Crystal Balling 2008 – Good Times Continue To Roll

By Martin Kelly

CAN it get any better for the Australian travel industry? The answer is yes.

Sure, 2007 was an excellent year for most operators – except for those reliant on the Japanese market – but it looks like 2008 could be even better, though not by a huge margin.

This of course assumes there will be no terrorist attacks, airborne disease, pestilence, US, Chinese or Indian economic calamity etc. Consider the evidence:

  • Australia’s biggest airline group Qantas has just increased profit forecast by 40% – some analysts believe this is conservative.
  • Australia’s two biggest travel agents predict bumper profits … Flight Centre says 25% up on last year; MFS, which also owns hotels, says profits 5% up on forecast and ditches private equity deal.
  • Australia’s biggest hotelier Accor says business is the best it’s been in 20 years (since right before the pilot’s strike!) and is forecasting rate increases of at least 10% for the next two years.
  • Hotel room numbers (ie supply) set to remain static in key markets while demand will probably rise, meaning the above estimate could be considered conservative.
  • Outbound departures – estimated at 7% though 2007 – will stay strong (up 5.5% over higher base) through 2008 according to the Tourism Forecasting Council with big increase in capacity during second half.
  • Domestic aviation capacity should rise 10% in 2008 thanks to extra Low Cost Carrier competition leading to lower airfares and lots more passengers.
  • Inflation should remain under control despite some politically motivated warnings from new Treasure Wayne Swan.
  • According to AMP, interest rates won’t blow out and oil prices will fall, while the $A and local economy should hold ground thanks to continued demand for commodities.
  • Ergo, it’s reasonable to assume high consumer confidence through 2008 which will flow through to more travelling Australians.

And of course the clincher, just about everyone I’m speaking with is either taking or considering an expensive holiday, including me.

Winners through 2008 should be just about everyone in the industry though there will be several notable exceptions:

• Poorly marketed wholesalers of a certain size
• Tourism businesses reliant on the dwindling drive market
• Inbound operators that have not yet accepted the New World Order
• B&B still using doilies

I also think a couple of the new LCCs may find it more difficult – and expensive – to gain traction in the Australian market than they initially thought.

But they have deep pockets and should be able to handle it.

Travel Trends: December 17, 2007

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