INTRODUCTION
The Tourism industry is working in one of the most challenging periods of its history with the number and scale of global and local events placing unprecedented pressures on the industry. This environment is likely to influence short and long-term targets. However, rarely do such events or crises have an impact on long term strategies. This addendum to Victoria ’s Tourism Industry Strategic Plan 2002-2006 has been developed to highlight major issues that will impact the industry in the current climate.
Tourism Victoria (TV), in partnership with relevant tourism and travel industry partners, will deliver some significant activities in 2003-04. These include hosting the 2004 Australian Tourism Exchange, the completion of the zonal tourism development plans, including strategic destination development for regional Victoria , and continuing the roll out of Phase 7 of the highly successful Jigsaw marketing campaign. TV will also manage the implementation of the four year 2006 Commonwealth Games Tourism Marketing plan.
TOURISM INDUSTRY ENVIRONMENT
There have been a number of environmental factors that have influenced the tourism industry in the past year that will continue to have some affect into the future. These environmental issues are summarised under the following headings:
- Research
- Government Policies
- Commonwealth 10 Year Strategy
A. RESEARCH
NB : Tourism Forecasting Council (TFC) data is based on environmental conditions at the time of forecasting. Therefore, forecasts will be revised as circumstances change.
The Impact of Iraq War and SARS Outbreak on Tourism to Victoria
International
The latest data shows that international arrivals to Australia in May and June 2003 were well down compared to the same time in recent years. These results reflect the impact of the war in Iraq and the outbreak of Severe Acute Respiratory Syndrome (SARS).
In May 2003, the Tourism Forecasting Council released revised forecasts taking into account the latest available tourism and economic data including macroeconomic variables such as the consumer price index, exchange rates and economic growth, in addition to travel concerns generated by war, terrorism and global health issues. The Tourism Forecasting Council will release updated forecasts in late 2003 or early 2004.
International travel to Australia is forecast to fall by 5.3% to around 4.6 million visitors in 2003, the lowest figure since 1999 and the third year in a row that inbound travel activity has contracted. This fall in visitation, combined with lower spending of existing international visitors to Australia , sees export earnings from tourism forecast to decline by 9.6% to $15.9 billion in 2003.
A recovery in 2004 is expected, with total visitor arrivals to Australia forecast to grow by 9.8% to just over 5 million visitors. This growth reflects pent up demand continuing from 2003, and assumes discounting of air capacity to stimulate travel.
The forecast average annual growth rate for the period 2002-2012 is 4.3% per annum which will generate around 7.5 million international visitors to Australia in 2012.
Assuming Victoria maintains its current market share of international visitors, there will be an estimated 1.1 million visitors in 2003, 1.3 million in 2004 and almost 1.9 million by 2012.
The chart below shows the changes to international forecasts over recent years. The forecasts for October 2001 were current at the time of the release of Victoria ’s Tourism Industry Strategic Plan 2002-2006. It is evident that the global economic slowdown and the specific impacts on the tourism industry and the travelling population of terrorism, war and SARS have caused a significant reduction to the visitor forecasts.
Source: Overseas Arrivals and Departures, Australian Bureau of Statistics, 1989-2002 Tourism Forecasting Council
Key Markets
New Zealand
- Australia’s largest inbound market, New Zealand is likely to remain the inbound market least affected by the Iraq war and SARS.
- SARS is expected to detract from NZ travel to Asia and lead to an increase in travel to “safer” destinations like Australia. Offsetting this is the likely increase in NZ domestic travel.
- There were 173,000 visitors from NZ to Victoria in 2002. NZ arrivals are forecast to increase by 0.9% in 2003 and by 3% in 2004.
- Victoria is expected to receive 214,000 visitors from NZ by 2012.
Japan
- In Japan , the SARS impact is not expected to be as severe as in some of its Asian neighbours.
- There were 80,000 visitors from Japan to Victoria in 2002. Japanese visitor arrivals are forecast to be down 6.9% in 2003, a strong recovery is forecast in 2004, with 12.5% growth.
- Growth in 2004 reflects the severe decline in 2003, the effect of “pent-up” demand as a result of weak outbound tourist activity in recent years and strengthened marketing campaigns.
- Victoria is expected to receive 104,000 visitors from Japan by 2012.
China
- There were 69,000 visitors from China to Victoria in 2002. Compared to recent trends, visitor arrivals from China are expected to significantly decline, with a forecast decline in 2003 of 17.7%. This is mostly as a result of Chinese travel authorities placing restrictions on outbound travel from the strongest tourism generating provinces, due to SARS.
- Chinese arrivals are forecast to be strong in 2004, growing by 29.7%. However, a risk to future growth is the granting of Approved Destination Status to some European countries.
- Victoria is expected to receive 224,000 visitors from China by 2012.
Singapore
- There were 75,000 visitors from Singapore to Victoria in 2002. Visitor arrivals from Singapore are forecast to decline by 9.6% in 2003, and grow by 11.6% in 2004.
