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Executive summary

 

Tourism consumption in Australia is forecast to increase at an average annual rate of 1.8%for each

year over the 2007-2017 period to reach $107 billion in 2017 in real terms,underpinned mainly by

growth in inbound tourism.Total tourism nights (inbound and domestic)are forecast to increase at

an average annual rate of 1.7%to reach 541 million in 2017.

I

NBOUND FORECASTS

Inbound arrivals are forecast to remain .at at 5.6 million in 2008 before rising 3.3%to reach 5.8

million in 2009.The Total Inbound Economic Value (TIEV)of inbound tourism (equivalent to tourism

export earnings)is forecast to increase by 2.5%to $24.3 billion in 2008 and by a further 2.9%to $25.1

billion in 2009.

Aviation capacity serving Australia is expected to increase in 2008 and 2009 despite the upward

pressure on aviation costs from increases in oil prices and the associated well publicised reductions

in planned aviation capacity between Japan and Australia.Total aviation seat capacity is expected to

increase by around 3%in 2008 and around 8%in 2009.However,in 2008 this growth is lower than

the combined forecast growth of inbound and outbound tourism passengers.As a result,the average

aviation load factor is expected to increase from 78%in 2007 to 79%in 2008.This is likely to place

upward pressure on airfares and make it increasingly dif .cult to secure seats during peak periods.

These high load factors also mean that special events like World Youth Day may have a reduced

impact on growth in total arrivals (but substantial bene .t to the event location).In 2009,higher

growth in capacity compared to demand is expected to reduce average load factors to 76%.

The number of arrivals to Australia is forecast to increase at an average annual rate of 4.4%a year

between 2007 and 2017,to reach 8.7 million,compared with annual average growth rate of 2.7%

between 1997 and 2007.TIEV is forecast to grow at an annual average rate of 4.1%to reach $35.4

billion in real terms in 2017.Substantial investment in the accommodation and other tourism related

sectors will be required to meet this demand from the expanding inbound sector.

The 4.4%average annual growth in international visitor arrivals over the forecast period,2007

to 2017,translates to a cumulative extra 19.6 million arrivals over the next decade.The growth

in visitors is expected to add $82.8 billion in real TIEV over the full decade.The major markets

contributing to the increase in tourism exports are China (up $22.5 billion or 27%of the total gain),

the United States ($12 billion,or 14.5%),while the emerging markets of India and Middle East/

North Africa (or MENA)are also projected to be signi .cant contributors to the growth in the value of

tourism exports over the next 10 years.Considerable investment in tourism supply capacity (such as

in the accommodation and aviation sectors)will be required to meet this demand.

Oil prices

The price of West Texas Intermediate (WTI)almost doubled in the year to June 2008 and increasedby 44%between January and June 2008.The WTI oil price rose from a monthly average of $US67 per

barrel in June 2007 to US$147 per barrel in July 2008,before easing back later in the month.However,

because the US dollar has depreciated against most currencies,oil prices for most consumers have

not doubled.In Australian dollar terms the price of WTI increased by 75%between June 2007 and

June 2008 and 34%between January and June 2008.

Higher oil prices can place downward pressure on growth in arrivals to Australia by decreasing

the amount of discretionary income available for travel and by increasing the costs of air travel.

The increase in world oil prices has pushed jet fuel prices higher since January 2008.The price of

Singapore Kerosene-Type Jet Fuel has risen by 55%from an average of US$2.53 per gallon in January

to US$3.92 per gallon in June.The average price in 2007 was US$2.03 per gallon.

Sustained higher fuel prices are leading to increases in the cost of air travel.“Fuel surcharges ” have

been a key mechanism for passing on higher fuel costs to travellers in recent years.Increases in the

cost of air travel tend to disadvantage longer-haul markets as airfares are a larger component of the

total cost of travel.As Australia is a medium to long haul destination for most international visitors,

its competitiveness as a tourist destination is eroded when world oil prices increase.Increases in oil

prices also increase the likelihood that airlines will choose to reduce services on routes that are less

pro .table or less able to support increases in airfares.Oil prices are assumed to fall to around US$110

in June 2009.However,if oil prices average US$150 a barrel in the second half of 2008 and through

2009,arrivals would be forecast to fall by 3%in both 2008 and 2009.

