Probably no sector suffered more directly from the COVID pandemic than tourism.
The whole industry stopped. No more international tourists, no interstate travel, only a trickle of inter-state tourists – the sector had two truly-terrible years.
Today recovery is well on its way and picking up speed. Let’s have a look at who is travelling to Australia and let’s think through upcoming challenges for the tourism sector.
In the 12 months leading up to March 2023, Australia recorded 5 million short-term visitor arrivals. During the lockdowns, the annual count was close to zero.
In the 12 months leading up to March 2019 (our pre-pandemic benchmark), Australia saw 9.3 million short-term visitors. By that measurement, we welcomed 54 per cent of the pre-pandemic visitors to Australia in the last 12 months.
Thankfully the pace of recovery is picking up. If we only compare the intake for February and March 2023 with that of February and March 2019, the rate of recovery is up to 69 per cent.
Who has returned to Australia already – and who hasn’t, at least not yet. returned yet?
The graphic below lists the 12 largest source countries of short-term visitors before the pandemic.
Chinese visitors drove the industry. If you work in tourism, you know this, you felt this. Before the pandemic the service offering was adjusted to satisfy Chinese preferences (congee and steamed buns at hotel breakfast buffets are just one obvious example).
The last 12 months saw only 155,000 visitors from China – that’s a mere 11 per cent of the 1.4 million Chinese who travelled to Australia before the pandemic. At least the trend is our friend. In the last two months, the recovery rate reached 20 per cent.
Indian visitation is already back to normal. An impressive recovery rate of 98 per cent means that in the last 12 months Australia hosted twice as many short-term visitors from India than from China (357,000 vs 155,000).
Unfortunately, this will probably not be reflected in the breakfast buffets of our Australian hotels as Indian visitors are more likely to stay with friends and family than are Chinese visitors.
But enough about my love of Indian food and the countless hotel breakfasts I consume each year.
Indian visitation in February and March 2023 already exceeded pre-pandemic levels at 106 per cent. India is not alone in this ranking, a total of 16 countries are already visiting Australia at higher levels than before the pandemic, with Columbia (243 per cent), Nepal (147 per cent), and Pakistan (145 per cent) leading the pack.
Kiwis (86 per cent), Brits (91 per cent), and Americans (77 per cent) are visiting Australia at almost their normal levels too.
Why do people travel to Australia?
The need for human connection, the need to see your loved ones is the strongest driver for Australian visitors. Visiting friends and relatives (VFR in tourism lingo) is the most important driver in tourism at the moment, with an impressive recovery rate of 79 per cent.
Conferences (53 per cent), business (51 per cent), as well as education (48 per cent) have seen decent rates of recovery. However, holidaymakers (37 per cent) and short-term employment (31 per cent) fall short. Cost of living pressures and high air fares hit these segments particularly hard.
Visitors enjoying Australia for longer periods have already returned at high rates – the longer you stay in a place, the less prohibitive expensive flights are. These visitors are backpackers, relatives of Australian residents, and some business travellers.
The shorter the intended stay in Australia, the slower the recovery. With flights being expensive and the cost of living going up everywhere, short-term visitors just stay away. Travellers staying six to 12 months reached a recovery rate of 82 per cent, while travellers staying a week or less sit at a poor 38 per cent.
I am not optimistic that these short-term visitors will return to pre-pandemic levels any time soon.
People will, if at all possible, not skip a holiday, but they will opt for a cheaper, more local option instead. This suggests that marketing to longer-stay visitors might be a smart move. I would also expect a heavy focus on the VFR segment.
The recovery of the tourism industry will continue, but certain segments will take much longer to recover.
Making the most of the trends
Were I a tourism operator, I would think about how I might appeal to people visiting their friends and relatives.
I’d try to package my snorkelling adventure, my winery tour, my guided walks in a way that it becomes the thing you do when mum and dad visit from India, New Zealand or the UK.
As a hotel I would advertise affordable long-stay packages for mum and dad spending a couple of weeks visiting their kids and grandkids. This might help hotels to have high occupancy rates outside of traditional holiday seasons.
In the long run, the tourism sector will be fine and will surpass pre-pandemic levels.
The Asian middle-class continues to grow (more people will be rich enough to travel to Australia), Australia becomes more multicultural (growing the VFR segment), cost of living pressures will ease eventually and the Brisbane Olympics will further strengthen the brand awareness of Australia.
Tourism businesses will be well advised to hang in there in the meantime and focus their efforts on the visitor segments with the fastest pace of recovery.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter, Facebook, and LinkedIn for daily data insights in short format.
