The tourism industry in Australia, which was already struggling as a result of the devastating summer bushfires, has been one of the sectors hardest hit by the COVID-19 pandemic. Restrictions on domestic and international air travel, as well as domestic border closures, the ‘ring of steel’ that separated regional Victoria from Melbourne and the recent outbreaks in Sydney and Brisbane have resulted in a significant decline in business and leisure travel in 2020. However, there are some positive signs for the industry, as our states and territories have improved processes to successfully contain outbreaks, the prospect of international travel bubbles and the commencement of the vaccine distribution both in Australia and globally.
Some parts of the tourism industry such as travel agents and international aviation have been disproportionately impacted and will struggle to recover until the end of the pandemic. But for others, there are opportunities to pivot to drive additional demand for domestic travel and make the most of restless Australian would-be travellers.
The good news is that Australians have the desire, the time and the means to fill the gap left by international tourists and the expected reduction in business travellers. Australians’ adventurous spirit could prove to be a lifeline for the industry, with the restrictions on international travel inspiring more Australians to explore their homeland, which could bolster the industry for years to come.
|Australians have both the desire and the flexibility to grow domestic tourism in the wake of COVID-19.
Australians are well known for their wanderlust; it’s part of our national identity. In fact, Australians’ thirst for travel has grown rapidly over the last decade. And most of the growth has been within Australia – with over 90 percent of total trips by Australians remaining domestic.
Having spent most of 2020 at home, many Australians will be eager to escape their own four walls and taste some relative normality after a long and unusual year. In a recent survey conducted by KPMG, 61 percent of Australian respondents said they were planning on booking a holiday between January and June 2021 and 72 percent said they would book a holiday between July and December 2021.
Adding to this, many of us have newfound freedoms in how we work as a result of COVID-19. This makes working from holiday destinations acceptable as well – creating a new category of working holiday. These changes in consumer behaviour may provide welcome opportunities for tourism operators to capture a greater share of the Australian traveller’s wallet.
|Many Australians also have the financial capacity and the time to close the gap
left by international tourists and reduced business travel.
Australians have been saving hard through the pandemic – and holidays are likely to be at the top of the treat list. Lockdown restrictions have also meant people are also likely to have accrued significant leave balances, so many Australians have both the time and money for holidays. However, to sustain the industry we need Australians to spend more on domestic recreational travel than they have in prior years to offset the lost revenue from international inbound tourists and a likely reduction in business travel.
The good news is that theoretically, if domestic borders stay open and if Australians are prepared to spend their international travel budgets on home soil this year, there is a possibility that the domestic industry could hold steady. To tread water, the domestic tourism industry would need to convince Australians to spend ~70 percent of what they spent overseas in 2019 on domestic trips instead. Not an easy task for the industry overall, but individual operators may succeed through bold and forward-thinking strategies that recognise and cater to the changed consumer.
|Recreational travellers could spend 2021 ticking off their backyard bucket list, experimenting
with working holidays, and romancing with the great Aussie road trip.
Our research has uncovered several key trends relevant to the domestic tourism industry, all of which will continue to evolve in response to the global health crisis. We believe that recreational travellers will be driven by three key mindsets over the next 12-24 months:
|Business travellers may reduce commute-style trips but increase conference-style trips that more
purposefully bring teams together in response to the shift towards remote working.
The drastic reduction in business travel as a result of COVID-19 may not take long to resume but could take longer to recover. The global remote working experiment now brings into question the need for some business trips. It is likely that shorter business trips could remain suppressed following the pandemic.
Employers are now facing an interesting dilemma which could create new reasons for business trips – how to create a culture that enables flexible working but also builds a strong sense of team. Employers need to effectively flip the office, whereby most work is done at home and most work-related socialisation is done at work. One possible solution could be to increase the frequency of conference-style events or team gatherings that more intensively build communities and trust.
|Where the money is spent across the industry will shift and players that quickly adapt
to compete in surging sectors have the potential to emerge stronger.
Three subsectors which we believe are in a strong position to capitalise on the current environment are:
Domestic travel and tourism businesses will need to pivot quickly to capitalise on these.