The AnnuAl VicToriA Tourism indusTry PerformAnce And ouTlook rePorT March

 The AnnuAl VicToriA Tourism indusTry PerformAnce And ouTlook rePorT March 2008 introDuction The Tourism indusTry PlAys A significAnT role in The VicToriAn economy, conTribuTing To inVesTmenT, ouTPuT, exPorT eArnings And jobs. The $11 billion indusTry currenTly emPloys 159,000 VicToriAns And comPrises 5.3% of sTATe gdP. This report provides a snapshot of current tourism industry performance based on publicly available information including price, output and consumption measures. It also draws on industry knowledge. It is not intended to be a definitive scorecard, but rather an indicative summary of recent trends and prospects. This analysis suggests Victoria’s tourism industry has been performing relatively well on a number of indicators including growth in; capital investment, occupancy rates, and international visitor numbers. However, there is room to improve in areas including; spending by international visitors in regional Victoria, and growth in domestic visitor numbers. While often comparable with performance in New South Wales, Victoria is generally behind performance in Queensland. There are many trends and challenges influencing the tourism industry, including the growing awareness of environmental issues, the skills and labour shortage, and the persistently high Australian dollar. The industry will need to identify potential risks and opportunities arising from these and develop successful mitigation and adaption strategies to ensure risks are minimised and potential benefits are realised. Definition: The Tourism indusTry can be difficulT To define. in This reporT Tourism is used in a broad sense and incorporaTes producTs and services provided To inTernaTional and domesTic day and overnighT visiTors. WhAT does The Tourism indusTry look like? thE industry is charactErisEd by: – A high level of internal and external competition – Low industry concentration with many small players – A high degree of product and service differentiation – Largely service based and labour intensive operations – A generally low level of capital intensity. key findings strong annual groWth in builDing approvals in recent years. positive but Declining annual groWth in room availability. stable groWth in Domestic air passenger volumes. variable but positive groWth in international air passenger volumes. Value of Building Approvals (Accommodation) – Annual Growth (year ending december) 200.0 150.0 100.0 50.0 0.0 -50.0 2003 2004 2005 2006 2002 2007 VIC NSW QLD Trend (VIC) Room s Available (Establishm ents With 15+ Room s) - Annual Grow th 6.0 Rooms Available (Establishments With 15+ Rooms) – Annual Growth (year ending september) Percentage (%) VIC NSW QLD Trend (VIC) Percentage (%) 4.0 2.0 0.0 -2.0 2001 2002 2003 2004 2005 2006 2007 capital investment anD capacity What Do the figures tell us? – After lagging over the period 200206, the value of building approvals for accommodation in Victoria over 2007 exceeded $850 million and surpassed the value of approvals in New South Wales ($233m) and Queensland ($250m). This indicates confidence within the industry. Growth in the value of building approvals for accommodation in Victoria grew significantly over 2006 and 2007, exceeding growth in New South Wales and Queensland which largely declined. – With the exception of 2007, Victoria has displayed solid growth in the number of accommodation establishments over the past seven years comparable with, or exceeding, New South Wales and Queensland. Average annual growth over 2000-07 was 2.2% in Victoria, equal to Queensland (2.2%) but greater than New South Wales (1.2%). – Growth in the number of rooms available, in establishments with fifteen or more rooms, has been variable although comparable with growth in New South Wales over the past three years. Average annual growth in Victoria over 2000-07 was 2.8%, higher than growth in New South Wales (1.3%) and Queensland (1.7%). – While measuring room availability in large establishments (15+ rooms) by no means provides a complete measure of the tourism industry, it does provide an indication. In the September 2007 quarter there were 795 establishments with fifteen or more rooms, providing a total of 37,742 rooms in all. Almost 65% of these establishments and 40% of these rooms available are located in regional Victoria. By comparison