Feb 24 2020
According to IBISWorld analysis, the outlook for Australia’s Tourism industry is bleak for the remainder of 2019-20. The cumulative effects of the severe Australian bushfire season and concerns regarding the COVID-19 outbreak are projected to damage tourism-related businesses and industries.
“Many international tourists have cancelled or postponed Australian holidays following media coverage of the disastrous bushfire season. This has since been compounded by a ban on inbound tourism to Australia from China, in response to the risk of spreading COVID-19,” said Tom Youl, Senior Industry Analyst.
However, Australia’s Tourism industry was already showing signs of trouble before the fires and disease outbreak.
Existing red flags
Inbound tourism growth was weak in 2018-19, relative to the robust results of previous years. Inbound international tourist visitor numbers grew at an annualised 7.5% over the five years through June 2018. However, this growth rate slowed to 2.8% in 2018-19.
While global economic headwinds played a small part, a significant slowdown in the growth of Chinese arrivals was the primary driver of this sluggish result. Chinese visitor numbers to Australia grew by a mere 0.8% in 2018-19, when the previous lowest growth record was 9.5% in 2016-17. This follows staggering growth of 15.1% annualised over the five years through June 2018.
“A modest slowdown in the Chinese economy is believed to have contributed to this worrisome result. On a positive note for Australia’s tourism sector, expenditure growth did not slow to the same extent,” said Mr Youl.
Expenditure by Chinese tourists still grew by 5.9% in 2018-19, while overall expenditure rose by 5.0%. Furthermore, domestic tourists have picked up some of the slack left from international vacancies. Domestic trips increased by 12.3% over the 12 months through September 2019, which is well above average growth of 5.8% over the past decade.
A short but significant decline
Many tourism-related businesses have already felt the downturn caused by the recent bushfires and COVID-19 outbreak. Travel bans influencing China are of particular concern, given Australia’s reliance on Chinese travellers for tourism spending. During the peak of the SARS virus outbreak in 2003, inbound tourist numbers fell by 16.7% relative to the prior year. IBISWorld expects the downturn associated with COVID-19 to be more severe.
“Australian inbound visitors are forecast to report a peak decline of 30-40% compared with 12 months ago, due to the bushfires and COVID-19. The sluggish growth leading to the downturn would be causing further concerns for tourism-focused enterprises,” said Mr Youl.
Recovery has previously been rapid following shocks to global tourism. For example, inbound tourism to Australia took only three months to return to growth following the peak of the SARS outbreak. However, given the sluggish inbound travel trends recorded in 2018-19, the full recovery from current events is projected to be slower.
“Domestic tourism is expected to continue to its strong positive trend, partially moderating the sector’s overall decline. Expenditure in regional Australia is anticipated to return to robust growth from March onwards. In addition, the Domestic Airlines industry has been showing signs of growth,” said Mr Youl. This follows an unusual decline in passenger volumes over the year through August 2019.
IBISWorld reports used to develop this release:
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