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Tourism Market Outlook: demand for travel resilient despite economic headwinds

Domestic travel in full swing, international travel building but patience needed

8 DECEMBER 2022: Domestic tourism in Australia has bounced back faster than initially expected, but international holiday makers are proving slower to return to Australian shores slowed by constraints in aviation capacity and impeded by the continuing travel restrictions from China.

Releasing the latest edition of Deloitte Access Economics’ Tourism Market Outlook, Deloitte Access Economics partner and Deloitte national tourism leader, Adele Labine-Romain, said: “After more than two years, pent up demand means the domestic travel segment is strong, our borders are again open to international visitors, students, and migrants, and our tourism recovery is well and truly underway.

“The pace of recovery does differ considerably across the country, however. Our big cities are lagging regional destinations – not surprising given international arrivals which make up a significant portion of demand in our citieshave yet to return to anywhere near pre-pandemic levels.

“International arrivals are primarily focused in the visiting family and friends segment, which has recovered to 53% of 2019 levels over the first nine months of 2022, compared to holiday arrivals lagging at 16%. In an encouraging sign, the September quarter saw holiday arrivals return to almost 30% of 2019 levels, suggesting recovery is really starting to gather pace.

“From an outbound perspective, we remain among the most avid travellers globally, and have been quick to dust our off our passports and head overseas. Similar to our inbound markets, visiting family and friends has been the primary driver of overseas trips, with a slower return for holiday makers.

“The pace of outbound recovery will depend in part on how quickly international aviation capacity can rebuild. As a gauge, as at September, international aviation capacity into Australia was at 55% of 2019 levels.

“High and persistent inflation, rising interest rates, and a volatile geopolitical environment mean our tourism sector does now face a different set of challenges. Our economy is better placed than most on this front, but the accelerating headwinds could impact travel spending.”

And the outlook?

“The strong momentum around domestic leisure travel, supported by a weaker Australian dollar incentivising many Australians to holiday at home, is expected to continue in the short term, but rising cost of living concerns could put the brakes on the recovery,” Labine-Romain said.

“Travel intentions from key international source markets are being encouraged by a weaker Australian dollar, but they are also moderating, possibly due to increased cautionary consumer spending behaviour as rising inflation places upward pressure on prices.