over the same period, there were 461 establishments with five to fourteen rooms, providing a total of 4,417 rooms in all. Almost 95% of these smaller establishments and rooms are located in regional Victoria. – Airport passenger volumes provide an indication of capacity in the aviation sector, a key facet of the tourism industry. The number of international passengers over the period 2000-07 has grown at an average annual rate of 6.7%, compared to the number of domestic passengers which grew at an average annual rate of 5.6%. – Strong growth has also occurred in aircraft movements. Over the period 2000-07 international aircraft movements increased at an average annual rate of 4.1%, while domestic aircraft movements increased at an average annual rate of 3.0%. Further growth is expected over 2007/08 as existing airlines boost services and new airlines, including Korean Air and Tiger Airways Australia, establish services. What Do those in the tourism inDustry say? – A sizeable level of new investment is expected over the next twelve months. However, the rate of investment growth is expected to ease. – Investment is expected in both plant and equipment and buildings and structures. – Benefits of this investment include; improved competitiveness and profitability, increased productivity and an ability to deliver new products and services. – Potential barriers to investment include; the cost of and availability of capital and regulatory issues such as the planning system. sourcE: Vtic surVEy Airport Passenger Volumes (year ending June) 20.00 15.00 International Domestic Trend International Trend Domestic Millions 10.00 5.00 0.00 -5.00 -10.00 2000 2001 2002 2003 2004 2005 2006 2007 Employment (Establishments with 15+ Rooms) - Annual Growth (year ending september) 4.0 VIC NSW QLD Trend (VIC) key findings moDerate groWth in employment. Percentage (%) 2.0 0.0 -2.0 -4.0 -6.0 2001 2002 2003 2004 2005 2006 2007 employment What Do the figures tell us? – Between 1997/98 and 2003/04 employment in Victoria’s tourism industry increased 19%, (25,000 jobs) bringing total state tourism employment to 159,000. By 2016, it is expected that another 66,000 new jobs will be created. – An estimated 6.6% of Victoria’s total workforce is employed directly and indirectly in Victoria’s tourism industry, an increase on the 6.2% employed in 1997/98. At a national level, direct and indirect tourism employment accounts for 8.1% of the total workforce, while direct employment accounts for 4.6%. – Tourism directly employs 74,085 people in metropolitan Melbourne and 61,000 people in the regions. – The tourism industry is largely service based and labour intensive, and has a relatively high number of part-time and casual employees. – Many tourism or tourism-related businesses are small-to-medium enterprises, employing less than twenty staff. – Industries with the largest proportion of tourism related employment include: Accommodation, Cafes and Restaurants; Retail Trade and Transport and Storage. – Given the absence of timely information on employment, it is difficult to make an accurate assessment. A proxy measure has been used to provide an indication. The number of people employed by hotels, motels and serviced apartments with fifteen or more rooms increased moderately over 2006 (1.0%) and 2007 (0.9%), following a decline in 2005 (-0.8%). Growth in other states also fluctuated. Over the period 2000-07 employment levels in Victoria increased at an average annual rate of 0.2%, below that of Queensland (0.6%) but above that of New South Wales (-1.1%). What Do those in the tourism inDustry say? – After more than a year of upward pressure on wages, there are expectations that pressure will start to ease over the coming quarter. – Employment growth over the past twelve to eighteen months has been positive but moderate. Growth is expected to slow over the coming quarter. – While a skills and labour shortage exists within the industry, variations occur across different regions and operations. There is a shortage of both generalist and specialist skills. Specialist skills required include: language and cultural skills and specialty bakers and chefs. – Some of the most popular solutions being implemented by industry include: upskilling current staff, offering increased remuneration and other incentives, and employing mature aged workers. – There is a recognised