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Australian tourism industry flying high thanks to cheap airfares and outbound APAC exploration – IBISWorld

January 17, 2019 Statistics & Trends No Comments Email Email

More Australians are travelling overseas despite the depreciation of the Australian dollar over the past five years. According to the Australian Bureau of Statistics, 10.8 million overseas trips were undertaken by Australian residents in 2017-18.

IBISWorld analysts believe that cheaper airfares and a growing interest in the APAC region among Australian travellers have driven this trend. While this growth has benefited the tourism sector overall, bricks-and-mortar travel agencies and traditional holiday rental services are experiencing ongoing pressure from larger travel agencies and online firms.

Australians are taking advantage of cheap airfares internationally

While the fall in the value of the dollar has made outbound tourism more expensive for domestic residents, the historically low airfares on offer have encouraged more Australians to travel abroad.

“Major Australian and international airlines are expanding their flight capacity to and from Australia, as competition on key international routes intensifies,” said IBISWorld Senior Industry Analyst Nathan Cloutman. “For example, budget carriers, such as Singapore Airline’s subsidiary Scoot and Malaysia-based AirAsia X, have extended their Australian route networks and passenger capacities over the past five years, and the increased competition has lowered the cost of airfares.”

Australians are increasingly interested in exploring the APAC region

New Zealand, the United States and the United Kingdom are traditionally the most popular holiday destinations for Australians. Yet, the number of visitor nights spent in the USA and the United Kingdom are falling as Australian travellers increasingly favour smaller trips to nearby Asian countries. Consequently, the number of visitor nights is increasing at a much slower rate than the number of overseas trips.

“Bali is a popular destination in Asia for Australians and is now the second largest outbound market by visitor numbers. However, according to Tourism Research Australia (TRA), the number of visitor nights spent in Indonesia declined in 2017-18 compared with 2016-17,” said Mr Cloutman.

“A reason for this decline is the fact that Australians are increasingly influenced by popular travel blogs and TV shows that feature exotic Asian destinations outside of Bali. According to TRA, the number of visitor nights spent in Hong Kong, Japan and Vietnam have grown significantly over the past year.”

Australian Overseas Visitor Nights by Location – Selected Countries – Millions
  2016-17 2017-18 %
USA 19.80 19.19 -3.1%
United Kingdom 17.71 17.54 -1.0%
New Zealand 13.25 13.79 4.1%
Indonesia 10.96 10.74 -2.0%
China 9.56 8.76 -8.4%
India 7.97 7.61 -4.5%
Thailand 7.50 7.34 -2.2%
Japan 5.19 6.80 31.1%
Vietnam 4.18 4.62 10.4%
Hong Kong 2.06 2.84 38.1%
Other Countries 76.51 76.73 0.3%
Total 174.69 175.95 0.7%
    Source: TRA

Australians are travelling by car over planes domestically

The number of Australians travelling domestically is also on the rise. The latest data from TRA shows that the number of domestic overnight trips taken by Australians increased by 6.0% over the year through September 2018. Regional trip expenditure also increased by 10.3% over the same period. Apart from the Northern Territory, all other states and territories have seen an increase in domestic visitor nights and tourism expenditure.

“Interestingly, according to TRA, close to two-thirds of Australians drive their own vehicle when travelling interstate. However, the number of domestic residents using air transport is increasing, as airline competition continues to put downward pressure on domestic airfares,” said Mr Cloutman.

Overseas Trips by Australians
  2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Millions 8.40 8.99 9.26 9.67 10.30 10.76
Growth 7.0% 3.1% 4.4% 6.5% 4.5%
          Source: ABS

Outbound travel growth benefits parts of the industry, although limits some

According to IBISWorld, rising domestic and international travel by Australians is benefiting local tourism industries. Notably, the Travel Agency and Tour Arrangement Services is expected to increase by 5.0% in 2018-19, to $8.6 billion.

However, bricks-and-mortar travel agencies are feeling the pressure from online-only players. Many store-based travel agencies have reduced their costs and prices and transitioned to online operations and a fee-based business model. Outbound tourism can also limit the domestic demand for tourism businesses. As a result, tourism companies are increasingly targeting international consumers as opposed to local consumers, particularly from China and other Asian markets.

“Competition is intensifying across the tourism sector as more and more businesses enter the domestic market to capitalise on growth in international tourism. The Holiday Houses, Flats and Hostels industry, for example, is also expected to feel the effects of strong and rising competition across the accommodation sector. Revenue for this industry is expected to decline by 0.1% in 2018-19,” said Mr Cloutman.

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