawke’s Bay and Gisborne and is similar to Northland’s. Productivity has also grown slowly over the last five years, at 0.6 percent per year compared to 1.1 percent per year nationally, and growth has been lower than most comparable regions. Real GDP per capita is higher in Marlborough than nationally, at around $50,850 compared to $49,120 in 2017. Estimated growth in real GDP per capita has been around the national average over the last decade at 0.6 percent per annum, and grew more strongly over the last five years (by 1.6 percent per annum compared to growth nationally of 1.4 percent per annum). Mean annual earnings ($50,720 in 201612) and median annual personal income ($27,900 in 201313) are slightly lower than national figures ($57,800 and $28,500). However, both are higher than several comparable regions, such as Gisborne, Hawke’s Bay, Nelson and Tasman. Median household income in the region is lower than median income nationally – in 2013 the median household income in Marlborough was $55,200, compared to $63,800 nationally.14 However, national median household income is skewed by Auckland and Wellington. Marlborough’s level of median household income compared well to other similar regions such as Northland ($46,900), Gisborne ($50,500), Hawke’s Bay ($53,200), Nelson ($54,300) and Tasman ($53,500). In short, the economy is achieving mixed results, with relatively slow growth in value added, jobs and population over the long-term but with relatively high productivity, real earnings and median household income compared to similar regions. The question this raises is: how long can these high levels of productivity and incomes last?

The visitor economy Visitor spending in the region is relatively high. Visitor expenditure in the year ended November 2017 was $358 million. This was higher than many areas of a similar scale such as Nelson ($346 million), Tasman ($308 million), Thames-Coromandel ($355 million), Gisborne ($140 million), Napier ($338 million) and New Plymouth ($301 million). However, visitor expenditure has grown relatively slowly over 2012-2017 at 2.9 percent per annum compared to 7.7 percent per annum nationally. This is likely a flow-on effect of the Christchurch earthquake in 2011 and Kaikoura earthquake in late 2016, given that a high proportion of tourists come from or via Canterbury. Indeed, there was a drop in visitor expenditure in Marlborough between 2011 and 2012 (of $16 million) and between 2016 and 2017 (of $9 million).

______11 A rough estimate of productivity as defined as GDP per employee. From Infometrics economic profile. 12 Infometrics economic profile. 13 Based on Census 2013. 14 Based on Census 2013.

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Figure 15. Growth in visitor expenditure in Marlborough over 2009-2017 ($m)

$400m

$350m

$300m

$250m

$200m

$150m

$100m

$50m

$0m 2009 2010 2011 2012 2013 2014 2015 2016

Domestic International

Source: MartinJenkins using MBIE regional tourism estimates (years ended November).

Commercial accommodation nights increased by 4.1 percent per year over 2012-2017 (December years), which was lower than the growth rate nationally (4.7 percent per year). Marlborough’s average length of visitor stay in the year ended December 2017 was 2 days, the same as the New Zealand average. However, this may have been skewed by workers involved in the Kaikoura restoration staying in the region over the year. We note that the average length of visitor stay in previous years has been below the New Zealand average (e.g., in the year ended December 2016, the average length of stay in Marlborough was 1.8 days). International visitor expenditure has grown over the five years (November years) by 8.2 percent per annum, below the average New Zealand growth rate (11.3 percent). The number of international visitors was estimated to increase by only 1.2 percent per year over the same period (September years), compared to 12.4 percent per year nationally. International visitor nights in commercial accommodation increased by 3.6 percent per annum over 2012-2017 (December years) compared to 7.2 percent per year nationally. Domestic visitor expenditure has grown relatively slowly over the period, by 0.7 percent per annum compared to 5.5 percent per annum across New Zealand overall. However, domestic commercial accommodation guest nights increased by 4.6 percent per annum over 2012-2017, higher than the growth experienced across New Zealand as a whole (2.9 percent per annum). This is due to a large jump in accommodation nights over 2016/17, which is likely a result of workers involved in restoring Kaikoura infrastructure staying in the region over the year. In the five years to December 2016, domestic guest nights in Marlborough only increased by 1.7 per year compared to 3 percent nationally. The region has a moderate proportion of domestic expenditure at 66 percent of total visitor expenditure compared to an average of 60 percent across New Zealand. Marlborough has a slightly different profile of visitor expenditure than expenditure nationally. In the year ended November 2017, 26 percent of expenditure was for ‘other passenger transport’ compared to 15 percent nationally, with 15 percent on ‘other retail sales’ compared to 25 percent nationally. Only 4 percent was on ‘other tourism products’ compared to 11 percent nationally.

