According to the latest figures from the Ministry of Business, Innovation and Employment, annual visitor spending in the City was $428 million for the year ending March 2015.
This was a rise of 13 per cent on the previous year and higher than the national average increase of 11 per cent.
The latest figures show international tourist spending in Palmerston North increased by 13% in the past year indicating the City is now recovering from the loss of trans-Tasman flights in 2008 when Freedom Air was wound up.
"The City has overtaken Nelson and Hastings in the past 12 months in terms of visitor spending and is rapidly closing in on Taupo," says Palmerston North Mayor Grant Smith.
"The decision by Originair and Jetstar to include Palmerston North in their schedules can only boost our visitor spending in the future," he says.
The City's strength is in domestic tourism, where it is now ranked 7th nationwide in terms of spending compared with 11th four years ago.
Domestic visitors shelled out a total of $389 million in the City during the period, an increase of $111 million or 40% on the amount spent in 2009.
Visitors from the three main centres were the strongest contributors.
Aucklanders spent $51 million in the year to March 2015, an increase of 82% on 2009.
Canterbury visitors spent $29 million in the last year, up 124% from 2009.
Residents from the Wellington region spent the most at $86 million, an increase of $24 million or 37.8% on 2009.
Palmerston North is known for hosting conferences and conventions but it is also attracting national sporting and cultural events and competitions. Lance Bickford, Chief Executive of Destination Manawatu, says the City is taking better advantage of its central location.
"It has also had great success in encouraging drivers travelling along state highways 1, 2 and 3 to stop off and explore the range of recreational and leisure opportunities offered by the City and the wider region."
Mr Bickford says Destination Manawatu has strongly promoted its domestic drive campaign under the banner of Explore the Country Road New Zealand over the past 5 years to North Island residents.
The campaign encourages visitors to explore beyond the beaten track and experience places like the Pohangina Valley and Irongates Gorge.