The youth and adventure tourism industry says small businesses are missing out on the government fund to boost the sector's recovery.

The Innovation Programme for Tourism Recovery is a multimillion-dollar shot in the arm for tourism through co-funded projects.

But not everyone was finding the fund to be as simple as it sounded.

Small and medium-sized enterprises - SME's - such as backpackers and family-owned agencies were struggling to understand how the money could help their businesses to get back on track after two and a half of years dealing with the

pandemic loss.

The Backpacker Youth and Adventure Association - BYATA - has over 200 members in New Zealand, mostly small operators.

Chair Chris Sperring said small businesses were finding it hard to understand how to access the government's new funds.

"Trying to articulate and understand how small business might be able to take advantage of that scheme is a challenge for us at the moment."

Sperring said he could see how bigger organisations might be able to access it but small companies, especially in the backpacker sector, were really struggling to engage with the innovation scheme.

Small operators were struggling to recover from the Covid-19 pandemic and the money could help bring back an important part of the sector, Sperring said.

"If you think about the Youth sector and the backpacker sector, he said, a lot of the innovation we have seen has come out of this sector, such as bungee jumping and jetboating and activities such as that were born in our sector."

Operators, especially small and medium-sized enterprises (SMEs), are busy, Sperring said.

"They had two and a half years where they did not have that cash flow, they are pretty tired in their business, they are wearing many hats to be able to offer the service they are expected."

Money was certainly a challenge, he said.

"Understanding the lack of that cash flow means that like-for-like funding, which is contained within the funding criteria is quite a big barrier for SMEs."

They did not have enough available funds to think about something within transformative innovation and apply funds to it, because it simply did not exist, Sperring said.

The association had been having conversations with the Ministry of Business, Innovation and Employment (MBIE) on how to get SMEs involved with the Innovation Tourism Recovery Fund, Sperring said.

"That way we could see if we can unpack what a 'transformative innovation' looks like and how can we open up SMEs to collaboration."

The youth adventure sector was keen to get MBIE involved so small business owners could be better informed on how they might access this fund, he said.

"Because at the moment they only see a couple of roadblocks."

The smaller operators really felt they had been hard done by in terms of this fund and really did not see how they could access it, Sperring said.

Jason Goodson is the managing director of Backyard Roadies, a small company that offers tours around New Zealand.

Goodson said he got excited when he found out about the Innovation fund, but soon realised the challenges.

"I looked into it and realised that there were things there that for small business are quite tough to meet the mark."

The slow cash flow in the past two and a half years meant it was hard for small companies to co-fund projects, Goodson said.

"The fact that we are not able to use the money towards small things like recruitment, vehicle assets, operations or marketing makes it harder on us.

"Since you can't use the money for that, I don't see much point in it."

Small businesses needed to be creative to figure out what kind of project would tick all the boxes, and then use capital to co-fund - capital they did not have, Goodson said.

Goodson said he did not believe small business was a priority when the fund was launched after becoming aware of the fund's lack of accessibility for SMEs.

MBIE response

Approached by RNZ, the Ministry of Business, Innovation and Employment did not make it clear how the funds could be used by small business operators, such as backpackers and youth adventure businesses.

"New Zealand Māori Tourism and Business South are offering support for those who are interested in applying," manager tourism system and insights Danielle McKenzie said in a statement.

The funding was open to individuals, groups or businesses that had a New Zealand presence and was not specifically for businesses that had closed during the pandemic, McKenzie said.

The fund was designed to support innovations across the full visitor journey, from planning a visit, to experiences in and around the country and returning home, she said.

MBIE said since the fund opened, the programme had received 20 applications for Stream One and Two.

For more information on how to apply is available on MBIE's website.