Tourism outlook strengthens as buoyant market conditions boost visitor numbers
- International and domestic tourism growing at fastest pace in 10 years
- No let-up in growth of visitor numbers from Asian markets
- Exchange rate and oil price falls further fuel growth prospects
26 February 2015: With both international and domestic tourism growing at their fastest pace in more than a decade, buoyant industry conditions have been further strengthened by sharp falls in the Australian dollar and oil prices and a generally solid macroeconomic outlook.
The latest Tourism and Hotel Market Outlook has seen Deloitte Access Economics upwardly revise its forecasts for international visitation, with trips to grow by 5.7% and visitor nights by 5.6% each year over the next three years.
According to Deloitte Access Economics Partner Lachlan Smirl: “The economic drivers most critical to Australian tourism have largely moved positively over recent months. While the global economic outlook has moderated a touch, it remains strong among Australia’s major tourism source markets.
“The depreciation of the Australian dollar, while not unexpected, has been sharper than anticipated. As the effects work through tourism markets over coming months, its full impact on travel flows will become apparent. Certainly, its positive effects are some way from fully materialising.
“The steep fall in oil prices has been a big plus for tourism, and especially Australian tourism, given the vast travel distances often involved. Some of this fall will be offset by the commercial strategies of airlines and the exchange rate itself, given jet fuel prices are tied to the US dollar. However, with fuel costs accounting for up to a third of air fare costs, it will undoubtedly provide a further stimulus to travel growth.”
Growth from Asian markets showed no signs of abating, with visitors continuing to be drawn to Australia in record numbers. A rapidly expanding middle class saw double-digit growth in visitor numbers from China continue, with arrivals growing 10.5% over the year to September 2014. However, Malaysia (24.1%), Hong Kong (14.8%), Singapore (14.4%) and India (14.6%) all outpaced China, with additional aviation capacity contributing to the growth.
Smirl continues: “While China may no longer have the mantle of fastest rate of growth, in volume terms it’s ahead by a good margin. In fact, over the last four years, growth in visitor numbers from China has averaged nearly 100,000 annually. To put this into perspective, this is nearly 50% higher than at the peak of the Japanese tourism boom (1992 to 1996).
“Encouragingly, the US and UK – two of Australia’s most important traditional tourism markets – maintained their momentum, as economic conditions in their local economies improved. The US posted its fastest growth since the global financial crisis (GFC), with visitor numbers increasing 11% for the year.
“Destination Australia performed strongly relative to its developed economy peers, with growth outpacing the likes of the US, UK and France. However, across South East Asia, Australia’s growth was surpassed by Thailand, Hong Kong and Singapore. It remains a competitive landscape locally.”
Growth in domestic overnight travel grew at its fastest pace in two decades over 2014, spurred by corporate trips and visiting friends and relatives. Domestic leisure travel receded modestly.
Strong growth in the volume of travellers visiting friends and relatives in the Northern Territory resulted in it outperforming all other markets and recording a 14% increase in the number of domestic trips in 2014. On the international front, it was Victoria (10.4%), Tasmania (8%) and South Australia (7.5%) posting the strongest growth in overseas visitors, with leisure travel the driving force.
Smirl explains: “The importance of air access as a driver of international arrivals growth, particularly via low cost carriers, continued to be apparent with a number of markets growing on the back of increased route capacity. So too was the impact of major events, with the G20 Summit just one among a host of big ticket drawcards boosting visitor numbers in 2014.”
Domestic and international tourism outlook
Looking ahead, the economic drivers of tourism are almost universally positive. Smirl says: “Whereas the recent past has seen exchange rates and oil prices elevated and economic growth in traditional source markets subdued, the scorecard on these fronts is now decidedly more positive. Indeed, the outlook for Australian tourism has not been more encouraging since the GFC.
“Emerging Asia, and its expanding middle class, remains the driving force, with the exchange rate and oil price likely to further spur growth, particularly among leisure segments. With economic conditions continuing to improve in the US and holding firm in the UK, the growth prospects from legacy markets have further improved. Asia is the key, but markets such as the US and the UK remain major sources of visitors to Australia. A strengthening outlook for these markets only further boosts the overall growth forecast.
“Domestically, corporate travel patterns will continue to be impacted by the economy’s transition away from resource sector dependency – a broad geographic shift to the south east. While falling oil prices buoy outbound travel, exchange rate impacts are expected to prevail. Outbound travel is projected to continue to slow to a range of 3-3.5% over the next three years. The prospect of Australians increasingly holidaying at home rather than abroad is contributing to a strengthening domestic travel outlook, with both trips and visitor nights projected to grow at 2.4% per year over the next three years.”
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.
A separate Tourism & Hotel Outlook media release covers the hotel sector.
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