Tourism industry tipped to recover first

It has been a horror year for the Australian tourism industry with pilot strikes, airline collapses, health scares, economic crises and rising global terrorism.

However, it is tipped to be one of the first sectors to show signs of recovery – with IBISWorld forecasting the sector will be worth $79.18 billion in 2010, an increase of 1.1% from the previous year.

IBIS general manager Robert Bryant says the Australian tourism industry has actually proved quite resilient in the face of the global financial crisis.

“Revenue only declined by about 1.2% in 2008-09 – largely thanks to the buoyant Australian economy, which has proved more resistant than many of its global counterparts, as well as discounting campaigns which have helped maintain visitor numbers,” Bryant says.

While the Australian tourism industry continues to be adversely affected by the drop in domestic overnight travel, which has been in a low growth trend for the past 15 years, it has been supported by the durable Australian economy and attractive holiday deals.

“Promotions for school and public holiday periods, as well as for key sporting events such as the State of Origin and football grand finals, has seen the domestic tourism market largely maintain its market position,” says Byrant.

The international sector, which accounts for around 18% of total industry revenue, has come through relatively unscathed. In 2008-09 tourist arrivals fell by around 4% to 5.47 million but the 7.3% increase in average length of stay, and 4.2% increase in total expenditure has shielded the industry.

One area that has been hit hard is discretionary and business spending. In 2008-09, there was a small 1% increase in international passenger numbers, compared to an average 7.6% increase in more prosperous years.

“Increasing competition for a smaller passenger pool has brought down the price of international airfares in and out of Australia by an average of 10.4% since mid 2008,” Bryant says. “The launch of new airlines, and new routes, such as V Australia with its LA to Sydney route, has resulted in increased competition, seeing fares fall across the sector, In terms of the LA to Sydney route, the entrance of V Australia has seen fares fall from as high as $2,000 to as low as $600.”

He says fares on routes from Europe have also fallen sharply. “STA Travel recently held a promotion offering a limited number of one-way fares from the UK to Australia for just 10 pounds,” he says.

Many of the cheapest travel deals are being offered online, with IBISWorld estimating the total value of online travel bookings – including domestic and international airfares, as well as accommodation, car hire and other related travel expenditure – to be around $24 billion.

“Bargain prices are expected to be promoted well into 2010, with the cheapest deals – particularly in terms of airfares – being offered online,” he says.

The use of online travel booking systems is expected to continue to increase, placing pressure on travel agents.”

One area that has bolstered the tourism sector is the number of under-30s backpackers attracted by low airfares.

In the 12 months to March 2009, 558,000 backpackers visited Australia, the same number as in the 12 months to March 2008.

“Not only have backpacker numbers remained strong, but during this period spending by international backpackers visiting Australia actually increased by 6.5% to $3.3 billion,” Bryant says. “This group, being far less likely to own their own home or hold an investment portfolio, has escaped much of the drop in wealth that has discouraged other travellers.”

But he also warns that further growth for the industry has to rely on more than discounted prices.