Beyond recovery: Australia's tourism sector enters a new phase
Australia's tourism sector has recovered, but resilience is now being tested as fuel costs, capacity cuts and Middle East disruption impact the cost and availability of travel.
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Australia's tourism sector has entered a new phase. The post-pandemic recovery is largely complete, with both domestic and international travel stabilising at levels approaching or exceeding pre-COVID benchmarks.
Domestic and international travel are now within reach of pre-COVID benchmarks, though at different speeds. Domestic overnight trips, at 113.1 million in the year to March 2026, remain a little below 2019 levels, even as day-trip volumes have moved well past pre-pandemic norms. International visitor numbers have essentially closed the gap, tracking close to their 2019 benchmark of around 8.5 million arrivals.
While tourism has normalised, the sector has done so against a backdrop of significant global uncertainty. Higher inflation, elevated airfares, volatile oil prices and ongoing geopolitical tensions – including conflict in the Middle East – have all increased the cost and complexity of travel. The impact of the conflict on the cost of international travel is reflected in jet fuel prices, which increased by 63% from February to March based on U.S. Energy Information Administration data. Prices have since eased, but not without disrupting global aviation throughout the June quarter.
Airservices Australia's June 2026 data shows Australian aviation held up for most of FY26, with passenger flights up 3% on FY25 and international flight growth at 7% for the year. However, growth softened in the June quarter, as airlines began adjusting capacity, routes and fleet deployment to manage fuel and supply chain pressures stemming from the conflict. Middle East carriers saw a sharp contraction in flights after the conflict started, while Asia-Pacific hubs such as Singapore, Hong Kong and Kuala Lumpur absorbed much of the long-haul demand. The ACCC's monitoring of Australia’s aviation sector points to the same pattern at an airport level: while Sydney and Melbourne recorded their strongest March quarter on record for international travel, Melbourne Airport's international passenger volumes fell 7.1% year-on-year in April due to greater exposure to Dubai, Doha and Abu Dhabi routes.
For travellers, the conflict has affected both the ability to fly and the price of flying. Qantas and Jetstar paused several lower-demand domestic and international routes in recent months, while redeploying aircraft from the US and domestic networks to meet strong demand for Europe via routes bypassing the Middle East. Despite these challenges, Deloitte’s ConsumerSignals show Australians’ appetite for travel remains relatively elevated but has softened since a February pre-conflict peak (see Chart 1).
Recent aviation disruption is a reminder that resilience, not just recovery, will define this next phase. Looking ahead, Australia's tourism agenda is increasingly shifting from rebuilding visitor numbers to improving the productivity and resilience of the visitor economy. Governments are placing greater emphasis on investing in tourism-enabling assets including national parks, visitor infrastructure, regional airports and nature-based tourism experiences to encourage regional dispersal, increase visitor yield and support long-term economic development. As the sector moves beyond recovery, these structural investments are likely to play a larger role in shaping Australia's tourism competitiveness than traditional destination marketing alone.
This newsletter was distributed on 24th July 2026. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Ethan McArthur (Manager, Deloitte Access Economics)
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