- Victoria is expected to receive 104,000 visitors from Singapore by 2012.
United Kingdom
- There were 205,000 visitors from the UK to Victoria in 2002. Arrivals are forecast to be down in 2003 by 3.6%, with growth of around 7% in 2004.
- The nine months to September 2003 are looking particularly negative. However, the Rugby World Cup and the Northern Hemisphere summer are expected to assist the recovery beginning in the December quarter 2003 and flowing on into 2004.
- Victoria is expected to receive 304,000 visitors from the UK by 2012.
Germany
- There were 53,000 visitors from Germany to Victoria in 2002. German arrivals are expected to be stable in 2003. Growth is expected to improve in 2004 with an increase of 6.7%.
- Victoria is expected to receive 81,000 visitors from Germany by 2012.
USA
- Aviation issues continue to erode confidence, with financial problems faced by United Airlines, Air Canada and American Airlines.
- After a very weak first six months of 2003, North American market conditions are expected to improve in the second half of the year.
- There were 124,000 visitors from the USA to Victoria in 2002. US arrivals are forecast to decline by 4.5% in 2003, with growth of 7.5% in 2004.
- Victoria is expected to receive 176,000 visitors from the USA by 2012 .
Strategic Response: Tourism Victoria is constantly reviewing and re-evaluating its marketing campaigns and will continue to monitor the situation in conjunction with the Australian Tourist Commission, our key international marketing partner.
The longer-term strategic direction and priorities articulated in Victoria’s Tourism Industry Strategic Plan 2002-2006 remain unchanged.
Domestic
While the Tourism Forecasting Council’s revised forecasts suggest the combined impact of SARS and the Iraq war is likely to substantially deter outbound travel, it is also likely to boost domestic tourism in 2003. As a result of these factors, domestic visitor nights are forecast to increase by 1.9% in 2003 to 304.3 million nights. A factor that may play a significant role in the growth of domestic tourism in 2003 is pressure on suppliers. These firms are likely to lower prices domestically to fill excess capacity caused by a downturn in international travel. This effect will be greater in regions traditionally popular amongst overseas travellers.
Holiday travel is forecast to be the main beneficiary of the current concern over SARS, forecast to increase by 1.5% in 2003 to 146 million nights, the sector’s first increase for two years. Growth is also forecast for Business and VFR travel in 2003, albeit by a slower rate when compared to the previous year, with each sector to increase by 2.3% to 48.3 and 95.6 million nights respectively.
Assuming Victoria maintains its current market share of domestic visitor nights, there will be an estimated 57.8 million visitor nights in 2003, 58.1 million in 2004 and almost 59.6 million by 2012.
The chart below shows the changes to domestic forecasts over recent years. The forecasts for October 2001 were current at the time of the release of the Victoria’s Tourism Industry Strategic Plan 2002-2006. While the combined impact of SARS and the Iraq war is likely to boost domestic tourism in 2003, longer term issues including economic conditions, the tendency to work longer hours and increased competition for Australians’ remaining leisure time continue to constrain growth prospects for domestic tourism.
Source: National Visitor Survey, Bureau of Tourism Research, 1998-2002
Tourism Forecasting Council
Strategic Response: As articulated in Victoria’s Tourism Industry Strategic Plan 2002-2006, Tourism Victoria continues to focus on the most relevant high yield segments of the domestic market that will deliver sustainable growth in domestic tourism to all regions of Victoria.
Additional Research
In light of the Iraq war and SARS outbreak, Tourism Victoria and other stakeholders have implemented a number of additional measures to monitor impacts.
A telephone survey of 2,276 Australian tourism businesses was undertaken in May 2003 to gauge actual and anticipated impacts. Results showed that:
- The effect of the Iraq War and SARS on the Australian inbound and outbound markets has generally been adverse, whilst overall, the impact on domestic tourism has been favourable.
- The decline in visitors from Asia is having the greatest impact on operators in the international inbound market.
- Tour companies, travel agents and restaurants/cafes, as well as businesses with an annual turnover exceeding $500,000 have been most significantly impacted.
- Businesses in the Melbourne Metro area have been significantly affected, with 71% reporting a decrease in total revenue compared to 7% in regional Victoria.
- The overall impact of SARS and the Iraq War on employment has been slight, and is expected to ease during the next 3 months.
A survey of Australian consumers was conducted over the period 29 April – 1 May 2003 regarding their travel intentions in the wake of the war in Iraq and the SARS outbreak. The survey found that:
- The majority of Australians (83%) expect to travel the same amount as they usually do, despite the crises.
- Over 90 per cent of Australians feel fairly or very safe travelling by air in Australia. Australians feel less safe about travelling by air overseas with 67 per cent feeling fairly or very safe travelling outside of Australia.
- Nearly 2.3 million Australians (15% of the population) had changed their holiday plans because of recent events, with reasons relating to SARS cited far more often than the war in Iraq. The most common changes were to the timing of the trip and/or the destinations.
