Posted: 04 Jun. 2020 10 min. read

Restarting tourism… a look at a trans-tasman bubble

Australia and New Zealand have both shown relative success in containing the spread of COVID-19, mitigating the immediate health crisis and laying the groundwork for economic recovery. In recent weeks, both countries have also outlined plans for the gradual restarting of business and domestic economic activity, including intra- and interstate (or inter regional) travel. Further away is the question of international travel.

Australia and New Zealand have a remarkable and lasting relationship, defined by mateship and sustained by the many hundreds of thousands of individual family and business connections across the Tasman. So it’s sensible that as both governments consider opening their borders to international visitors, that the first step is the proposed trans-Tasman travel zone (‘the bubble’).

The bubble is an uneven opportunity

Around 1.3 million New Zealanders visited Australia in 2019, representing 15% of all international trips. More than 1.5 million Australians went the other way across the Tasman, accounting for 40% of all international visits to New Zealand.

Australia is the largest source of international visitors to New Zealand. The reverse was true until September 2017, when China overtook New Zealand as the number one source of international visitors to Australia (Figure 1).

Figure 1. Source of international visitors to Australia (left) and New Zealand (right)

New Zealand visitors spent an estimated A$2.6 billion in Australia in 2019 – around the same amount that Australians spent in New Zealand. These figures, however, require context: New Zealanders’ spend in Australia represented 6% of the total $45 billion spent by international tourists in 2019, while Australians’ spend in New Zealand accounted for almost a quarter of their $11 billion total (Figure 2, left panel).

In other words, if the bubble enabled a resumption of trans-Tasman tourist activity, a much smaller part of Australia’s usual international tourism activity would be restored than New Zealand’s.

Australia is also a much more significant destination for New Zealanders travelling overseas, than New Zealand is for outbound Australians. Kiwis spent an estimated A$7.6 billion on overseas travel in 2019, a third of which was spent in Australia. In contrast, of the A$64.9 billion that Australians spent on international travel, only 4% was in New Zealand (Figure 2, right panel).

Figure 2. Share of inbound (left) and outbound (right) international tourism expenditure, 2019

Without any competition from other international destinations for the time being, the trans-Tasman bubble presents a significant – if uneven – opportunity for both countries.

In 2019, Australians spent $62.2 billion on overseas travel outside of New Zealand. That said, the economic toll that measures to mitigate the health impact of COVID-19 have imposed on household budgets is expected to put downward pressure on travel budgets.

But if, for example, 25% of that amount were redirected from other overseas destinations to New Zealand over 12 months of the trans-Tasman bubble being in place, that could see Australians pouring an additional $15.6 billion into New Zealand’s tourism industry (more than offsetting the loss of expenditure from all other international visitors). Coming west across the Tasman, if 25% of the $5.0 billion spent by New Zealanders on overseas travel outside of Australia were redirected here, that would see an additional $1.2 billion in Australia.

Of course, it’s not possible to predict exactly how beneficial the bubble would be to either country given the number of uncertainties in play, including the impact of underlying economic conditions in each country, the duration of the bubble (or extension to include other countries), the availability of aviation capacity (and the cost of flights) and more fundamentally what travel preferences will emerge as tourism restarts.

As internal intra- and interstate (or inter regional) borders open, regional and state tourism bodies are commencing ‘holiday at home’ campaigns making for a competitive marketplace. Tourism Australia’s #HolidayHereThisYear campaign will support these efforts, encouraging Australians to play their part in supporting tourism operators and businesses across the country. Tourism New Zealand is encouraging Kiwis to get out and about with their “Do Something New, New Zealand” campaign. The introduction of a trans-Tasman bubble with compete with these domestic travel pushes on both sides of the Tasman.

Mateship, the personal connection

Of the 1.3 million trips by New Zealanders to Australia in 2019, almost 40% (or 480,000 trips) were to visit friends and relatives (VFR). Travel in the other direction followed a similar pattern: of the 1.5 million Australian visits to New Zealand in 2019, 37% were to visit friends and relatives. In both cases, the share of VFR trips was much higher than among visitors from most other countries.

That speaks to the importance of personal connections between residents of the two countries as drivers of tourism activity. There were almost 570,000 New Zealand-born residents in Australia as at June 2019, and more than 75,000 Australian-born residents in New Zealand recorded in its 2018 census.

Once travel between the two countries is permitted, VFR travel is likely to recommence and recover relatively strongly, as many will perceive the opportunity to see their friends and relatives face-to-face as a necessity after so many months of isolation. Given the significance of VFR travel between Australia and New Zealand, that’s good news for both countries’ tourism industries.

Where will New Zealanders go in Australia?

New Zealand visitors do not disperse evenly across Australia, with more than 90% of NZ visitors concentrated in the eastern states (Figure 3). Queensland was New Zealanders’ number one destination in 2019, accounting for around a third of all trips. A further 32% of visits were to New South Wales and the ACT, and 25% to Victoria. 

Figure 3. Distribution of New Zealand visitors to Australia, 2019

New Zealand visitors do not disperse evenly across Australia, with more than 90% of NZ visitors concentrated in the eastern states (Figure 3). Queensland was New Zealanders’ number one destination in 2019, accounting for around a third of all trips. A further 32% of visits were to New South Wales and the ACT, and 25% to Victoria.

That distribution roughly follows the pattern of migration across the Tasman. Almost 40% of New Zealand-born residents in Australia live in Queensland, with a further 40% spread across New South Wales and Tasmania. The outlier is WA, which hosts 15% of the New Zealand-born resident population in Australia, but only 5% of New Zealand tourist visits.

That suggests that the trans-Tasman bubble will be of greater importance to eastern Australia. On the other hand, might this represent an opportunity for the central and western states and territories to market their unique offerings to Kiwis looking for something different? Experiences in northern WA and the NT, for example, could be compelling substitutes for holidays in other countries outside of the bubble.

What happens next?

The realisation of the trans-Tasman travel bubble depends on several factors, most notably Australia and New Zealand’s continued success in managing the spread of COVID-19 within their borders. In Australia, individual state and territory restrictions apply a further layer of complexity; we may see travel between certain states and New Zealand before we see a full opening of interstate borders.

There are other open questions around the bubble’s feasibility. Aviation capacity is a major one, though there are strong signs of support from the major carriers. There are also considerations around the restrictions each government apply to airport procedures, maximum patronage, etc. – and how will this affect the cost of travel?

There are upside uncertainties too. The trans-Tasman travel bubble allows both countries to test and fine tune new travel protocols, and if the bubble functions successfully, we could well see travel restrictions relaxed further, and sooner. The bubble could be expanded to include additional jurisdictions – like some Pacific Island nations that are effectively COVID-free but greatly affected by the collapse in international tourism.

The impact that the bubble will have on each country’s tourism industry is also uncertain. But any boost in visitation would be a welcome improvement under the current circumstances, and help the industry start down the path of recovery.

More about the author

Adele Labine-Romain

Adele Labine-Romain

Partner, Deloitte Access Economics

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.