Rekindled interest? The tide turns on outbound holiday travel

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Rekindled interest? The tide turns on outbound holiday travel

  • Domestic holiday numbers boom as overseas leisure travel stalls in first six months of 2015
  • Growth of international visitors continues to remain strong into H2 2015 and beyond
  • Tasmania, Victoria post strong growth in visitor numbers during H1 2015 
  • Gold Coast, Tropical North Queensland hotels record strong increases

20 August 2015: The tourism dashboard has lit up with signs Australians are rekindling their love affair with local holiday destinations, according to Deloitte’s latest Tourism and Hotel Market Outlook which covers the first half of 2015.

Much of the shift is owed to the 25% improvement in relative prices as a result of the Australian dollar’s depreciation over the past year.

Lachlan Smirl, Deloitte Access Economics Partner, said: “After a decade growing at an average rate of 11% a year, growth in outbound holiday travel by Australians has ground to a halt. In fact, the number of Australians holidaying abroad fell marginally over the year to June.”

As overseas holiday travel slowed, the number of local holidays surged. Domestic overnight holiday trips grew 4.0% overall, and 5.3% in terms of interstate trips, in a clear indication Australia’s local holiday hot spots are back on travellers’ itinerary.

And after 10 consecutive years of widening, the difference between numbers of Australians holidaying overseas and visitors coming to our shores narrowed in the first half of June 2015.

From the 27% growth in domestic holiday travel to Tasmania, to the three percentage point climb in hotel occupancies on the Gold Coast and northern Queensland, activity levels are accelerating across many of Australia’s traditional leisure markets.

“We know there’s lag between currency movements and travel patterns and, as the dollar has fallen, travellers have adjusted travel across all feasible dimensions,” Smirl said.

“They have opted for cheaper overseas destinations, shorter trips, reduced per day spending and then, finally, chosen to holiday at home.

“The switch back to local destinations has been the slowest of these factors to emerge as a new holiday trend and it’s clear there remains considerable upside for the local leisure market.”

While the highlight for domestic travel has been in the strengthening of the holidaymaker segment, the mantle for fastest growth still rests with corporate travel. Despite sluggishness in the local economy, domestic travel for business and employment purposes grew at 14% during last financial year.

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International visitation

Inbound arrivals maintained their momentum through the first half of 2015, albeit at a marginally more moderate pace. Compared to the same period a year prior, arrivals grew 6.6% over the 12 months to June. Leisure travel remained among the major drivers, posting growth of 5.4% and contributing a third of the extra volume.

Other key highlights from H1 2015 included:

  • China edging closer to joining New Zealand in the illustrious million visitors per year club, outperforming its last five years to grow by 22%
  • Visitation from India grew 19% as cricket fans flocked to Australia for the ICC Cricket World Cup
  • Visitors from the US grew 9.0% and New Zealand 3.6% to out-pace historic trends
  • The spoils of growth were distributed relatively widely across the nation, with only the ACT and South Australia failing to capitalise on inbound tourism flows
  • In South Australia, international visitation fell around half of a percentage point despite the number of Indian visitors nearly doubling due in large part to the cricket
  • Tasmania topped the growth league table with international visitor numbers growing 28% boosted by a sharp increase among Chinese and Indonesian travellers
  • Victoria saw the nation’s second fast growth in international visitor arrivals, with impressive growth of 12%.

The tourism outlook

According to Smirl: “Looking forward, the fundamentals for Australian tourism remain aligned for growth.”

The outlook for international visitor growth remains strong, albeit moderating a touch as forecasts for global economic growth have been wound back. International visitor numbers are forecast to grow at above the 4.5% five-year trend pace, increasing at an annual rate of 5.2% per year over the period to December 2017. Emerging Asia will be responsible for 60% of this growth, and China alone responsible for 25%.

“With domestic travel conditions improving, our forecasts for domestic travel have been upwardly revised, with both visitor numbers and nights now forecast to grow 2.7% per year to December 2017 as the local leisure segment continues to gather pace,” Smirl said.

Hotels

“The first half of 2015 was a modest period for Australia’s hotel sector. Strong growth in tourism flowed through only partially to increasing demand for commercial accommodation. Room nights sold were up 2.5% over the year to June – well shy of the growth in overnight travel. Nevertheless, the national trend of demand outpacing supply continued and Australia’s national average occupancy pushed one percentage point higher to 68%,” Smirl said.

Fortunes were mixed across the major markets, with key Outlook highlights including:

  • Queensland’s beaches posted the biggest gains in occupancy, with the Gold Coast and Tropical North Queensland recording increases of 4.3% and 3.5%, respectively, on the same period last year
  • The mining hubs lagged as supply increases combined with softening demand dragged both occupancy and room rates lower in Brisbane, Perth and Darwin 
  • Darwin was hit particularly hard, with occupancy falling 10% over the year to June
  • National average daily rate (ADR) increased at a trend rate of 2.5% for the year to June – a touch below its five year average of 3.3%
  • Sydney, with the highest hotel occupancy, saw room rate growth of 3%, while rates in Melbourne grew 3.5% for the year to June 
  • The Gold Coast led the way among the major markets, with ADR growth of 4.4%.

Hotel market outlook

The forward pipeline of new hotel developments remains steady, with 67 properties on the cards for the next two and a half years.

Key Outlook forecast points, include:

  • 8,600 rooms are expected to be added to the nation’s inventories over the course of the next two and a half years, pushing supply higher at an average annual pace of 1.3%
  • Supply growth outlook is led by Perth, with expectations of an additional 2,300 rooms by end 2017
  • Over the next three years, supply growth is expected to be healthy, but more moderate, in Brisbane (growth of 5.0% per year) and Adelaide (3.6% per year)
  • In Sydney and Melbourne, where 90% average occupancy is in sight, supply is still forecast to trail demand despite a number of high profile projects coming onto the market over the next two years
  • The projected national performance outlook remains one of demand growth (2.5% per year) outstripping supply growth (1.3%) and occupancies forecast to climb 1.5 percentage points to just above 70% by December 2017.

Smirl explains: “The range of forecast performance across markets is widening as the sector’s growth drivers shift. With corporate travel following the nation’s economic transition back to the south east, so too is short stay accommodation demand putting further pressure on the already stretched Sydney and Melbourne markets.

“At the same time, a resurgent domestic leisure segment is buoying demand for holiday hot spots from Tasmania to Queensland’s beaches and emerging Asia continues to propel markets successful in luring these high growth segments. Indeed, it is the Gold Coast and Hobart that are projected to post the largest occupancy gains.

“The single biggest driver of the performance divide is supply. With big pipelines across several cities edging closer to reality, occupancies will recede across several major markets. Room rates are projected to grow at an average 3.1%, nationally, and fastest in Sydney, Melbourne and Hobart.”

About the report

Deloitte’s Tourism and Hotel Market Outlook utilises the forecasting, modelling and analytical expertise of Deloitte Access Economics, one of Australia’s leading economics advisory practices. The Outlook also draws on Deloitte’s real estate industry experience and insights, and a range of other sources, including hotel data generated by STR Global Limited.

NB: Full state and territory hotel performance breakdown and forecasts, including RevPAR, room rate and occupancy is available to paid subscribers.

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