International tourism: why growth is good but yield is gold

David Smith, Manager, Tourism Research Australia

 

For a long time tourism operators have been buoyed by the industry’s impressive economic performance.

At face value, results from Tourism Research Australia’s latest International Visitor Survey bring more of the same. Spend is up more than 5% over the year to A$44 billion. Overseas arrivals are at all-time highs.
With each release of new data, however, substantial changes become apparent. The most obvious is this: that the healthy 5% boost in spend is happening off the back of very sluggish growth in visitor numbers.

Tourism arrivals hit an international plateau

Between March 2018 and March 2019, overseas visitors to Australia grew at a tick over 2%. This is well below the 8% figure from 12 months earlier, and the lowest rate of growth in seven years.

Visits from China increased only 2% in twelve months, a growth rate overshadowed completely by the double digit figures of recent years. Australia is not alone in this space. France and Canada also report modest growth in Chinese arrivals, while the US and New Zealand show declines. Despite Brexit difficulties, the UK is bucking the trend, although its 16 per cent growth rate in visitors from China comes off a much lower base.

But Chinese tourism is not the only factor in play.

The latest ABS data shows that visitor numbers from South Korea and UK fell heavily over the last 12 months, while growth from the US and New Zealand is lethargic. An acceleration in visitor numbers from India and a resurgent Japan are the two high points among our top ten markets.

Australia a magnet for high-spending tourists

Although these are all sobering signs, what carries far greater importance is how long visitors stay, how much they spend and where they spend it.

Australia has the enviable reputation of having the highest traveller yield in the world. In 2019 the average international visitor spent A$5,200, with international airfares (23%), education (15%), accommodation (14%), and food and drink (14%) taking up most of that spend.

The most intriguing thing about these figures is the significance of education – a service not immediately associated with tourism.

 

Tourism spend 2018-19

 

The tourism value of an Australian education

International education has become an increasingly important part of tourism due to surging overseas student numbers. Students are easily our highest yielding cohort. In the year to March 2019 they spent an average of A$21,600 during their stay – the economic equivalent of five overseas holidaymakers or seven people visiting Australia to see friends and family.

 

Inbound tourism 2018-19

 

As a driver of industry growth, education visitors made up only 7% of total numbers, but accounted for 29% of overall spend and 47% of the increase in tourism spend in 2018. In contrast, visitors who arrived to spend their holidays in Australia comprised 46% of all visitor numbers, but contributed 38% of total spend. Visitors who came to see family and friends accounted for 30% of arrivals, but just 17% of total spend.

The challenges and opportunities of tourism

Global competition for tourists is intense. Today’s economic headwinds, trade tensions and geopolitical uncertainties are dampening consumer demand. Any slow-down or decline, however, can be more than compensated for by attracting a greater share of higher spending visitors.

Pivoting towards yield also reduces tourism’s environmental footprint and lifts public acceptance. A fully crewed maxi-yacht hosting a handful of well-heeled passengers will benefit small communities far more than coachloads of day trippers seeking a souvenir and toilet stop.

In a nutshell, growth is good but yield is better. In the interests of sustainable growth, the focus should be on hip pockets not head counts.