 

The Australian dollar

The continuing high value of the Australian dollar against most currencies,in particular against the

US dollar,remains an impediment to growth in inbound tourism.The Australian dollar remains well

above long-term trend levels and is reducing Australia ’s price competitiveness against other travel

destinations and other rival goods and services.

The effect of exchange rate .uctuations is not immediate because,on average,nearly half of visitors

to Australia book their .ights between one and six months before arrival.This means that exchange

rate .uctuations can be a good indicator of changes in arrivals in the short term.Most currencies

remained relatively unchanged against the Australian dollar in the March quarter 2008 compared

to the December quarter 2007.Notable exceptions were the UK pound and the South Korean Won,

which both depreciated by 5%against the Australian dollar.However,data covering the 6 months to

June 2008 show that the currencies of most of our major trading partners have depreciated against

the Australian dollar compared to the previous 6 months.The UK Pound and the South Korean Won

have depreciated the most:by 9%and 12%respectively.This has a negative impact on Australia ’s

competitiveness as a destination and will place downward pressure on arrivals growth in late 2008

and into 2009.

The Australian Trade Weighted Index (the TWI is an index of the Australian dollar against the basket

of currencies of Australia ’s major trading partners)rose 7.1%in the year to June 2008 compared to

the year to June 2007.The current level of the TWI is the highest achieved over the past decade and

arrivals growth is expected to be .at this year,well below the 10-year average growth rate of 2.7%.

Other factors being equal,if the Australian dollar were to remain at current levels or continue to

appreciate against the currencies of inbound source markets,arrivals are likely to fall.There is a large

range of factors that in .uence the number of arrivals to Australia.Nevertheless,the strength of the

Australian dollar does affect the competitiveness of the Australian tourism industry.The Tourism

Forecasting Committee assumes that the Australian dollar will remain high for the rest of 2008 and

early 2009 and will start depreciating to around US$85cents by mid 2010.

 

DOMESTIC FORECASTS

Higher than previously assumed oil prices have led to downward revisions in the number of domestic

trips and nights for 2008 and 2009.Airlines have responded to increasing oil prices by raising airfares

and reducing expansion plans.Higher oil prices are also making travel by road more costly.During

early-mid 2008 Qantas and Virgin Blue announced signi .cant changes to their .eet expansion

plans.The airlines are accelerating the retirement of older,less fuel ef .cient aircraft and delaying the

delivery of new aircraft.Services to less pro .table routes are being reduced or cut altogether.

However,increases in incomes and a robust labour market are expected to support modest growth in

domestic trips.The number of domestic trips is forecast to rise by 2%to 75.3 million in 2008 and by

a further 3.5%to 77.9 million in 2009.The average duration of domestic trips is forecast to decline in

2008 and 2009.Despite the expected increases in the cost of some airfares,the competitiveness of air

travel over road travel is expected to increase.Further,increasing pressures on discretionary spending

are also expected to contribute to a decline in the average length of trips.As a result,domestic visitor

nights are forecast to fall by 3%to 279.7 million in 2008 and by 2.7%to 272.1 million in 2009.

The number of domestic tourism trips is forecast to grow at an average annual rate of 1.4%between

2007 and 2017.The outlook for domestic visitor nights is less positive,with nights forecast to fall at

an annual average rate of 0.3%each year between 2007 and 2017 to reach 280.4 million.However,

this long-term trend masks a pro .le of strong decreases in visitor nights in 2008 and 2009 followed

by modest growth over the remainder of the period.

Total Domestic Economic Value (TDEV)is forecast to grow at an average annual rate of 0.9%a year

between 2007 and 2017 to reach $71.9 billion in real terms.Domestic tourism ’s share of the total

economic value of the Australian tourism market is forecast to decline from 73%in 2007 to 67%in 2017.

O

UTBOUND FORECASTS

Increases in world oil prices are placing downward pressure on the pro .tability of the international

airline industry.However,the high load factors on most routes servicing Australia decreases the

likelihood of signi .cant reductions in capacity on these routes.These load factors are receiving

considerable support from the increasing propensity of Australian residents to travel overseas

that has been stimulated by the high value of the Australian dollar and the continued strength of

domestic employment.

Outbound departures are forecast to increase by 9.9%to reach 6.0 million in 2008 before rising a

further 8%to 6.5 million in 2009.Departures are forecast to continue growing at a higher rate than

domestic tourism given the strength of the Australian dollar,the expansion of low cost air capacity to

outbound markets and the overall expansion in international aviation capacity from late 2008.Over

the period from 2007 to 2017,total outbound departures are forecast to grow at an annual average

rate of 5.4%to reach 9.3 million in 2017 (532,000 higher than inbound arrivals).

