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Fundamental to any memorable travel experience are human interactions. This means that the tourism sector is at the front line and among the most vulnerable sectors in the face of the COVID-19 pandemic.
Now is still the time for Australians to be united, stay home, stop the spread and save lives. But now is also the time to look into the future. There are reasons to be optimistic about opportunities for the tourism sector in the future – even in the nearer term.
A closer look at tourism expenditure
Over the last decade, international and domestic tourism expenditure in Australia increased rapidly from $77 billion in 2009 to $138 billion in 2019, an impressive 6.1% increase annually over the last 10 years (see Figure 1).
International visitors have been a key segment for Australia, and we welcomed almost 9.5 million visitors in 2019 who spent $31 billion while in Australia. The response to the pandemic, however, is expected to challenge this segment for an extended time with devastating impact to significant parts of the tourism industry. For the time being, we must turn our attention to the domestic segments.
In recent years, Australian domestic tourism has grown strongly and in 2019 Australians spent almost $107 billion on domestic travel, including $39 billion and $68 billion on interstate and intrastate trips, respectively.
Figure 1. Tourism expenditure in Australia
In addition to their trips across the country, Australians have a significant footprint when it comes to overseas travel. Australians made just under 10 million trips outside of Australia in 2019, spending a total of $65 billion. Keep in mind, however, that some of this expenditure (estimated at 12% or $8 billion) stayed in the Australian economy, for example in the form of airfares on Australian carriers or commissions to travel agents who book overseas trips. About $54 billion of this overseas spend is connected to leisure trips, including holidays or visits to friends and family.
We have mapped out all the spending that usually occurs in Australia alongside the spending of Australians travelling overseas to provide a view of the total tourism expenditure bucket (see Figure 2). Categorising tourism expenditure in this way sheds light on how outbreak control measures, as necessary as they are to save lives, impact various categories of tourism demand – and importantly which categories could help lead the return of activity to the sector.
Figure 2. Expenditure categories of visitors and Australians in Australia, 2019
International visitors and interstate visitors (i.e. Australians who travel outside of their home state) together spent $70 billion in Australia. The nature of these market segments means that they have essentially been wiped out by measures such as state border closures and ban of non-residents arrivals (with the exception of essential workers).
Perhaps less often talked about (until now) but accounting for the largest part of tourism demand in Australia are visitors who travel within their home state (note: to be considered a ‘visitor’ you need to have travelled more than 40km from home). Intrastate visitors spent $68 billion in 2019. The most stringent outbreak control measures, such as physical distancing policy or the ‘stay close to home’ edict have eliminated even this important category of travel – which for many regions around the country are the lifeblood of their tourism industry.
Redirecting tourism dollars
As far-off as an end to this pandemic may seem now, there will be a time when restrictions will start to be relaxed, and the most stringent restrictions lifted. This is when the tourism recovery journey begins.
In the early stage of the recovery, intrastate travellers will lead the way. When you consider Australians’ total travel spending, on trips here in Australia and overseas, spending on intrastate trips accounts for almost 40% of travel spending. The share is even greater among residents of Queensland, Tasmania, the Northern Territory and Western Australia where intrastate spending accounts for more than 45% of residents’ travel expenditure bucket.
However, there is also a potential for Australians to increase their spending on intrastate trips in the early stage of the recovery as they redirect (at least some) of the spending they would usually be making on the interstate and overseas trips (see Figure 3).
State border closures and international travel restrictions not only stop people from coming in but also stop people travelling out. While acknowledging that many people will have seen their income reduced (at least temporarily) which may limit their capacity for spending on travel, this does represent an opportunity for states and regions to ‘redirect’ and ‘retain’ some of the expenditure that Australians would have spent overseas or in other states.
This ‘retained spending’ opportunity could be worth up to $37 billion to New South Wales, $27 billion to Victoria and $17 billion to Queensland, based on previous spending patterns. The retained spending has the potential to offset in part the reduced revenue that would have come from welcoming interstate or international visitors and will certainly be a key feature of tourism recovery strategies.
Figure 3. Retained spending opportunity vs. existing spend by state
While we know that the economic landscape has changed, and expect that there will be a more cautious approach to spending (as people look to rebuild or increase savings) impacting Australians’ propensity for travel, and we also anticipate shifts in visitor preferences and behaviours as travel resumes, there are reasons for optimism in the tourism sector. People will crave connection and want to revisit their favourite spots and discover new places and experiences – an intrastate-led recovery can deliver hope for both visitors and the sector.
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.