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Industry performance The Marlborough economy is somewhat concentrated in particular sectors. It has an average tress index of around 5815, which has remained fairly constant over the last decade. Beverage product manufacturing represents 15.6 percent of the regional economy, property & real estate services represents 5.6 percent, electricity & gas supply represents 5.0 percent and health care and social services another 4.9 percent. Other major sectors include agriculture support services (3.2 percent), central government administration & safety (3.5 percent), professional, scientific and technical services (3.2 percent), and horticulture & fruit growing (2.8 percent). Two of the major sectors have not performed well over the medium-term. Beverage product manufacturing grew moderately over 2012-2017, with 1.4 percent real GDP growth, and most of the growth occurred over 2016-2017. The value of electricity and gas supply declined by 1.8 percent per year. The region has a strong comparative advantage (high location quotient) in beverage product manufacturing and a revealed advantage in electricity & gas supply. Agricultural support services did perform well over the last five years, growing by 3.5 percent per year. The region also has a strong revealed comparative advantage in this industry.16 Several other major service sectors have performed reasonably well, with construction services growing by 6.1 percent per year over the last five years, health care and social assistance growing by 4.0 percent per annum over 2012-2017; professional, scientific and technical services growing by 4.5 percent per year; and retailing growing by 3.5 percent per year. However, accommodation and food services and education & training grew more moderately (the former by 2.4 percent per annum and the latter by 1.0 percent per year). The region does not have demonstrated advantages over other regions in any of these sectors.17 Several primary sectors have performed well. Forestry and logging grew by 8.6 percent per year over 2012-2017, horticulture & fruit growing grew by 3.1 percent year, and fishing & aquaculture grew by 6.3 percent per annum. The region has revealed advantages in all of these sectors. There have been mixed results for manufacturing industries. Fruit, cereal and other food product manufacturing was static over the five years, seafood processing declined by 1.6 per annum, and transport equipment manufacturing declined by 3.5 percent per year. However, wood product manufacturing grew very strongly by 12.3 percent per year (albeit from a small base) and machinery and other equipment manufacturing and fabricated metal product manufacturing also grew strongly at 4.9 percent per annum and 3.6 percent per annum respectively. The region does have comparative advantages in a few of these sectors (seafood processing, wood product manufacturing, fruit and other food manufacturing, and transport equipment manufacturing). Overall, growth in the Marlborough economy over the last five years has been driven mainly by primary sectors and related processing and servicing.

______15 MartinJenkins calculations. The tress index measures the degree of concentration of an economy on an industry or sector basis. A tress index of zero represents a totally diversified economy, while an index close to 100 means the economy is highly concentrated in a particular sector or sectors. Formally, a tress index is developed by calculating each sector’s contribution to the local economy; multiplying each sector’s total employment by its share of the economy; calculating the sum totals of the weighted values for each sector and then indexing the totals. 16 As measured by employment location quotients. Location Quotients (LQs) measure the concentration of industries in an area and can provide an indication of a region’s comparative advantages. They measure industry employment (or GDP) within a specified location relative to industry employment (or GDP) nationally. An LQ greater than one means that the industry or segment is ‘over-represented’ and concentrated relative to the rest of New Zealand, which suggests it is a net exporter and that some comparative advantages exist. 17 As measured by employment location quotients.

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APPENDIX 2: DETERMINING A CLEAR RATIONALE FOR LOCAL GOVERNMENT IN ECONOMIC DEVELOPMENT

1 Is there clear evidence of significant problems or opportunities impacting on business and industry performance and growth in the region? Problems impacting on the performance of businesses and industries in regions or opportunities for growth that are not being taken up are easy to find. The key is to determine that the problems or opportunities are significant enough that they are having a detrimental impact (or that they could have a positive impact) on a large proportion of businesses or a significant part of the regional economy.

In order to determine whether or not this is likely, a Council or its agency must gain a detailed knowledge of the issues and organisations or industries impacted, knowledge that can likely only be obtained directly from those involved.

This test is likely to be met if there is a good research base about the problems or opportunities and if there is ongoing engagement with private sector and non-government organisations to gather intelligence and feedback.

2 Do ‘market failures’ underpin such problems? Council investment in direct economic development interventions is justified when private and non- government sector decision-making, if left on its own, is likely to result in investment and outcomes that are less than socially desirable, i.e., when market failure occurs.

