04 November 2008
Key Points:
Clearly a function of the current economic climate, the survey has returned an overall score of just 69.By comparison, the lowest score recorded by the UNWTO over the five years of its global tourism survey was 112.
The poor result is in spite of the fall in the Australian dollar. Under normal conditions, that would be seen as a boon for international tourism, making it much more affordable for inbound visitors to come here. Some commentators have raised the prospect of increased international visitation, but we believe many potential customers in some of our key source markets are more focused on paying the mortgage than paying for an overseas holiday. Also, the dollar’s value makes it more expensive for Australians to go overseas, a factor which could see more Australians choosing to holiday at home.
Yet regardless of those factors, tourism operators are very concerned about the economic conditions which are likely to dominate the collective consciousness well into next year. While there is greater confidence in domestic than international markets, the difference is marginal, with ratings of 77 and 68 for domestic and international tourism respectively - a decidedly bleak outlook for both. Of greater concern, businesses have already begun addressing expected problems through recruitment freezes and reducing major spending.
The Sentiment Survey captured six specific business indicators which reveal similar concerns about the impact of the slowing economy. Less than 20 percent of businesses rated themselves as "better" than usual for this time of year on the measures of profitability, sales and forward bookings. Of these three measures, forward bookings is the most negative, emphasising that operators expect tourism activity to get worse before it gets better. One in eleven said their forward bookings are "much worse" than expected and a further 46 percent "worse", undoubtedly a consequence of people adopting a ‘wait and see’ attitude to discretionary spending.
Although the above measures are bad, in fact the poorest ratings came in "capacity to make major investments" (64 percent said "worse" or "much worse"), "capacity to employ more staff" (58 percent said "worse" or "much worse") and "capacity to refurbish existing product" (54 percent said "worse" or "much worse"). While the ratings for making major investments are likely to be a consequence of the cost of credit, the reluctance to employ new staff or refurbish product are clear signs of a general loss of confidence.
Warnings of an extended recession have clear implications for the tourism industry, and its ability to invest in new product. The concern for many is that not only will international visitor numbers fall, but that Australians, too, adopt a "rainy day" position, further exacerbating the global financial crisis. The Federal Government has announced significant measures to try to promote economic activity by way of its $10 billion dollar stimulus package, which should help to lessen the potential pain of the next 12 to 18 months, but it’ll be some time before we know whether that has been a success.
Consumer behaviour will be a major factor in just how seriously Australia is affected by the current downturn. For years we’ve been encouraged to “Buy Australian”. We now must ensure that tourism is treated the same way and convince people that not only will an Australian holiday contribute to domestic economic activity – including in regional areas – it can also help alleviate the impact of the global financial crisis.
More details on the TTF Quaterly Sentiment Survey are available at our website, www.ttf.org.au
For further information, please contact Christopher Brown.
