Australian Domestic Tourism: Spike or Long-term Trend?

 

The impact of COVID on every aspect of Australian tourism cannot be ignored as we head into 2021. 

International and, in many cases, interstate travel has been drastically reduced this year, with the overseas situation not boding well for next year.

The latter half of this year saw more people holidaying in their own backyards with areas such as the Sunshine Coast and Margaret River enjoying a surge of visitors.

That’s good news for domestic tourism operators and accommodation, but the question is, can domestic tourism do enough to save the industry? Is it a spike or a long-term trend?

Tourism Minister Simon Bermingham announced new funding in the Budget aimed at encouraging Aussies to visit tourist attractions in their own areas, helping to boost local airports, restaurants, shops, and hotels.

 

Government pledges $250 million

The Government has earmarked more than $250 million for a Regional Tourism Recovery Package, which will include $100 million for infrastructure projects that boost regional tourism.

More than $50 million has been pledged to attract domestic visitors to those tourism hot spots that rely heavily on international travellers, such as Tropical North Queensland and Tasmania.

The IBISWorld tourism industry report shows loss of numbers and revenue across the board, although the forecast annual growth for 2020-2025 is sitting at 5%.

Over most of the past five-year period, tourism activity in Australia has increased, driven by cheap international airfares and a weaker Australian dollar. Transport providers, retailers, accommodation providers, and other tourism players have all benefited from the increased tourism activity and spending.

With the lack of tourism activity since March 2020, industry revenue is expected to decline by around 19.4% this year. But it doesn’t stop there. The effects of the Australian lockdown, and the ongoing COVID restrictions in Europe and the US, will continue to affect tourism revenue well into 2021.

 

Recovery likely to be strong

However, IBISWorld predicts that recovery is likely to be strong, and this will encourage increased investment across the industry for decades to come.

Industry revenue is projected to rise at an annualised 5% over the five years through 2024-25, to $147.2 billion.

Indeed, the new The Western Sydney Airport, set to open in 2026, will be necessary to cater for future increases in air traffic to and from the country, the report says. 

As mentioned earlier, tourism businesses have been well supported by government measures during the COVID-19 pandemic. For example, the JobKeeper Payment scheme has provided income to businesses to retain employees if they lost 30% or more of their revenue. As a result, employee numbers have not fallen as strongly as initially feared. 

In saying that, even as the industry starts to recover, there is another issue that could become problematic for operators. In 2017-18, China overtook New Zealand as Australia’s largest source of international visitors. 

 

What will China do?

The growth was the result of rising middle-class wealth in China, allowing Chinese visitors to spend more money on discretionary activities such as travel. It is also considered that Chinese visitors have the largest tourism expenditure of any international market. 

At the start of 2020, it was estimated that around 1.4 million Chinese visitors come to Australia each year and spend almost $12 billion. Bans on overseas travel put pay to that, and the future is uncertain given the current relations between Australia and China.

However, The Financial Review reported in late October that Chinese travel agents are still showing a lot of interest.

Turning our attention back to domestic tourism, visitors most commonly visit New South Wales, Queensland, and Victoria, due to well-known attractions such as the Sydney Opera House and the Great Barrier Reef. However, the Northern Territory, Western Australia and Tasmania all exhibited strong growth in domestic tourist visitor nights over most of the past five-year period, due to successful tourism advertising campaigns that attracted interstate visitors.

 

Weak dollar a bonus

With the Australian dollar anticipated to remain weak over the next five years, there’s likely to be a further increase in domestic tourist visitor nights, as well as encouraging international visitors to travel to Australia. 

This increased tourism activity will boost industry profitability, with tourism operators likely to benefit from having a greater pool of potential customers. As we recover from COVID-19, we should see a rise in both the number of establishments and industry employees over the next five years. 

IBISWorld also highlights a need for Industry players to enhance their digital presence and boost their technology capabilities over the next five years as technology becomes an increasingly important part of providing tourism services. For example, tourism companies – such as accommodation providers and travel agencies – should be building up their social media platforms. They should also be working with people on these platforms with a high number of followers on marketing and promotional campaigns to try to boost demand. 

In addition, more tourism companies in regional areas are projected to provide easy payment options for domestic and inbound tourists by offering contactless payment options, such as Visa payWave and Alipay.

The government’s Tourism 2030 project will most likely focus on improving tourism infrastructure, streamlining cumbersome regulations, and developing marketing campaigns. 

There is also likely to be increased demand for ecotourism, which will provide significant opportunities for industry players, particularly those operating scenic and sightseeing tours.