need for relevant, accessible, targeted training, and further promotion of careers within the industry, including the establishment of development plans and career paths. sourcE: Vtic surVEy Tourism and evenTs sTraTegy 2016  1 key findings positive anD increasing groWth in average room yielD. strong recent groWth in takings for hotel, motel anD serviceD apartments (15+ rooms), anD holiDay flats, units anD houses. Average Room Yield (Establishments with 15+ Rooms) – Annual Growth (year ending september) 7.0 VIC NSW QLD Trend (VIC) Percentage (%) 3.0 -1.0 -5.0 2001 2002 2003 2004 2005 2006 2007 Takings from Accommodation by Type – Growth 2006-07 (comparison of september quarters) 20.0 16.0 12.0 8.0 4.0 0.0 HMSA HMSA (5-14 Rooms) (15+ Rooms) Caravan Parks (Short-term) Caravan Holiday flats, Parks units and (Long-term) houses Visitor Hostels profitability What Do the figures tell us? – In the absence of a more specific and timely indictor of total industry profitability, a proxy has been used. The average annual growth in room yield from accommodation establishments (15+ rooms) in Victoria was 3.2% over the period 2001-07. This is higher than growth in New South Wales (2.5%) but less than growth in Queensland (4.7%). – Annual growth over 2006 and 2007 has been strong in Victoria, recording 7.1% and 4.8% respectively. Percentage (%) – Over the September 2007 quarter, hotels, motels and serviced apartments (15+ rooms) contributed 83% of total takings. By comparison, smaller hotels, motels and serviced apartments (4-14 rooms) contributed 4%, and short-term caravan parks contributed 7%. – When comparing takings in the September 2007 to the corresponding period in 2006, takings from holiday flats, units and houses increased 16%, followed closely by takings from hotels, motels and serviced apartments with fifteen or more rooms (12%). What do thosE in thE tourisM industry say? – Profitability over the past twelve to eighteen months has been variable. Despite generally solid growth in sales and average selling prices, profitability has been negatively impacted by a tight labour market and upward pressure on wages. sourcE: Vtic surVEy 2  Tourism and evenTs sTraTegy 2016 Room Occupancy Rate - Annual Change (year ending september) key findings VIC NSW QLD Trend (VIC) Percentage Points 3.00 2.00 1.00 0.00 -1.00 -2.00 -3.00 2001 2002 2003 2004 2005 2006 2007 International Domestic Linear International Linear Domestic positive groWth in room occupancy rates over the past five years. VIC NSW QLD Linear (VIC) International Domestic Linear International Linear Domestic occupancy rate What Do the figures tell us? – The room occupancy rate gives an indication of demand within the tourism industry. Consideration should been given to the influence of supply however, as a lower occupancy rate can either indicate lower demand for accommodation by visitors, or an increase in the overall supply of rooms, or both. – After declining in 2001 and 2002, room occupancy rates within Victoria have continued to increase over the five years to 2007. After lagging behind New South Wales over 2002-05, room occupancy rates in Victoria exceeded that of New South Wales in 2006 and 2007. Occupancy rates in Victoria remain lower than those in Queensland. Over the year ending September 2007, occupancy rates in Victoria were 65.1%, higher than rates in New South Wales (63.9%) but lower than those in Queensland (67.5%). – Annual growth in occupancy rates within Victoria has remained positive over the past five years, and in 2007 exceeded growth in New South Wales and Queensland. – Hotels, motels and serviced apartments located in Melbourne tend to have higher occupancy rates regardless of establishment size. In the September quarter 2007 Melbourne establishments with fifteen or more rooms had an average occupancy rate of 75.5%, much higher than those with less than fifteen rooms (53.9%). In regional Victoria, occupancy rates were 44.7% and 37.0% respectively. – When comparing the September 2007 quarter to the corresponding period in 2006, growth in occupancy rates has been dominated by establishments with fifteen or more rooms. – In regional Victoria, the Goldfields, the Murray and Victoria’s High Country have exceeded the regional average room occupancy rate in both small and large establishments. What Do those in the tourism inDustry say? – Over the February quarter 