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However, report author Nathan Cloutman says: “The latest Covid-19 outbreaks at the start of 2021–22 have put further pressure on the Australian tourism industry.
“In particular, Victorian and New South Wales-based tourism businesses have faced further financial hardship due to the extended lockdowns in their respective states, which have essentially halted demand from domestic travellers.
“As a result of renewed lockdowns in Australia, the projected recovery of the tourism industry is expected to be slower than initially forecast earlier in 2021.”
However, there will be a rise in fortunes as we move into 2022, he suggests.
“Despite the ongoing negative effects of the Covid-19 pandemic, tourism demand is projected to rise later on in 2021–22. The Australian population is becoming increasingly vaccinated for Covid-19, which is reducing the potential for further outbreaks and lockdowns.
“Further, it is likely that Australia will open up its borders to countries that have been successful in their vaccination programs later in early to mid-2022, providing a boost to tourism operators.
“Nonetheless, ongoing fears relating to Covid-19, the likely cautious approach to easing Australia’s international border controls and downturns across the global economy are all anticipated to limit the industry’s recovery in the short term.”
The good news from the analysis firm is the sector is projected to recover over the next five years – although this bounce-back may be less of a bounce and more of a gradual rise.
“A recovery in tourism activity is likely to encourage increased investment across the industry over the coming decades,” wrote Nathan.
“Overall, industry revenue is projected to rise at an annualised 15.9 per cent over the five years through 2025–26, to $149.1 billion.”
To get an overview of the tourism sector, and the hotel business within it, Inside Franchise Business has drawn on IBISWorld reports Tourism in Australia, March 2021, and Hotel and Resorts, June 2021.
The state of the tourism industry
Overall the sector is valued at $71.2 billion, a drop of 11.5 per cent over five years.
What’s included in the industry analysis?
IBISWorld calculates revenue based on expenditure, so it includes direct and indirect tourism firms; retailing, transport, purchases of food and beverages from restaurants, and accommodation are the largest sources of revenue for industry operators.
Costs of the sector
Accommodation, hospitality and travel agency businesses have significant wage costs although a large proportion of casual and seasonal staff are on low average wages. As a share of industry revenue over the past five years, some firms have boosted staffing levels to provide a higher level of service while others have dropped employee numbers as they automate processes.
Rent costs have increased as a share of industry revenue over the past five years due to rising demand for property in key tourism areas.
Where do we go?
New South Wales, Queensland and Victoria are most popular with domestic tourists. However, the Northern Territory, Western Australia and Tasmania have attracted interstate visitors with successful advertising campaigns.
How is technology affecting the sector?
The trend for online booking services has forced businesses to embrace internet bookings, and technology is increasingly important. Expect to see companies build up their social media platforms.
In regional areas easy contactless payment options for domestic and inbound tourists will become more common.
The good news ahead
On a financial front, the five-year forecast of a relatively weak Australian dollar is likely to encourage international visitors.
As a poor exchange rate also discourages outbound travel, more Aussies are likely to skip the overseas trips and this should equate to a rise in domestic tourist visitor nights.
More businesses are likely to open up, and they will need more staff. Wage costs are forecast to decline as a share of revenue over the next five years, as industry operators improve efficiency.
The serviced apartments sector is projected to remain a strong challenger to traditional hotels over the next five years – there’s more investment in and continued construction of new serviced apartments.
Budget accommodation is likely to be impacted by the continual popularity of Airbnb, and hotels are likely to seek alternatives to low prices to attract guests.
Increasing tourism activity in Australia is forecast to lift industry profitability over the next five years, predicts IBISWorld.
Overall, industry revenue is projected to rise at an annualised 15.9 per cent over the five years through 2025–26, to $149.1 billion.
The government has a campaign to boost the tourist industry: Tourism 2030 will look at improving tourism infrastructure, streamlining regulations and developing marketing campaigns.
This article was originally published in an issue of Inside Franchise Business magazine