There are several possible areas of market failure that can be considered in determining whether economic development investments and activities by local government are required. Some common types that can provide a rationale for direct economic development services and activities are:

 Information problems, i.e., organisations or industries may have limited information about an investment opportunity (e.g., the potential costs involved and benefits they will receive from co- investing in a research centre in the region), which stops them from investing. A Council agency might be able to bring information to bear to support the decision (e.g., about consenting costs and timeframes for the centre; about the skills available in the region that the centre may need; about the benefits that a similar centre in a different region has generated).

 Coordination problems, i.e., organisations or industries may be reluctant to partner with others on an investment because they are concerned about sharing information with potential competitors or simply because they don’t know all the parties they should be partnering with. A Council agency might be able to play a ‘broker’ role in bringing the required parties together.

 ‘Spillovers’ or wider economic benefits, i.e., when the benefits of a project or investment are likely to flow to a range of organisations beyond those actually investing or taking part. For example, there might be a few businesses contemplating co-investing in a new training programme to develop more highly skilled workers for their industry, but they know that some of those workers will end up working for other businesses. So they will not want to fund the full amount required. A Council agency could provide partial funding to get the training programme established on the basis of the broader industry and regional benefits.

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Markets never work perfectly. So problems such as the above need to be of sufficient magnitude to warrant Council involvement.

3 Can a Council (or its agency) do anything to address the problems/opportunities and is it best placed to improve on the outcomes? An industry problem or opportunity may have been identified and a potential role for a Council or its agency determined. But a Council must also have the ability to improve on the existing situation.18 This is more likely when a Council or its agency has some advantages to bring to bear. For example:

 A Council might have privileged access to some information or be regarded as a more credible provider of the information (e.g., about environmental impacts, proposed developments, new regulation).

 In some areas of activity a Council may have an advantage in providing support to businesses or industries due to its links with officials in New Zealand or overseas, and because of an expectation of local government involvement. This could be the case in developing city to city relationships (e.g., in China) or in initiatives that have significant central government involvement.19

 In some cases, a Council can help facilitate or broker decisions and cooperation across organisations as it can be regarded as commercially neutral, impartial and as having wider regional interests in mind.

 Council agencies can sometimes attract support from experts at discounted or no cost who wish to give something back to the community.

4 Will Council intervention succeed and will the benefits of intervention exceed the costs? An assessment of expected (or realised) benefits and costs of an economic development initiative should involve consideration of:

 the benefits that would occur over and above those that would have been generated anyway (i.e., what would have happened if there was no support)

 the broader benefits to the region over and above those that the organisations directly involved will receive

 the broader costs that might be generated, over and above the direct costs of the initiative. For example, the costs involved in administering and monitoring the initiative or unintended consequences such as some businesses being disadvantaged.

If possible, particularly for projects involving significant investment, an attempt should be made to estimate the size of the wider (public) benefits compared to the private benefits as this should influence how the costs are shared between the Council and the private sector.

Evaluating the impact of economic development activities over time to assess whether they are achieving their objectives, whether they can be provided more effectively and efficiently, and whether there have been changes in the environment that suggest a change in direction is required is important to justify the continuation of activities or changes in resourcing.

______18 This condition is an attempt to make sure that government failures are avoided to the largest extent possible. One difficulty with this condition is uncertainty - it is not possible to know for sure beforehand if an intervention can solve the problem or not. 19 This is also referred to as the government imprimatur (badge of endorsement).

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5 Are stakeholders willing and able to engage The final requirement is that the relevant stakeholders, whether they are businesses, industry organisations, iwi, educational institutions, research institutions, or central government agencies are willing to participate and, as appropriate, co-invest in the activity. There’s no point in the Council identifying a major opportunity or problem and a proposed economic development service or activity if affected stakeholders are not serious about taking action.

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APPENDIX 3: ECONOMIC DEVELOPMENT SERVICES IN OTHER REGIONS

Table 25. Selection of economic development services offered in other regions

Northland Nelson-Tasman Hawke’s Bay Taranaki Western Bay of Plenty

Main organisations

Northland Inc Nelson Regional Business Hawke’s Bay Venture Taranaki Priority One Development Agency Whangārei District Council (NRDA) Hawkes Bay Tourism New Plymouth District Tourism Bay of Plenty (i-SITE, support for CBD Council (economic promotion, support for Uniquely Nelson Hawkes Bay Regional development strategy, I- Western Bay of Plenty events, investment Council (Regional Site, events), South District Council (supports attraction), Far North Nelson City Council Business Partner, Taranaki District Council city promotion groups), District Council (i-SITEs, (town promotion), economic monitoring), (i-SITE). Stratford Tauranga City Council support for community Tasman District Council Hastings District Council District Council (i-SITE) (supports city promotion development, support for (supports town (i-SITE), Napier City and marketing) events) promotion groups, i- Council (economic SITEs) intelligence, strategy The sub-region also works development, i-SITE) with Bay of Plenty Connections on regional projects

