What does tourism in Australia look like now that travelers are returning?

The international terminals at our airports looked like busy beehives before the pandemic.

During the lockdowns, we learned that empty terminals look like the set of a scary zombie movie.

As of May 2022, all state borders will be open (I’m writing this column in a hotel room in WA), and more international destinations will allow travel every month.

The tourism industry has suffered greatly from the lockdown restrictions but is now gearing up for a massive comeback. So, what is the state of the industry, and what are the biggest challenges it will face?

It took a pandemic to understand the magnitude of tourism. From February 2020 to April 2020, the tap was turned off, and the number of arrivals fell from 1.6 million people to less than 20,000. The ABS counts the number of overseas arrivals in the country.

For what it’s worth, the travel and tourism industry just stopped. The numbers remained extremely low for 20 months. A few ex-pat Aussies and a few professionals were allowed to travel internationally.

What does tourism in Australia look like now that travelers are returning?

International travel doesn’t come back in full swing overnight. Airlines are slowly adding new routes, some international travelers are still hesitant to travel, many countries maintain restrictions on free movement, plus the big summer vacations in the northern hemisphere are still a few months away.

In the past six months, international arrivals have grown from just 20,000 in October 2021 to 580,000 in April 2022. Although the figure in April is 29 times the number in October, it still lags behind pre-pandemic arrivals of 1.7 million people in April.

Who is traveling again, and who is staying at home? The ABS certainly has the answers!

Let’s compare the latest arrival figures for March 2022 by category with the long-term, pre-COVID average for March (2015-19). In general, arrival volumes are up to 24 percent of the old normal.

Arriving travelers are split into two main categories. Permanent or long-term arrivals (more than 12 months) and short-term arrivals (less than 12 months).

Australian ex-pats have been unable to return home for nearly two years but have been born in large numbers in recent months. Long-term visitors (96 percent) and permanent arrivals (69 percent) are approaching pre-pandemic levels. The figure for March was 166 percent of the long-term average.

The two short-term groups (mainly Australian tourists returning home and tourists coming to Australia) still have much room to grow. Both groups are at 21 percent of the pre-COVID level.

Once Aussies travel abroad on a large scale, we will see them return on a large scale. That won’t happen until the destination countries have strict travel restrictions before adding more international flights.

Who are the international visitors already coming back to Australia? The Chinese lockdowns impact Australia in many ways, including rising import costs. The lack of Chinese tourists and international students is the other. As of March 2022, our arrival inflow from China is at a sad four percent of the long-term pre-pandemic benchmark.

Our Kiwi neighbors have not yet resumed frequent trips to our shores (17 percent of pre-Covid normal). Americans are back at 20 percent, while the UK is at a stronger 38 percent. The good news is that Indians are already traveling to Australia in large numbers (52 percent).

Tourism Research Australia measures the economic value the tourism industry adds to each region. All states and territories look forward to increased tourism revenue. We can ignore the total dollar amount that tourists might add for now. Instead, let’s focus on the proportion that international visitors add to each state.

New South Wales and Victoria depend more on international tourists than the other states. The two largest states send their residents as visitors interstate, while major events in the two largest states attract international visitors. In addition, migrants in the two states attract international tourism as friends and family fly in to visit.

The trend is your friend. Visitor numbers are rising, and we will soon reach pre-COVID tourism levels. Is everything all right in paradise, then? Barely our local tourism industry faces many challenges.

As in any other industry, prices for all business inputs will rise. My advice here is the same as in any other industry. Invest in high-quality goods, materials, and technology. Businesses can save money in the long run as replacement and renovation cycles are extended.

The bigger problem is the skills shortage coupled with a lack of housing. Catering companies across the country are already struggling to find enough workers. How will they cope later in the year when more tourists come?

Can a company expect employees to relocate for minimum-wage jobs? Many jobs offered by tourist offices and hospitality establishments in tourist hotspots are relatively low-paid. The minimum hourly wage is just $20.33, adding 25 percent for incidental charging to come out at $26.95. It is unlikely that a tourism company could convince workers to relocate for such a low wage. Even if they found an employee willing to do so, they would not have affordable housing options.

So the endless discussion of affordable housing enters our discourse on tourism. Tourism organizations that want to convince employees to relocate must think outside the box and offer their employees a full package, including pay, lifestyle in a preferred location, and affordable housing.

On Melbourne’s Mornington Peninsula, Sorrento is a tourist hot spot and a notoriously expensive place to live. Two Christmases ago, local restaurants were so understaffed that they had to serve $40 meals on paper plates because there was simply no one available to do the dishes.

A group of investors bought and renovated the old Continental Hotel, a landmark in Sorrento. To ensure guests can eat from real plates, the investors also purchased an old retirement village to convert into cheap rental housing for their future employees.

Admittedly, that’s a big solution to a big problem. Not all tourist providers have pockets deep enough for such an investment. Perhaps smaller tourist companies should work together and provide housing for their future employees.

There will be significant tourism growth (both interstate and international). Now is the time to prepare for this wave; now is the time to think big.

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