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Taupo has two major things that you have to do- one is the Tongariro crossing (Mordor Mountain from Lord of the Rings) with is a full day hike though it is challenging it is can be done by most, you can be picked up from most hostels and dropped off at base camp and then picked up from the other side for about $16. The other must do is a sky dive, it is the cheapest place in New Zealand to do one and come summer all of the companies have a price war so if you shop around or ask at your hostel then you should get a bargain pulse you get one of the most amazing views of the lake. Taupo dose have other things to offer there is a good night life though the local night club the Holy Cow is pretty basic and a bit rough around the edges but when all the tourist buses are in it can be a fun night, with drinks offers and dancing on the tables for all. There is also a cheap bungee over the Waikata River, natural hot springs, and in the local pool you can hire your own personal hot pool and relax for and hour or two.
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