Services

Visitor promotion and events attraction

Northland Inc leads NRDA undertakes Hawke’s Bay Tourism Venture Taranaki Tourism Bay of Plenty promotion and destination marketing and undertakes promotion undertakes promotion undertakes promotion and marketing of the region promotion of the region and marketing of the and marketing of the marketing of the region, through various as a visitor destination region, including region, including including events campaigns, including the domestically and promoting the regional promotional campaigns, attraction, promotional development and internationally. Includes brand, regional website, collaborative initiatives campaigns, cruise ship implementation of a media and trade hosting social media, events with Tourism NZ, attraction, trade show Northland twin coast and promotion, event attraction and support, a provides collateral, and participation and the tourism strategy, and a promotion, conference tourism toolkit, cruise attracts conferences and Tauranga i-SITE. Has destination website. marketing, tradeshows, ship attraction, and events. Has assisted recently worked with other Northland Inc has been development of provides general visitor with the cases for new RTOs and Councils in the active in undertaking collateral etc. and information. tourism experiences and region to launch a new destination management implementation of the products. regional brand story and by supporting studies and Nelson visitor strategy, Hawke’s Bay Tourism Visitor Economy Strategy. cases for new tourism events strategy and and Councils in the Councils support i-SITEs products. Nelson-Tasman identify region are all involved in in Puke Ariki, Stratford A key result area of strategy. Also manages implementing the and Hawera. Tourism Bay of Plenty is Councils (e.g., Whangarei the Nelson i-SITE, which regional events strategy. to support tourism and Far North) support The Taranaki Economic development and provides a shop-front for Action Plan includes Strategy and visitor local events and local i- tourism activities and encourage investment. SITEs. The Regional actions to establish a strategy has a focus on providers. Attracts coordinated approach to growing new tourism Council co-invests in new events to the region. tourism developing tourism products and products/attractions. Council provides funding products, develop a experiences in the support to events. Māori tourism group to region. increase experiences, and to undertake a study on a Napier to Gisborne cycleway.

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Northland Nelson-Tasman Hawke’s Bay Taranaki Western Bay of Plenty

Business development

Northland Inc facilitates NRDA facilitates Hawke’s Bay Regional Venture Taranaki Priority One offers business access to business access to Council with the local provides business business development capability vouchers and capability and R&D Chamber is the Regional assessments, access to support through Ignition R&D grants from NZTE grants from NZTE and Business Partner and mentoring and co-working space, support and Callaghan Innovation. Callaghan Innovation. facilitates access to facilitation of NZTE and for WNT ventures Also provides general Also provides general mentoring, NZTE and Callaghan Innovation incubator and support for business information and business information. Callaghan Innovation support. Also provides Enterprise Angels. referral services and Works with Nelson- support. Business business toolkit capability workshops. It Tasman Business Trust Hawke’s Bay supports materials. The Regional Business works with the local in facilitating access to high performance Partner is the Tauranga Chamber to facilitate mentoring and small workplace productivity Chamber of Commerce. access to mentors. business advice. initiatives and a co- working space/business hub.

Industry development and facilitation

Northland Inc has NRDA has been Business Hawke’s Bay Venture Taranaki Priority One has facilitated previously facilitated a involved in economic facilitates the food and facilitates a visitor an ICT cluster and forest industry advisory assessments and beverage sector and industry advisory group, Kiwifruit post-harvest group, Miere (honey) facilitation of major Food Hawke’s Bay oil and gas industry working group. coalition, and marine industry projects. It has Strategy. Has supported cluster, and engineering industry group. It supports previously undertaken research on the potential consortium. It provides Priority One, the Western a F&B coalition to attend a cluster facilitation for of nutritional powders for promotional material on Bay of Plenty District national trade event. It led aviation, engineering the goat and sheep key sectors, provides an Council, Tauranga City the development of an and design/build industry. oil and gas capability Council and Bay of Plenty international education industries. database, and has Regional Council strategy and works with supported the (amongst others) support the education sector to Council co-funds development of an the Bay of Plenty regional promote educational Education Nelson- international education film office. Marlborough. opportunities. It works with strategy and Priority One and industries on cases for investigations into the Tauranga City Council major industry projects. Manuka honey industry. support Education Is a partner in Study Tauranga. The Regional Council co- Taranaki and is the invests in feasibility regional film office. studies for major projects and in projects with a good business case

