The tourism industry operates in a globally competitive market and is experiencing tight but improving conditions as the global economy recovers from the economic downturn. Operators that concentrate on factors under their direct control, such as new product investment, service and training, product positioning and pricing, will experience relatively solid performance.
Currently, Australians are making their preferences known by heading off overseas in droves. At the moment the equivalent of 30.2% of the population is taking an overseas trip each year, and this may rise to about 50% by 2015-16. To become more competitive, the Australian tourism industry needs to recognise this trend. A more aggressive approach could be taken in the international travel market to attract more visitors and improve industry revenue and profit growth.
In 2010-11, domestic tourism nights are expected to grow by 2.1% to 256 million after three years of decline. This projected upswing is due to forecasts of more solid economic growth and business travel. International tourist arrivals will rise by 5.3% to 5.95 million, as the global economy improves. International movements have particularly rebounded since late 2009, especially in Asia-Pacific. International departures will rise by 15.5% to 7.82 million, assisted by recent heavily discounted international airline fares and accommodation deals to short-haul destinations in Asia and an improving exchange rate. Increased airline competition for Qantas has also led to far lower prices across the Pacific route to the United States.
Domestic tourism accounts for 75% of total industry revenue. While trip growth will remain low, expenditure will rise gradually, particularly as business and corporate travel rebounds. However, operators will continue to discount tourism products to maintain cashflow. The current drag on domestic tourism is partly due to the significant rise in interest rates from October 2009 to March 2010.
It is projected that the Australian tourism industry will generate $84.2 billion in revenue during 2010-11, which represents real growth of 2.3% over 2009-10. However, Australia will continue to lose its share of the global international traveller market, as many new destinations emerge. While tourism arrivals and departures will display better growth as the global economy moves into a cyclical upturn, the domestic tourism market will remain in limbo, as it continues to lose its strategic focus and its connection with travellers, who now prefer to travel overseas instead.
In 2010-11, the industry is anticipated to comprise about 54,938 enterprises, a fall of 0.7% due to continuing industry consolidation. These enterprises are expected to operate 60,798 establishments or locations around Australia, a fall of 1.0% from 2009-10. The industry will employ 513,390 people, up by 1.2%, resulting from consolidation forces and the trend by employers to use more casual workers. This is likely to continue until the current economic recovery becomes more evident to operators. Wages are expected to reach about $21.57 billion.
Over the five years through 2015-16, the Tourism industry is expected to experience ongoing fierce competition in most areas, particularly in the domestic and international airline industries, as discounted tickets continue to dominate passenger air travel markets. The introduction of the supersized aircraft into Australia since August 2008 has assisted in driving this trend. However, the adoption of an open-skies airline policy between the United States and Australia in April 2008, and increasingly with other countries, provides an opportunity for these markets to expand significantly.
The introduction of expanded domestic services by discount airlines, such as AirAsia, provides increasing opportunities to expand tourism in Australia. Airfare competition for Qantas and United Airlines on the Pacific route to the United States has escalated significantly with the introduction of services by Virgin Airlines and US operator Delta since mid-2009. The industry will be negatively affected by the trend in the accommodation industry towards fragmentation, however, as travellers shift their preferences towards serviced apartments and other smaller styles of accommodation. The increasing ageing of the population may see some rising demand for newer forms of purpose-built, long-stay and comfortable accommodation in major tourist regions, which will benefit the industry.
It is expected that there will be far fewer traditional shopfront travel agents, particularly independent ones, as the online travel information, booking and payment revolution becomes the norm for many travellers by 2015-16. Growth in gaming-linked establishments will lessen as the proportion of disposable income allocated to all gaming and wagering falls. Australian casino operators will increasingly generate a higher proportion of revenue from overseas, particularly in the Asia-Pacific. Cafes, restaurants and coffee shops will continue to grow but will always remain low-margin operations.
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Robert Bryant is the general manager of business information firm IBISWorld.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
