Posted: 14 Jul. 2020 5 min. read

Uncertain road ahead for tourism

Weekly economic briefing

It won’t surprise many that the COVID-19 pandemic is set to have a widespread, and long-lasting, impact on the tourism sector.

Just as the industry was taking early steps towards recovery, the last weeks have dealt a demoralising blow with the new wave of infections in Victoria, and now concern for a potential outbreak in New South Wales.

With the borders shut to international travellers, and this likely to be the case until at least the middle of next year, international tourism has essentially ceased. Data released by the ABS has shown year-on-year declines of more than 99%. And it is the same picture for outbound, with overseas travel by Australians also coming to a halt.

As a result, the tourism sector is redirecting efforts to encourage Australians to travel locally.

The resumption of domestic aviation capacity is key, as is the readiness and ability of tourism businesses to operate viably while observing social distancing measures.

But economic concerns, weak consumer confidence and fears around the safety of travel will dampen any revival for the industry.

Australian consumers were gradually feeling safer and more confident to travel again, but sentiment has started to dip, with growing anxiety around the situation in Victoria (see Chart 1 below). With considerable apprehension within the community, the path to recovery will be a long one.

Chart 1: Australian consumer sentiment relating to travel

Source: Deloitte State of the Consumer Tracker, fortnightly waves from 19 April to 27 June

 

The current resurgence in cases in Victoria, and the emergence of clusters in New South Wales, reinforce the importance of a scenario-based approach when planning for the future, with the specific path likely to continue to change in coming months, or even weeks. 

When will travel return? And what will that look like?

On the domestic front, data collected in March by Tourism Research Australia[1] indicates an encouraging propensity for visitors to postpone trips rather than cancel them. 45% of Australians interviewed in March indicated they were delaying their future trip (rather than cancelling it), with a small share (3%) changing the location of their trip within Australia.

Certainly, as restrictions are lifted and there is more certainty around travel, the hope is more Australians will redirect some of what might have been overseas travel spend on holidays at home.

In the best-case scenario, and should we see no further worsening of the health crisis, and regulatory and economic measures respond favourably, we could expect domestic travel volumes to return to 2019 levels in 2022. In a mid (harsh) or even severe scenario, however, we may not see domestic travel return to 2019 levels until 2023 or 2024 respectively.

With different countries around the world at different stages of managing the impacts of the virus and reopening to travel, the recovery of Australia’s inbound tourism sector is even less certain, and expected to be uneven across our key source markets.

Based on expectations that international travel will be possible in early or mid-2021, the recovery to 2019 levels won’t come until 2022 in the middle scenario, or even 2025 in the severe scenario.

[1] National Visitor Survey, Tourism Research Australia March 2020

 

Chart 2: Domestic trips (overnight and day) relative to 2019 level

Source: Deloitte Access Economics, estimate as of June 2020

 

Chart 3: International tourism arrivals to Australia relative to 2019 level

Source: Deloitte Access Economics, estimate as of June 2020

 

Again, it’s an uncertain future for Australian tourism operators, both domestically and when it comes to inbound international.

Successfully managing the latest outbreaks will be important in providing Australians with the confidence that they can safely travel across state and territory borders.

To read the COVID-19 recovery scenarios for the tourism sector, please click here.

More about the authors

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

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.