Australia / Analyst Insights
In Limbo: The Australian Tourism Sector Remains in Lockdown

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by Yin Yeoh
Jul 23 2020

The Tourism industry is an important part of the Australian economy. Tourism Australia, the tourism promotional vehicle of the Australian Government, actively promotes Australia as a tourist destination. Industry revenue is calculated based on total expenditure on tourism products and services by both local and international tourists.

Over the four years through 2019-20, major Australian and international airlines expanded their flight capacity to and from Australia, boosting international travel to Australia. Additionally, the depreciation of the Australian dollar over the period made inbound travel more attractive to overseas visitors, further supporting the industry. The Hotels and Resorts industry and the Serviced Apartments industry also benefited from increased tourism activity over the period.

However, tourism activity in Australia has plummeted in the current year. Issues arising from the 2019-20 bushfire season and the subsequent COVID-19 pandemic include:

  • Government implemented restrictions on inbound travel from March 2020.
  • Travel restrictions are significantly limiting inbound and domestic tourism, reducing demand for hotel and resorts and serviced apartments.
  • Smaller hotels and serviced apartment providers forced to close operations due to plummeting demand.

The COVID-19 crisis has reduced tourism activities, significantly affecting demand for hotels, resorts and serviced apartments. The Federal Government has implemented strict travel restrictions, with all foreign travellers banned from entering Australia since March 2020. The travel restrictions have limited both inbound and outbound tourism, constraining demand for accommodation providers. Restrictions of movements in some states have also affected domestic tourism.

Revenue for the Tourism industry is expected to decline by 2.5% in 2020-21, to $112.3 billion. A fall in tourism activity since March 2020, has also meant a reduction in occupancy rates, impacting accommodation providers. According to the Bureau of Infrastructure, Transport and Regional Economics (BITRE), international scheduled passenger traffic in May 2020 was 52,989, a 98.3% decline from May 2019. Similar low levels of international travel are expected until the international travel ban is lifted. Consequently, industry revenue for the Hotels and Resorts industry is anticipated to fall by 19.3% in 2020-21, to $7.7 billion. The Serviced Apartments industry will also be strongly affected by COVID-19, with industry revenue projected to fall by 9.1% in 2020-21.

However, strong opportunities exist for the Serviced Apartments and Hotels and Resorts industries to rebound and expand over the next five years. Both industries are likely to see a notable recovery after inbound travel restrictions ease. International visitor arrivals are projected to rise over the period, supporting industry revenue growth. China is anticipated to be the largest market for inbound arrivals. However, trade tensions between Australia and China may affect tourism demand. Should the trade tensions further escalate, inbound tourists from China could fall.

Over the next five years, the Australian dollar is anticipated to remain weak, encouraging international visitors to travel to Australia. The weak dollar is also projected to support growth in domestic tourist visitor nights as it would be more expensive for Australians to travel overseas. The Australian Government's Tourism 2020 campaign is set to be replaced by its new Tourism 2030 project, which is forecast to commence in January 2021. Similar to the 2020 campaign, Tourism 2030 aims to help Australian tourism businesses through projected increases in total visitor nights and tourist spending, by developing effective marketing campaigns and enhancing the tourism experience in Australia. The Tourism 2030 project is anticipated to boost revenue for the Hotels and Resorts industry and the Serviced Apartments industry as operators are likely to benefit from having a greater pool of potential customers.

 

IBISWorld Reports mentioned in this release:

Hotels and Resorts industry in Australia 
Serviced Apartments industry in Australia 
Tourism industry in Australia