Travel and tourism sector’s road to recovery

Deloitte Access Economics’ latest Tourism and Hotel Market Outlook suggests domestic tourism will surpass pre-pandemic levels in 2023, while recovery of international tourism may still require the next two to three years to fully get back on its feet.

The lifting of Australia’s international travel ban in February 2022 was a critical milestone in the recovery of the country’s tourism and hotel sectors, as the nation reopened to international visitors after being closed for almost two years.

But the devastating cumulative losses experienced by the industry as a result of the pandemic have been significant. From March 2020 to the end of 2021, Australia lost $147 billion in domestic and international tourism expenditure.

While the domestic travel segment has always accounted for the majority of the demand – and spending – it took on a much-heightened focus for tourism operators and destinations as they looked to stay afloat over 2020 and 2021. Despite the best efforts of Australians to travel when they could, nationwide and more localised lockdowns still led to significantly lower levels of domestic visitor spending across 2020 and 2021 (Chart 1).

Chart 1: Gap in domestic travel expenditure, relative to same quarter in 2019

Source: Tourism Research Australia
Note: Includes both overnight trips and daytrips.

Despite the bounce in demand witnessed whenever travel restrictions were lifted, across Australia in 2021 overnight trips, nights and spend were still down between 29 per cent and 35 per cent compared to 2019 levels.

Another important consideration around travel intentions is the rapid increase in inflation and cost of living pressures. The Deloitte Global State of the Consumer Tracker shows the intention to spend on travel remains relatively high, despite inflation concerns (Chart 2) – fuelled by pent-up demand for travel given two years of restrictions and higher household savings among some groups.

Chart 2: Plan to spend on leisure travel and concerns around inflation

Source: Deloitte Global State of the Consumer Tracker, April 2022.

Looking ahead, the return of travel will be uneven, with some market segments and regions expected to recover more quickly than others.

The holiday and visiting friends and family segments are expected to lead the recovery, in particular from short haul source markets. The outlook for business travel is weaker however, and long haul business travel will most likely to take longer to recover compared to short haul.

The remainder of 2022 and 2023 are expected to see a continuing recovery for the domestic travel market to pre-pandemic levels. For the inbound market, the rebuild is set to take longer.

For more information on Australia’s tourism outlook, please download the summary report here.