Investment attraction

Northland Inc supports NRDA is involved in Business Hawke’s Bay Venture Taranaki Priority One undertakes investment attraction, investment attraction by is involved in investment provides investment investment attraction including feasibility studies providing information to attraction, including attraction support, through the Tauranga for major investment businesses interested in tailored support for including facilitating Business Case profile and opportunities. locating to Nelson and business relocation, a introductions and through a dedicated promotes the region study to identify investment profiling business relocations Works with Whangarei generally to businesses investment opportunities (e.g., for the oil and gas manager. District Council on a – although is not a major and the development of industry). ‘landing pad’ initiative to focus an investment profile. host investors and developing an investment The Action Plan includes prospectus. actions on developing a regional strategy to attract businesses, investment and migrants.

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Northland Nelson-Tasman Hawke’s Bay Taranaki Western Bay of Plenty

Skills support

Councils supported a NRDA supports skills Has not been a focus in Venture Taranaki Priority One undertakes a career roadshow and a initiatives including the past, although the provides skills support skills attraction campaign skills attraction campaign. support for the Young recent Hawke’s Bay including targeting of and matching programme. Enterprise Scheme and regional economic skilled migrants and a It led the Bay of Plenty workforce development development strategy talent campaign, Tertiary intentions initiatives. and action plan includes employer missions strategy. The Tauranga a number of actions to offshore and a jobs City Council and Priority improve employment website. One are part of an pathways for youth. agreement and plan with Immigration New Zealand to attract and retain skilled migrants. Priority One offers Western Bay@Work programme which highlights career opportunities in the local area and the Instep programme which links secondary schools with the business community to demonstrate career prospects and the skills needed to succeed.

Internationalisation support

Council sister city Council sister city Council sister city Venture Taranaki Council sister city relationship building with a relationship building with relationship building with provides exporter relationship building with particular focus on China. a current focus on a focus on Japan and forums. Councils cities in Japan, China and Northland Inc provides China. NRDA delivers a China. involved in sister city South Korea. occasional workshops on China market relationship building with doing international development cities in Japan and business. programme, including a China. quarterly China Business Network meeting.

Innovation support

Northland Inc supported NRDA facilitates Hawke’s Bay Regional Venture Taranaki Priority One is involved in the development of a business access to Council, with the local facilitates business partnership with the feasibility study on the Callaghan Innovation Chamber, facilitate access to Callaghan University of Waikato to potential for a regional support. Has previously access to Callaghan Innovation support and establish a regional research institute. provided feasibility Innovation support. has developed a innovation hub. Developed the business support for the local Stakeholders in the relationship with Massey case for and established a aquaculture research region, including University to provide Innovation support is co-working space. centre. Business Hawke’s Bay R&D expertise in the provided through the Facilitates access to and Councils, are region. Innovation Forum, Bay of Callaghan Innovation investigating the case Plenty Tertiary support. for an innovation centre Partnership, Bay of Plenty in the region. Clinical School and Coastal Marine Field Station, and WNT Ventures

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Northland Nelson-Tasman Hawke’s Bay Taranaki Western Bay of Plenty

City and town improvement initiatives

Town promotion and Town and city CBD promotion and Not a major focus, City and town promotion marketing occurs through improvement and marketing is provided although several and marketing is provided a range of business promotion is provided through Inner City business associations through separate associations and through Uniquely Nelson Napier, Hastings exist. organisations, e.g., Katch incorporated societies and a range of town Business Association. Katikati, Te Puke EDG, (e.g., Doubtless Bay business associations Waihi Beach Events and Promotions Inc, Kaikohe (supported by Council) Promotion Association, Business Association, such as the Richmond Downtown Tauranga. Kaitaia Business Business Association. Association, Business Paihia, Russell Business Association). Far North Council has funded a business association advisory services.

Strategy and economic intelligence

Regional growth study Has a regional economic Hawkes Bay economic Has a New Plymouth Smart Economy strategy completed. Economic development strategy, strategy and action plan economic development is the local economic action plan being identify strategy, events being implemented. Is a strategy, district development strategy. implemented and is to be strategy and a visitor Tourism Ten Year economic plans, a visitor Bay of Plenty regional updated. strategy. Economic Strategic Framework strategy and a regional growth study and action monitoring includes the and Regional Events economic development plan also has an Economic profiles six-monthly Tracking the Strategy. strategy. A regional influence. provided by Councils. Far Economy report. economic action plan is North has a local Business Hawke’s Bay about to be released. Priority One and Bay of economic plan. provides economic Plenty Regional Council monitoring information. Venture Taranaki provide economic provides a range of monitoring information. economic and industry information on its website.

