Domestic Dilemma – Structural or Cyclical?

qantas takeoffOne of the big questions confronting Australian tourism businesses is whether the shift by residents to international travel over domestic holidays is structural or cyclical.

Many in the industry believe it is cyclical, that when the dollar falls so will demand for overseas holidays, which are now running at record levels. But others, including  Tourism Australia, are not so sure.

According to the most recent figures from the Australian Bureau of Statistics, the number of Australians travelling internationally in 2011 surged 9.6% to 7.8m.

The ABS believes tourism now contributes almost $35 billion – or $94.8 million a day – to the Australian economy.

However, while international travel into and out of Australia is strong, the domestic travel market is flat.

And that doesn’t look like changing any time soon.

The latest National Visitor Survey claims the number of Australian domestic visitor nights for the year to the end of September was stable at 262 million. Domestic spend grew by just one per cent.

To an outsider these look like unsatisfactory figures but Tourism Australia’s Managing Director Andrew McEvoy says they are good after a tough 12 months marred by weather events.

He says the domestic industry has regained some momentum and that a number of key markets have reported improved trading over the Christmas holiday period.

Inbound visitors have been a strong factor in that, and Mr McEvoy believes they are the future for Australian tourism, not Australians holidaying in Australia.

The fact is Tourism Australia does not believe the domestic market has much growth left in it, maybe one or two per cent a year.

It’s why Tourism Australia is only allocating around 10 per cent to 15 per cent of its time, money and resources to marketing Australia domestically.

The reality is that it sees the trend toward overseas travel by Australians as structural, not cyclical.

International growth ex-Australia may slow but it will not go backwards.

It is a long-term trend that transcends the high dollar, is now entrenched in the Australian travel psyche and cannot be stopped.

But there’s another school of thought, which is that the domestic tourism will bounce back if the dollar falls and the economy falters.

Wotif.com CEO Robbie Cooke is a proponent of this cyclical theory – and is supported by recent history.

Immediately after the Global Crisis hit, international travel slumped dramatically – Qantas even offered two-for-one ticket deals to get people flying again – and domestic holidays were hot again.

Over that period Wotif.com did outstanding business as Australians holidayed at home.

But as confidence returned, domestic travel growth stopped and in some cases went backwards with Australians heading overseas in record numbers once again.

This is despite rolling global uncertainty, something Australians have learned to live with.

Every second day there is reports of European turmoil and the potential of a second recession, yet Australians keep booking overseas holidays.

They’ve been hearing about financial Armageddon for the past four years but they still have jobs and the local economy keeps ticking over.

There’s been no bust, yet, so we may as well go on holidays, so thinking goes.

Indeed, according to research from the Canadian Tourism Commission: “One out of every two Australians has taken a long-haul trip in the past three years or is planning to do so in the next two years”.

The report adds: “The proportion of Australian travelers who feel that long-haul travel is very important has increased from 44 per cent in 2007 to a peak of 51 per cent in 2011.”

And even if there was a Australian economic slump, which may keep more people holidaying at home, the long-term trend would remain in place.

The trend to international travel is structural not cyclical. An overseas holiday is now part of Australian life.

Ends.

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3 thoughts on “Domestic Dilemma – Structural or Cyclical?”

  1. Martin I agree that “The trend to international travel is structural not cyclical.” I also believe that the Australian population, in general, thinks that our Australian product is overpriced and that it is simply not value for money anymore. I also believe that they are fed up with the very poor service that pervades our country. We must make our product value for money again and we must dramatically improve service. If we don’t, the future for our industry and Australia, is bleak.
    The Appraiser, Hotel Evaluations Sydney.

  2. Of course it is. Why pay more for unsmiling, grudging service when you can pay less and get a cheerful smile in many countries on our doorstep? I can get a grunt and a bad attitude from my kids for free. I don’t need to pay someone else’s bad-mannered offspring for the same treatment.

  3. Sad but true. If the powers to be spent even a fraction of what they spend on marketing campaigns, on improving service in this country, our industry/economy/country/people would all be much better off. Come on Tourism Australia, Tourism and Transport Forum (TTF), Australian Tourism and Export Council (ATEC), pick up the ball. Improve service and you improve value! Improve value and you get more customers, domestic and international. The question is, are you up to the challenge?
    The Appraiser, Hotel Evaluations Sydney.

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