The continued growth of low-cost Asian airline capacity and the economic recovery underway in the United Kingdom and the United States has contributed to visitor arrivals surging 8.2% over the year to May, the fastest rate of growth in nearly a decade.
This has led to an upward revision of Deloitte Access Economics’ international visitor forecasts. The latest Tourism and Hotel Market Outlook projects arrivals to grow by 5.1% and international visitor nights to increase by 5.2% over the next three years.
According to Deloitte Access Economics’ Lachlan Smirl, “The strengthening Australian Dollar ($A) was not enough to dampen growth in international leisure visitors. We know economic growth is the big driver of travel and as economic growth returned to the UK and US – and continued across the critical markets of Asia – visitor arrivals surged.”
“What was particularly encouraging for Australia’s leisure market is that this growth was primarily driven by international holidaymakers. While leisure travellers may not stay as long as international students or spend as much per night as their business counterparts, they disperse more widely, including to some of the nation’s most important regional visitor economies. In fact, international holiday visitors spend 35% of their nights outside of the capitals, compared with 20% for other visitors.”
However, with leisure travellers typically taking shorter trips, international visitor nights grew only modestly despite the growth in strength of visitor arrivals.
“The impressive growth in international visitor arrivals, led by Malaysia (20.4%), Hong Kong (18%) and Singapore (16%), was aided by additional capacity from low cost carriers, including Air Asia X and Jetstar.”
Importantly, China shook off the effects of the Chinese Tourism Law to grow a further 12% for the year to May. In cumulative terms, Chinese visitation has more than trebled over the last decade and now rivals the Japanese market at its peak. This time next year China may in fact surpass Japan’s 1997 heights – with wind in its sails and huge upside potential.
Domestically, visitor growth continued to outpace its post-2000 average, but the momentum shifted from leisure to corporate travel as economic conditions in the east improved, the Australian dollar strengthened and the effects of the mining construction boom lingered.
Smirl continued, “Against expectations, domestic tourism grew most rapidly in Western Australia, as leisure travel continued to grow and corporate visitation rebounded strongly. Improving economic conditions on the east coast were evident in corporate travel to Sydney, which grew 21%. On the international front, it was Victoria, South Australia and New South Wales that led the way, as low cost carrier capacity provided a fillip to Asia’s buoyant underlying growth.”
“The combination of increased international visitor numbers and the improving economic story on the eastern seaboard have translated into an exceptional year for the Australian hotel market, with national trend occupancy rates reaching 68%, up two points on last year, while room rates have continued to grow at above-trend rates, rising 3.2% over the same period.”
“The Outlook shows hotel occupancies in Sydney and Melbourne closed in on 90%, with the cities’ hotels at or near capacity several nights a week, and room rates and revenue per available room (RevPAR) growing at twice their decade average,” said Smirl. “Despite some high profile projects across the two markets, supply growth will continue to trail demand over the next three years, pushing occupancies further into unchartered territory and propelling RevPAR at rates considerably above their trend averages.”
Elsewhere, conditions are mixed, with strong growth in Adelaide and Hobart offset by softer conditions in Perth and Brisbane, as the demand momentum from resources investment activity tapers.
Commenting Smirl said, “The forecasts for both the major mining capitals reflects a modest demand outlook, coupled with strong growth in supply which, in Perth’s case, will see occupancies shed five percentage points by end-2016. Darwin, too, is projected to come off its peaks, with a 15% injection of supply combining with a moderation of resource-related demand to unwind both occupancy and RevPAR growth.”
“Notwithstanding the vast variability across individual markets, the national outlook for hotel performance is one of demand growing at nearly twice the pace of supply over the next three years, and occupancy rates being propelled further into record territory as a result.
In fact, should the forecast growth be realised, average occupancies across Australia will have gained five percentage points in as many years.”
Commenting on the outlook for international tourism Smirl said: “Asia’s sustained economic growth and rapidly expanding middle class continues to drive growth in international tourism, with robust arrivals growth forecast from China and India (8.8%), Malaysia (7.6%), Singapore (7.0%) and Thailand (7.2%). Asian source countries are expected to account for 63% of the total growth in visitor arrivals over the next three years.”
“But, as we’ve seen over the last 12 months, it’s not just about Asia. The improving economic outlook for the US and UK has contributed to upward revisions to our forecasts for these markets.”
“On the domestic front, visitation is projected to continue to grow at above-trend rates, with domestic trips growing at an average 2.0% p.a. over the next three years. The forecast easing of the $A to 80 US cents by 2017 will contribute to leisure travel assuming an increasing share of the domestic growth task.”
25 July 2014.