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The early green shoots for the travel and tourism sector in June now seem like a fairly distant memory.
While in some jurisdictions the sector continues to progress recovery plans, there is an unmistakable resetting of expectation around the pace of the recovery expected in the tourism sector.
The further outbreaks of COVID-19 in Victoria and beyond have raised anxiety in Australia, with levels edging close to the peak observed in early April during the peak of the initial impact (Figure 1). For many, early travel pursuits and plans to venture further afield have been postponed for now.
Figure 1: Australian residents reporting significantly increased anxiety
Optimistic signals were emerging from mid-April to mid-June, with an increasing share of travellers reporting they felt safe flying or staying in a hotel, and actively looking for travel deals (Figure 2). Since then, consumer travel sentiment and leisure travel intent have declined in the face of increasing health concerns and continuing or re-established travel restrictions.
Figure 2: Australian consumer sentiment relating to travel
Young and restless
The desire to travel in the future – demonstrated by actively searching for travel deals – has not faltered as much as the other travel sentiment indicators, likely reflecting continuing pent-up demand. A breakdown of the data by age group, however, highlights some differences, with 30% of those aged 18-34 years actively searching for travel deals in the most recent wave of the survey, contrasting with 15% (down 4 percentage points) of those aged 35-54 years and only around 8% (down 2 percentage points) of those 55+ years.
Data collected about travel intentions in July through the National Visitor Survey also points to the potentially measured return of domestic travel. While half of the respondents indicated they were planning to take a day trip or overnight trip within the next three months and another 25% planning to travel within the next year - assuming there were no travel restrictions in place, 20% of respondents are planning to wait a year or don’t know when they will travel. And when they do travel, a majority of Australians are planning to stay close to home, with 60% planning a trip within their own state or territory.
Travel done differently
Although the recent outbreak has stifled the emerging demand for domestic flights (and capacity as well), there were already signs that Australians were exploring different avenues for travel. An increased interest in car rentals can be seen (Figure 3), reflecting the growing appetite for an Aussie road trip – a reaction to limited flights, ongoing travel restrictions and that many domestic travellers just do not feel safe getting on a plane just yet (only 1 in 5, as per Figure 2 above). Travel intentions around car rentals have trended upwards, and are now at 14%, doubling the mid-April intentions.
Plans for hotel stays and domestic flights have seen a downward trajectory from mid-June, while intentions around private accommodation have also pulled back but are double where they were in the first wave of the survey.
The 18-34 years cohort are reporting higher intentions around leisure travel elements in the next three months than the older cohorts (see 18-34 years chart in Figure 3 below), with their intentions eight to 16 percentage points higher across leisure trips elements. More than 30% of this group are intending to rent a vacation home (higher than intentions around hotel stays and in contrast to the older cohorts). Intentions around air travel have fluctuated over the months, with a decline in recent weeks as intentions around car rentals continue their upward trajectory.
Figure 3: Leisure travel intentions
Financial stress dampening demand for travel
While travel intentions appear more robust among the younger cohort of the analysis, this is not due to lower levels of concern around the financial or employment impacts of the pandemic. With the Australian economy in recession for the first time in almost three decades, this is unfamiliar territory for many younger Australians, which combined with their greater employment exposure to some of the worst impacted industries, is leading to a higher proportion concerned about their finances – delaying large purchases and concerned about making upcoming payments – and their employment situation (Figure 4).
The brunt of the current financial pain is expected to persist and likely increase as government stimulus and support measures wind down. As Australians prepare for a prolonged period of financial uncertainty, it is expected that spending patterns will shift away from discretionary items such as travel.
Figure 4: Financial, health and employment concerns by age groups
So, what does this mean for Australia’s tourism sector?
While tourism related businesses in a number of regional destinations are reporting strong and, in some cases, very strong results, these regions have historically attracted mostly intrastate visitors and spend and are benefiting from a captive audience with interstate and international trips off the cards for most of our key population centres.
In aggregate, the tourism sector has seen a decline of more than 80% of usual domestic overnight expenditure (and essentially all of international expenditure) over the months of April and May  – with the impact the greatest in major cities whose exposure to international markets and corporate travel mean they have a tremendous gap and are not benefiting from the shift to regional travel.
Consumer confidence and health – and financial – concerns are key factors. The earlier expectations – or hopes – of many for a quick recovery of the tourism sector have been tamed by the resurgence in COVID-19 infections and the continuing – or reinstated – travel restrictions. But government decisions are not the only factors which will hold back the sector’s broader recovery when the time is right. Not all Australians are keen to travel, and of those who are, with the majority planning stay close to home (travel within their own state), the challenge for many businesses outside of regional areas is set to continue for some time. Health and financial concerns feature prominently, with the younger 18-34 years cohort more concerned than average on both counts.
The recovery is unlikely to be linear. In the face of uncertainty, businesses must plan for multiple scenarios and recovery time horizons, as they shift from crisis response to recovery and the future beyond, to ensure they can adapt and respond to the ever evolving landscape. Plans must be made for plausible scenarios relevant to their individual sector and geography(ies) that will guide iterative decision making as events unfold. A reset on the pace of recovery means that many businesses are now facing a broader set of decisions on how to refocus and/or potentially resize their operations in the face of longer and more uncertain timeframe.
To read the COVID-19 recovery scenarios for the tourism sector, please click here.
An interactive dashboard featuring the results of the Deloitte Global State of the Consumer Tracker is updated regularly to provide insights on evolving consumer trends – including travel readiness – to assist you in thinking about and preparing for the future. To access the dashboard, please click here.
 National Visitor Survey, Tourism Research Australia, July 2020
 National Visitor Survey, Tourism Research Australia, monthly snapshots April-May 2020.
Adele is the Australian Tourism Sector Leader at Deloitte and a partner within Deloitte Access Economics’ economic and policy advisory practice. With a deep understanding of the tourism landscape and experience in strategy and policy development including executive roles with Tourism Australia (Executive General Manager, Strategy and Research) and peak industry body Tourism & Transport Forum (Executive Director), Adele works with government and private sector clients across tourism-related industries including aviation, transport and cruising, hotels, business events, sports and major event and attractions.