Comment

Economic development Regional economic Not a major focus on Not a major focus on Has been a significant services are weighted strategy influences sector facilitation other city/town promotion, but emphasis on skills and towards visitor marketing prioritisation of some than for food and otherwise provides a innovation in recent years. and sector development. activities. beverage. balance of activities. Regional strategy Prioritisation of most of the Economic development Regional and district influences prioritisation of economic development strategy and action is economic strategies and activities. spend is determined having a major influence plans influence through a SOI process on economic prioritisation of between the regional development priorities. investment. council and Northland Inc and discussions between staff of both organisations. Economic Action Plan has guided the selection of some priorities. The economic strategy and action plan is to be updated.

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APPENDIX 4: SUMMARY OF NATIONAL EVALUATION EVIDENCE

Key findings from evaluations of economic development activities nationally are:  The success rates of business development support initiatives are variable. Business information services have been found to reduce transaction costs and benefit businesses, although it is not clear that such services generate wider economic benefits. Support for mentoring is a relatively efficient way of reaching a large number of small businesses. Incubation services help to increase firm survival rates and lead to incubated firms achieving higher rates of growth than non- incubated firms. However, generally it is not apparent that funding for business development support reflects the mix of regional and national benefits or public and private benefits. Grants (such as those facilitated in the region) confer significant private benefits to firms (e.g., higher sales, valued added and productivity) and do encourage additional activity beyond what the firms would do anyway. However, there is no evidence that spillovers are generated from the grants.  Innovation support initiatives that have stimulated significant commercial investment occur more frequently with traditional sectors, rather than in new or emerging industries (which may simply reflect greater scale and resources available in those industries). The spillover benefits being sought from innovation support are often poorly defined when the initiatives are established, and there is limited evidence that spillovers have been generated from these initiatives. There is also evidence that R&D subsidies improve firms’ ability to introduce new to the world innovations.  Sector development activities in New Zealand (e.g., cluster facilitation, major industry projects) have often been hindered by a lack of clear rationales or objectives. Successful interventions have occurred where an industry was at the formative stages of industry development or where there has been a clear strategy for phasing out support over time. In some cases there has been overlap between local and central government support for industries and the activities of industry bodies. The level of economic benefits that can be attributed to industry good activities has been difficult to assess, often due to a lack of clarity about the intended benefits from the outset. The selection of sectors for engagement has not always been based on a robust analysis of opportunities or barriers to sector growth and sometimes support has been spread thinly across too many sectors of interest.  There is little evidence that broad investment promotion influences investor perceptions of New Zealand or regional capability, compared to highly targeted (investment opportunity specific) promotion. Investment attraction and facilitation activity has not brought significant new foreign investment partners to New Zealand, but has helped develop additional investment from existing investors or retain existing investment that may have gone offshore. Feasibility and opportunity advice does help inform investment decisions. In several instances, overseas investment has resulted in domestic businesses being able to access distribution channels and networks that otherwise would not have been possible, improved technology and management know-how and generated a positive branding association between domestic and foreign businesses. However, overall, investment activities have often not been as well targeted as they could be and have often not been based on a detailed understanding of the value proposition for investors. If investment attraction activities are to be delivered, resource needs to be put into high quality diagnosis of investment potential and lead identification and generation.

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 Major event support tends to result in net economic benefits to the economy, although not as high as commonly thought because local visitor expenditure on events represents a transfer of expenditure from other activities rather than new expenditure. Events with the greatest international visitor contribution provide the greatest overall net benefit. On average, smaller regional or district events do not generate the level of benefit that major events do and recurring events do not generate the same benefits as one-off events. Greater net economic benefits tend to result from off-peak and shoulder season events compared to peak season events.  Destination marketing and promotion is only one factor that influences visitor numbers and spend, with factors such as incomes in source markets, the real exchange rate and cost of travel being major determinants. However, there appears to be a positive rate of return on destination marketing resulting from improved awareness and reinforcing other influences on decisions to visit a particular destination. One risk is that expansion of tourism activity in a region can crowd out development in other sectors of the economy (e.g., by pulling employment into the industry from other areas) unless there is existing capacity in tourism related industries.

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