2008, 13% of tourism businesses, many of whom provide accommodation, reported operating at a capacity level of 80% or more. – Almost 40% of tourism businesses reported operating at less than 50% capacity, an increase on the corresponding period in the previous year. – There are indications that spare capacity exists. This may in part be due to recent growth in capital investment in accommodation. sourcE: Vtic surVEy Tourism and evenTs sTraTegy 2016  3 key findings Percentage (%) soliD groWth in the number of international visitors, but a Decline in the number of Domestic Day trip visitors. soliD groWth in international visitor nights, but a Decline in intrastate visitor nights. Visitor Numbers – Annual Growth 15.0 10.0 5.0 0.0 -5.0 -10.0 -1 5.0 2001 2002 2003 2004 2005 2006 2007 INTERSTATE OVERNIGHT VISITORS INTRASTATE OVERNIGHT VISITORS DOMESTIC DAY TRIP VISITORS INTERNATIONAL VISITORS Visitor Nights – Annual Growth 25.0 INTERNATIONAL DOMESTIC INTRASTATE DOMESTIC INTERSTATE Percentage (%) 1 5.0 5.0 -5.0 -1 5.0 2001 2002 2003 2004 2005 2006 2007 visitor numbers anD nights What Do the figures tell us? – Demand within the tourism industry can be estimated by measuring both the absolute number of visitors and the number of ‘visitor nights’ – that is, the total number of nights spent in Victoria by visitors. – Over the period 2000-07, the number of international visitors increased at an average annual rate of 4.0%. By comparison interstate overnight visitors increased by 2.1%, intrastate overnight visitors declined 0.9%, and domestic day trip visitors declined 2.7%. – Over the year ending September 2007 there were 1.5 million international visitors. By comparison there were 35,000 domestic day trip visitors, almost 12,000 intrastate overnight domestic visitors, and 5,300 interstate overnight domestic visitors. – Regional Victoria is a popular destination for day trip visitors, with almost two thirds of all day trips made to regional Victoria. – Victoria currently lags behind other states as a destination for international visitors with 28% of all visitors to Australia visiting Victoria over the year ending September 2007. By comparison 55% of international visitors visited New South Wales and 42% visited Queensland. – Over 2007 international visitors spent over 31 million nights in Victoria. Despite fewer overall international visitors than other competitor states, there is growth occurring both in the number and length of stay of international visitors. – Not only are more international visitors coming to Victoria, they are also staying longer. Over the period 2000-07 international visitor nights increased at an average annual rate of 7.0%. By comparison interstate visitor nights increased 2.3% over the same period. Intrastate visitor nights declined at an average annual rate of almost 1.0% over this time, as Victorians choose to spend fewer nights away from home. – Visitors from China, New Zealand, United Kingdom, United States, and Singapore tend to spend the most time in Victoria. – Over the period 2000-07 growth in international visitors has been dominated by China, with visitor nights increasing at an average annual rate of 24%. Other countries displaying strong growth include; Indonesia (10%), Singapore (9.5%), Korea (8.4%), Malaysia (7.5%), Germany (7.1%), and the United Kingdom (6.6%). Many of these represent future growth markets. 4  Tourism and evenTs sTraTegy 2016 Day Visitors Total Expenditure ($ Millions) year ending sepTember 2007 desTinaTion expendiTure only. excludes long disTance TransporT and air Travel expenses Domestic Overnight Visitors International Visitors key findings Domestic overnight visitors make a significant contribution to the total expenDiture by visitors to victoria. the majority of spenDing by international visitors occurs in melbourne. there has been significant groWth in international visitor spenDing. $ 3,270 $ 6,969 $ 2,995 Expenditure by Purpose (%) Holiday Visiting Friends and Relatives Business Education Other International year ending sepTember 2007 Domestic 58% 24% 8% 10% 58% 21% 18% 3% 27% 17% 13% 38% 5% Linear (%) Share of ExpenditureInternational Regional Victoria Melbourne Linear Domestic 60% 40% 52% 48% 8% 92% year ending sepTember 2007 Annual Average Growth 1999/06 (%) including package expendiTure for inTernaTional visiTors 0.5% 3.5% 9.2% Expenditure per Visitor year ending