Australia is currently a net exporter of tourism.The latest Tourism Satellite Accounts (ABS Cat.No.

5249.0)shows that in 2006-07,exports of tourism goods and services exceeded imports of tourism

goods and services by $327 million.The TFC do not forecast the value of tourism imports but since

growth in outbound departures is forecast to exceed inbound arrivals in each of the next ten years,

Australia will probably become a net tourism importer in the period to 2017 after showing a tourism

trade de .cit of $235 million in 2005-06.

 

 

Tourism Forecasting Committee

Following the Tourism White Paper ’s initiative to form Tourism Australia

(TA),the Tourism Forecasting Committee (TFC)was established.Like

its predecessor the Tourism Forecasting Council,the TFC remains

an independent body charged with providing present and potential

tourism investors,industry and government(s)with consensus forecasts

of activity across international domestic and outbound tourism sectors.

Resources for the TFC are provided by Tourism Research Australia (TRA),

a division of TA.

The TFC ’s membership draws on the combined expertise of the private

and public sectors in the tourism and .nance industries.Chaired by

Bernard Salt (KPMG),committee members are from the Australian

Bankers ’ Association,the Australian Standing Committee on Tourism,

the Australian Tourism Export Council,the Department of Resources,

Energy and Tourism,Qantas,Queensland Tourism Industry Council,

Tourism Australia and TTF Australia.

Tourism Australia,the statutory authority responsible for Australian

tourism marketing and research,was formed on 1 July 2004.TA brought

together the responsibilities of the Australian Tourist Commission,the

Bureau of Tourism Research,the Tourism Forecasting Council and See

Australia.Tourism Research Australia provides secretariat support to the

TFC and its sub committee,the TFC Technical Committee.

Membership of the Tourism Forecasting Committee

Bernard Salt (Chair)KPMG

Daniel Gschwind Queensland Tourism Industry Council

Geoff Buckley Tourism Australia

Greg Hywood Australian Standing Committee on

Tourism

Jane Madden Department of Resources,Energy and

Tourism

Matt Hingerty Australian Tourism Export Council

Mark Dimech TTF Australia

Saul Eslake ANZ Bank,Australian Bankers ’ Association

Tony Webber Qantas Airways Limited

Membership of the Tourism Forecasting Committee

Technical Committee

Paul Fairweather (Chair)Tourism Research Australia

Andrew Maurer Tourism Research Australia

Ernst Krolke Airport Coordination Australia

Jeff Oughton National Australia Bank

Karen Wales Jones Lang LaSalle

Karl Flowers Tourism Australia

Evelyn Tricardos TTF Australia

Philippe Klee Qantas Airways Limited

Tim Quinn Department of Resources,Energy

and Tourism

The information in this publication is presented

in good faith and on the basis that neither

Tourism Australia,Tourism Research Australia

or the Tourism Forecasting Committee nor

their agents or employees are liable (whether

by reason of error,omission,negligence,lack of

care or otherwise)to any person for any damage

or loss whatsoever which has occurred or may

occur in relation to that person taking or not

taking (as the case may be)action in respect

of any statement,information or advice given

in the publication.Data derived from Tourism

Research Australia surveys are subject to sample

error.Users of the data are advised to consult

the sample error tables contained in Tourism

Research Australia publications or otherwise

available from Tourism Research Australia

before drawing any conclusions or inferences,or

taking any action,based on the data.

©Copyright Tourism Australia 2008

ISBN 0 642 28583 7

Tourism Australia and Tourism Research

Australia permits copies to be made for the

purpose of promoting Australian tourism

provided that Tourism Australia and Tourism

Research Australia are recognised on any

copies as the authors of the Tourism Forecast

Committee Forecast 2008 Issue 1 the Forecast

is reproduced in its current form and a

statement similar to this one is included on any

copy.However,copies may not be made for a

commercial purpose,that is,for sale without

the permission of Tourism Research Australia.

Tourism Research Australia

Level 3 11-17 Swanson Plaza Belconnen

Canberra ACT 2617 Australia

GPO Box 1110 Canberra ACT 2616

Telephone:+61 6228 6100

Fax:+61 6228 6180

Email:tra@tourism.australia.com

Web:www.tourism.australia.com

 

 

 

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