New Zealand looks beyond last Hobbit

As cinemagoers rush to see the third Hobbit film, "Tolkien-mania" is again sweeping New Zealand, where record tourist arrivals are boosting the economy and helping to offset a slump in the price of its biggest export, milk.

"We do get the fanatical fans," says Russell Alexander, general manager at the Hobbiton Movie Set Tours — a tourist-themed village with 44 hobbit holes and a working pub where parts of the film were shot.

"But most of our visitors say they are aware of The Hobbit and would feel cheated if they didn't come and see the set. There is now a big brand association between the movies and New Zealand."

The six Lord of the Rings and Hobbit films have become one of the most successful franchises in history, netting billions of dollars in revenue for Warner Brothers, the studio that made them. They have also transformed New Zealand, a country that depends on dairy exports, into a world leader in "film tourism", in spite of its remoteness from European and US markets.

Now, after record growth in visitor numbers, the country's tourism boom faces an uncertain future because the Tolkien movies have run their course. Arguments between the Tolkien estate and the Lord of the Rings filmmakers over money mean the chances of more adaptations are remote.

Surveys show 13 per cent of tourists say the Hobbit films influenced their decision to travel to New Zealand. Since 2012, when the first Hobbit movie was released, visitor arrivals have surged to a record annual rate of 2.83 million. And even with a strong New Zealand dollar, spending by international visitors grew 10 per cent to $7.2 billion in the year ended September 2014.

Read MoreHollywood's having another solid December

Tourist chiefs say a surge in spending by tourists from premium markets such as Germany, the US and UK can only be explained by film tourism. One in five visitors took part in some form of film-related tourism over the past 12 months.

"If we had to make an estimate of the value of the Hobbit films for tourism, I would put it between $50m and $500m per year," says Peter Ellis at New Zealand's business ministry. "We know 80-90 per cent of visitors know the films were made in New Zealand and that indicates a fair amount of placement of product in front of customers."

The buoyant tourism industry helped New Zealand become what HSBC described as the "rock star" economy of the developed world in 2014. Annual growth was 3.2 per cent in the year to the end of June — the fastest since 2007 — even though the price of milk powder, its biggest export, halved.

"Tourism has been soaring, helped by the global exposure provided by the Hobbit movies," says Kirdan Lees at the New Zealand Institute of Economic Research. "But the fall in dairy prices will hit the economy hard in the coming year and tourist revenues are unlikely to completely offset the negative impact."

More from The Financial Times:

Cyber security groups use fake computers to trap hackers
New Zealand spies on public, says Snowden
Kiwi's milk-powered rally turns sour

When the first Lord of the Rings adaptation dazzled cinema audiences in 2001 with its dramatic locations and scenery, New Zealand began cautiously tapping into a global film tourism market. Until then the best-known example of film tourism was the association of Salzburg with The Sound of Music. In 2012, with the release of the first Hobbit feature, the tourist board took a bolder approach, branding the country "Middle Earth" while companies such as Air New Zealand integrated movie characters into their marketing.

"We have a limited marketing budget and the films created a great opportunity to drive brand awareness in offshore markets, sell more tickets and be more creative," says Jodi Williams, head of global brand development at the airline.

The carrier has emblazoned its jets with Hobbit characters, put sculptures in airports and released safety videos featuring portrayals from the movie, which have gone viral, attracting millions of hits online.

Hobbiton Movie Set Tours is probably the most ambitious attempt to link tourism to the film franchise. A joint venture between the Alexander family and film-maker Peter Jackson, it has turned part of the family's land into a film set and is now a permanent visitor attraction.

"We charge NZ$75 (US$58) entry and get about 300,000 visitors a year," says Mr Alexander. "It is one of the most visited attractions in New Zealand."

Yet questions remain over how long Tolkien-inspired tourism can continue, with the film franchise ending. Kevin Bowler, Tourism New Zealand chief executive, says he expects a good 2015-16 as the Hobbit movie will still be current. "After that, film tourism demand may taper," he says. In the coming months, tourist chiefs will focus on sports-related visitors, when New Zealand and Australia co-host the cricket world cup.

Mr Alexander is more bullish. "Interest in Hobbiton will be here as long as I'm alive and it will probably outlive me."