- Just over half a million Australians (2% of the population) cancelled their next trip because of recent events with the majority of these planning an overseas trip.
B. GOVERNMENT PRIORITIES
The strategic direction articulated in Victoria’s Tourism Industry Strategic Plan 2002-2006 is supported by current Government policy and priorities. Tourism Victoria is structured to meet the demands of both the private and public sectors. The Strategic Plan 2002-2006 provides a framework for major initiatives to be implemented.
Government Policy
Tourism Victoria will initiate actions against priorities identified in Government policy. A summary of these policies is provided below: -
- Boost international marketing to raise Victoria’s profile as a desirable tourist destination;
- Develop a broader tourism strategy that unlocks the potential of the whole State not just Melbourne;
- Aggressively pursue job creation in the tourism industry in Melbourne and Country Victoria;
- Promote events tourism in the whole State, not just inner city Melbourne;
- Ensure that Tourism Online is used to highlight the tourism potential offered by Victoria’s small towns, not just major centres and major events;
- Aggressively market Victoria’s attractions;
- Facilitate more direct international flights into Melbourne; and
- Support the marketing and promotion of the 2006 Commonwealth Games;
- Continue to invest in tourism infrastructure projects;
- Focus on specialty sectors eg. Food and Wine, Business Events, Arts, Theatre and Cultural Heritage, Nature-Based.
To address Government priorities for 2003-2004, the major initiatives Tourism Victoria will oversee include: -
- Melbourne hosting the 2004 Australian Tourism Exchange;
- the launch of the Touring campaign as an integral part of the next phase of the highly successful Jigsaw campaign, emphasising regional Victoria;
- continued marketing to targeted overseas markets;
- an awareness program in relation to the ‘significance of tourism’;
- implementation of strategies outlined in Victoria’s Tourism Industry Strategic Plan 2002-2006;
- stimulation of regional tourism through a regional renewal program that will integrate marketing and industry and infrastructure development;
- implementation of the Alpine Resorts Tourism Business Plan 2003-2006;
- continued negotiations on direct plane services from key source markets; and
- maximisation of operator participation in accreditation programs.
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C. COMMONWEALTH – MEDIUM TO LONG TERM STRATEGY
Tourism in Victoria will need to be considered within the framework of the long term Commonwealth strategy for tourism. There will be a number of opportunities and issues associated with the strategic direction of the Plan. At this stage, the strategy has been released as a ‘Green Paper’ and pending consideration of feedback received, will be converted into a final tourism strategy document (‘White Paper’).
The Victorian Tourism Industry Council (VTIC), the Victorian Government and a number of other industry and government bodies have formally responded to the ‘Green Paper’.
As a dynamic document, ‘Victoria’s Tourism Industry Strategic Plan 2002-2006’ will, if required, be adjusted to maximise the benefits or address issues associated with the strategic direction of the Commonwealth Plan.
Although both short and long term forecasts have been influenced by recent events, the strategies outlined in ‘Victoria’s Tourism Industry Strategic Plan 2002-2006’ remain the catalyst for the sustainability of the tourism industry.
Notwithstanding this, it is important to highlight the following areas:
ACCREDITATION
An updated Tourism Accreditation Policy is available through the following link: www.tourismvictoria.com.au/accreditation
ZONAL TOURISM DEVELOPMENT PLANS
Tourism Victoria is currently in the process of updating and redesigning the existing regional tourism development plans. The state of Victoria has been divided into six zones - Murray, North East Victoria, Gippsland, Great Ocean Road/ Grampians, Goldfields and Melbourne Surrounds. This is purely for strategic planning and industry development purposes, and does not affect the 13 campaign regions established to facilitate cooperative marketing activity.
A Zonal Tourism Development Plans Steering Committee is responsible for managing this process and includes Tourism Victoria, Country Victoria Tourism Council, Parks Victoria, Regional Development Victoria, Department of Victorian Communities and Regional Campaign Committee representatives. Each zone will also have a Zonal Coordination Group.
The Plans are to be complete by mid 2004.
AVIATION
Events in Iraq and SARS have severely affected global aviation activity. Before these pressures, the State Government was on the verge of announcing a strategic addition to the carriers now serving Melbourne. These negotiations will recommence in the coming months. The Government and Melbourne Airport are working jointly to quicken Victoria’s recovery, including changes to bilateral air services agreements that make Melbourne a more effective gateway.
The bilateral negotiation outcomes Victoria has achieved with Malaysia and Dubai are to Victoria’s significant advantage, especially in securing Trans Tasman rights. Tourism Victoria is now in discussions with Malaysian Airlines and Emirates about how best to take advantage of these additional rights. Tourism Victoria and Melbourne Airport are also bringing forward meetings with several key international airlines with the aim of gaining new services from key markets.
The outlook for November 2003-April 2004 period is for a gain of around 2,000 seats per week, in addition to the reinstatement of suspended services.
