One of the challenges that Australia has always faced is people’s perceptions of our nation and of our economy. They view the Australian economy as still being strongly aligned with resources and extractives. This is partly true. Lately, we’ve seen strong growth in the value of Australia’s goods and services exports. In the 2018-19 year, the value of our exports was over 16%, or $470 billion. A lot of this, of course, was driven by increases in values of resources and extracted exports. Meanwhile, we’ve seen strong growth on our services side, which translates as travel, tourism, and leisure.
Tourism in the Recent Past
In 2019, Australia saw approximately a growth of 4.7% over 2018. Eight and a half million people came to Australia in 2018; this means that roughly 970 people were arriving into Australia every hour. Expenditure, in terms of total spend, was worth nearly $44 billion. Ten million were projected and anticipated for 2019, though we haven’t got the final figures for that year.
Tourism in the Age of COVID-19
The Australian government is now facing an incredible challenge in this new era. Now that Australia’s borders are closed, we obviously won’t see those 10 million international inbound tourists. And since the government is likely to keep the lockdown in place until we have effective therapeutics or a vaccine, we won’t see them for a while.
The duration of the border closure is critical to what the future looks like for Australia and for our services exports. The impact on hotel chains, car rentals, and domestic aviation is going to be profound. In the short to medium term, businesses are looking at restructuring their debt, something that will happen across the board.
There will be operators looking for opportunities in Australia because they’ll see, for example, hotel chains, medium-sized market cap operators, coming under significant pressure. There will be opportunities to buy discounted or distressed assets if you take a medium- to long-term view that says that there will be a recovery, that it’s not going to be bad forever.
The New Tourist
The question that nobody can answer is what the time frame for all this is. If an effective vaccine emerged this year, the recovery would be more significant and things would return to normal sooner. But if the vaccine takes longer, we’ll see people’s spending habits materially change, not just because of economic circumstances but because of fundamental changes in consumer pattern and behavior.
This could include a reticence to travel or less desire to congregate at conferences. The longer we see quarantine and isolation, the more profound the impact on long-term consumer pattern and behavior. The sooner we see a vaccine, the sooner we’ll see us edge back to normal behavior. We might start to see hotels full again, though not likely with inbound international numbers, but perhaps with more domestic numbers.
Given New Zealand’s strength at also tackling the coronavirus, the media has speculated that we could open up our borders with New Zealand and possibly other countries, like Singapore, if we trust their ability to manage the impact of COVID-19 through an effective public policy and a strong border policy. This would be an extremely positive move.
Australia and New Zealand: The Trans-Tasman Travel Bubble
The best assumption is that Australia’s borders will remain closed for quite some time and we will see, at best, our domestic economy reopen over the coming months and the connections to New Zealand being forged again. The possibility of New Zealand and Australia travel look good. Our governments are discussing possibly opening our borders to each other, creating a travel corridor between the two nations.
This provides reassurance to populations in both countries that there will be a market, allowing people, goods, and services to move back and forth. New Zealand is Australia’s largest outbound market. It’s quietly reassuring to Kiwis that Australians might take their June or July winter ski trips to New Zealand. Tourism is critically important to destinations like Queenstown and Auckland, plus it would provide revenue for the airlines; Air New Zealand, Qantas, and Virgin service those routes.
For Australia, New Zealand is our second-largest inbound international market. The bubble provides some reassurance to Australian tourism operators that they can expect to see New Zealanders willing to travel here. Destinations like my hometown in the Gold Coast, and also Cairns and Sydney, are incredibly popular for New Zealand tourists when they want to enjoy warmer beach weather.
About Steven Ciobo
In his former role of Australia’s Minister for Trade, Tourism & Investment, Steven Ciobo pursued Australia’s most ambitious trade and investment agenda. He negotiated and secured economy boosting agreements by completing the Comprehensive and Progressive Trans Pacific Partnership as well as the Indonesia-Australia Comprehensive Economic Partnership Agreement. In his tenure as a senior Cabinet Minister, Steven also started and completed the Peru-Australia Free Trade Agreement, as well as the Hong Kong – Australia Free Trade Agreement. He secured the commencement of free trade agreement negotiations with the European Union, and led Australia to be the first country to establish a negotiating framework for a post-Brexit free trade agreement with the United Kingdom.
This article is adapted from the May 5, 2020, GLG teleconference “Australian Travel, Tourism and Leisure Industry Outlook.” If you would like access to this teleconference or would like to speak with Steven Ciobo or any of our more than 700,000 experts, contact us.
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