Asia remains the key for Australian tourismDOWNLOAD
27 February 2012: Significant inbound growth from the emerging economies of India and, in particular, China, and domestic demand stabilising after a prolonged period of decline, have emerged as positives for Australian tourism, according to Deloitte Access Economics’ Tourism and Hotel Market Outlook for Q1 2012.
The Outlook also confirms that a strong Australian dollar, economic uncertainty in traditional inbound markets and local skill shortages will still remain challenges for Australia’s tourism and hospitality industry.
Deloitte Access Economics’ Lachlan Smirl, said the global economic outlook had grown increasingly fragile amid concerns around the Eurozone, with the downside risks now more acute.
“The outlook for the Australian economy remains relatively robust, provided of course that the global economy does not deteriorate significantly. However, as far as the multi-speed economy is concerned, Australian tourism continues to be in a slower lane,” he said.
“While the outlook is good for the business side of the domestic tourism market on the back of a relatively solid domestic economy, that strength is also driving strong outbound leisure travel.”
Mr Smirl said the multi-speed analogy extended to the hotel sector: “The story remains one of stronger business demand, and strong occupancy and room rates for city hotel owners, but challenges for their counterparts in regional and rural areas.”
Key points from the Outlook for the tourism sector include:
“The strength of the Australian dollar has no doubt presented challenges for the tourism sector,” Mr Smirl said.
“However, our research has shown that the exchange rate is only one of a myriad of factors influencing international visitation to Australia.
“Growth in some foreign incomes is the more significant long term driver. In that context, while we are clearly experiencing the negatives of a high exchange rate, we are also seeing strong signs that the sizeable upside associated with the rapid economic growth in China and India is materialising.”
Mr Smirl said skill and labour force shortages were among the most significant challenges facing the Australian economy in the near term, and this was particularly so for the tourism industry.
“The tourism services sector is labour-intensive and, as a result, quality, profitability and success are highly sensitive to worker availability and wages,” he said
Labour force forecasts developed by Deloitte Access Economics indicate that the shortage in tourism workers will increase to 56,000 by 2015, with around half of this being in skilled positions, with demand highest for kitchen hands, waiters, cafe and restaurant managers, and chefs.
“So the industry will continue to face a number of significant challenges, chief among these being how to maintain and grow the market in a high exchange rate environment, how to capitalise on the travel desires of the growing middle classes in China and India and how to address a skill shortage driven, among other things, by the multi-speed economy,” Mr Smirl said.
Key points from the Outlook for the hotel sector (which covers markets in Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, Darwin, Gold Coast and Tropical North Queensland) include:
“Particularly in capital city CBDs, hotels have continued to perform strongly,” Mr Smirl said. “Business travel demand is up, and the gains on that front have been sufficient to encourage operators to edge up room rates.
“The expected improvement in international visitor numbers, together with continued growth in the domestic business sector, should see occupancy rates reach their highest level for several decades.
“However the overall strength in occupancy rates masks a divergence between demand for CBD rooms, where the market is expected to become increasingly tight, and softer conditions in urban and regional Australia, reflecting, among other things, the changing composition of the tourism market.
“Sydney and Perth, in particular, are bordering on ‘capacity constrained’ territory where several nights a week the ‘full house’ signs are up. While this is good news for the hotel sector, it is less so for other parts of the tourism industry.
“With the pipeline of hotel investment looking modest, the challenge of ensuring a sustainable level of capacity while not unduly undermining returns to existing investors will be increasingly important for the industry over coming years.”