Seven Positives for Australia’s Tourism sector

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Australian Economy, Uncategorized

While domestic tourism is a large component of Australia’s tourism industry, the inbound market is estimated to continue a leading growth of about 9.3 per cent in 2015–16 and an average 5.6 per cent over the ten years to 2024–25 supported by lower fuel prices, the depreciation of the Australian dollar and the improvement of economic conditions in overseas markets.

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Arrivals growth and market share (Source: Tourism Research Australia)

Boost from China and Honk Kong: Australia Bureau of Statistics showed a 22 per cent growth in short term visitors from China to 1,001,200 in just 12 months which means China is now Australia’s most valuable tourist market worth a massive $7.7 billion dollars a year, and the second largest source of visitors. The International Visitor Survey compiled by Tourism Research Australia showed the big spenders from China spend an average $7769 on a trip to Australia, staying usually around six weeks. However, the number of Chinese visiting Australia is small compared to the total number of Chinese tourists globally. 100 million Chinese tourists travelled globally in 2015 and that figure is set to increase to 234 million within this decade, according to Fung Business Intelligence Centre. By 2020, almost 1.5 million Chinese travelers are expected to visit Australia each year. Although China’s economy has slowed down, growth in China is expected to outpace the global average rate of growth. China has been estimated to account for 43 per cent of total growth in visitor numbers from 2014–15 to 2024–25 and 60 per cent of growth in expenditure. By 2017–18, China may become the largest source of both inbound arrivals and inbound expenditure, overtaking New Zealand.

In 2015, Hong Kong was Australia’s 10th largest inbound market for the tourists coming to Australia. It is expected that the tourism potential would be over $1 billion by 2020. Talks were held in June 2015 between the Australia and Hong Kong to discuss bilateral arrangements however an agreement could not be reached. The two governments are expected to meet this year to discuss the arrangements. Overall the present scenario of Australia is attracting tourism from Hong Kong.

Sporting events: Events scheduled in 2017–18 are also said to witness an increase in arrivals from the UK, Australia’s third-largest inbound market.

Support from AUD: As per Tourism Research Australia’s (TRA) Tourism Forecasts, the outlook for tourism industry over the next few years is positive. Meanwhile, as per RBA the trade in travel services, the tourism responds to the movements in the exchange rate. Strong growth in holiday travel driven largely by the lower value of the Australian dollar will also steer growth in domestic tourism in 2016–17 and 2017–18 as many Australians are expected to choose to holiday at home. TRA estimates that the average AUD will be US$0.72 in 2016–17 and 2017–18. The lower AUD value is estimated to drive the growth of international visitor expenditure in Australia in the coming years.

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Oil Prices (Source: Tourism Research Australia)

Lower Fuel Prices: The growth of aviation sector is important for the growth of the tourism. The number of tourists would also be attracted if there is deduction in the ticket price as the cost of travelling would decrease. Fuel is the major cost component of the aviation sector. The oil price has reduced to a low level globally which has boosted travel. The 2020 Tourism Industry Potential launched in November 2010, estimated that the aviation industry need to grow by 40%-50% for international and 23%-30% for domestic. On the other side, exports of travel services have increased significantly in recent years in Australia in line with the substantial increase in visitor arrivals, particularly from China and East Asia and the travel imports have declined. Since the Chinese and Australian governments expanded their Air Service Agreement in January 2015 to allow more flights between the two countries, there have been strong interest from Chinese carriers to expand or start new services in particular from secondary ports in China.

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Declining Interest Rates: The lowering interest rates are providing many households with additional income to spend on discretionary items including travel. RBA cut interest rates to 1.75% during May and experts are expecting a further rate cut in August, given the challenging economic conditions.

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Industry Sentiment Survey (Source: Tourism Research Australia)

Consumer Sentiments: The gains in asset prices have supported increase in household wealth and there is a rebalancing of economic activity away from the resources sector towards other sectors. However, the growth in household consumption picked up in the second half of the year to be around average. Moreover, the factors for the consumption growth include employment growth and low interest rates, as well as the ongoing effects of lower petrol prices and a further increase in household wealth. For the year ending May 2016, the total international arrivals reached 7.78 million which is an increase of 9.6% relative to the previous year, equating to an extra 682,000 visitors. The demand for cafes, casinos, tour companies, travel agents, transport companies, and parts of the retail and education sector would increase.

Accommodation outlook: The 2020 Tourism Industry Potential launched in November 2010, also specified the target to achieve $115 billion -$140 billion in overnight spend and estimates 40,000-70,000 new rooms to meet the potential. The tourism industry consists of almost 280,000 enterprises that support the visitor economy from accommodation. Visitor nights are expected to jump 4.5 per cent in 2015–16 and to average 3.1 per cent over the ten years to 2024–25. By 2019–2020, total overnight expenditure is said to reach $127 billion in nominal terms as per estimates from 2016 forecasts from Tourism Research Australia.

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