sepTember 2007 International excluding package expendiTure for inTernaTional visiTors Domestic excluding airfares and long disTance TransporT cosTs for domesTic overnighT visiTors Linear International $ 94 $ 405 $ 2,028 Linear Domestic visitor spenDing What Do the figures tell us? – Visitor spending provides an indication of the strength of the tourism industry. – Among domestic visitors, those travelling for holiday purposes have the greatest level of expenditure, followed by those visiting friends and relatives, and those travelling for business purposes. – Among international visitors, those travelling to Victoria for education purposes have the highest level of expenditure, largely resulting from the nature of their travel and length of stay. – Domestic day trip visitors spend around 60% of total expenditure in regional Victoria, while expenditure by domestic overnight visitors is more evenly spread. By contrast international visitors spend the vast majority of their total expenditure in the metropolitan area (92%). This is comparable to New South Wales (89%), but higher than Queensland (56%). – Total expenditure by international visitors has increased at an average annual rate of 9.2% over the period 1999-06, far exceeding domestic growth. – International visitors spend an average of $2,028 per person (excluding package expenditure). This is significantly higher than expenditure by domestic visitors. – Excluding long distance transport and air travel expenses, total expenditure for international visitors equated to $2.9 billion over the year ending September 2007. This is less than total expenditure by international visitors in both New South Wales ($5,380m) and Queensland ($3,340m). Tourism and evenTs sTraTegy 2016  5 outlook WhAT globAl, nATionAl And locAl Trends Are influencing The Tourism indusTry in VicToriA? – Growing awareness of environmental issues, including climate change and the challenge of green house gas emissions and the transport industry. – The ongoing skills and labour shortage. – Increasing interest in nature-based tourism and demand for ‘unique experiences’. – Growing availability of cheap flights and an increasing supply of seats. – Ongoing technological advances, including increasing use of teleconferencing, VIOP, and the internet. – Demographic changes including the ageing population and growth in mature-aged travellers. – Increasing pressure on leisure time and discretionary spending (including rising interest rates, petrol prices and house prices). – Geo-political tensions. WhAT Are some of The currenT chAllenges fAcing The Tourism indusTry in VicToriA? – Carbon conscious travellers and Australia’s location as a long-haul destination. – The need to implement an ongoing and wide reaching certification or accreditation program, to provide assurance as to the quality of products and services. – Rising interest rates, house prices and persistently high oil and petrol prices, placing pressure on discretionary spending. – The persistently high Australian dollar, making external destinations more attractive. – The skills and labour shortage. – The impact of the ongoing drought and other environmental events such as bushfires and floods, and the perception visitors have of these. WhAT is required To ensure The Tourism indusTry conTinues To groW? – High quality products, services and experiences. – Product and service differentiation and innovation, giving consideration to the preferences of consumers, environmental issues and long-term sustainability. – Access to suitably qualified and experienced workforce. – Ongoing development and training of employees. – Collaboration within the industry to create common marketing messages and to leverage off these to ensure maximum benefit for all. – Planning and provision of sufficient and suitable infrastructure, including accommodation, to meet expected future demand. – Adoption of new technology including online searching, booking and payment facilities. for furTher informATion PleAse conTAcT: bindi goVe dePuTy ceo VicToriA Tourism indusTry council Phone: 03 8662 5170 emAil: info@VTic.com.Au sources australian burEau of statistics tourisM rEsEarch australia tourisM Victoria ibisWorld MElbournE airport city of MElbournE tourisM plan 2007-2012 10 yEar tourisM and EVEnts industry stratEgy Victoria tourisM industry council (Vtic) surVEy of pErforMancE and outlook