Continued global difficulties in containing the spread of COVID-19 has severely constrained revenue for both the Hotels and Resorts industry and Caravan Parks, Holiday Homes and Other Accommodation industry in Australia. Despite the country’s international borders remaining closed, domestic travel is beginning to ramp up again, providing both industries with a lifeline. Domestic travel is the largest market for Australian tourism. However, further outbreaks of COVID-19 have limited consumer confidence as it has increased the likelihood of sudden cancellations.
The main reasons for domestic travel include:
- Visiting family and friends
- Holiday and Leisure
- Business and study
Australians that have been separated from family and friends due to strict lockdowns restrictions are more likely to travel when measures are eased and drive demand for accommodation services. Demand from travel for business and study is anticipated to remain subdued as businesses and organisations continue to conduct meetings and classes online.
Impact of COVID-19
Rising domestic travel has positively influenced revenue streams for the accommodation sector in the current year. COVID-19 restrictions have led to a significant fall in revenue for the Hotels and Resorts industry, partly due to a higher density of operators in metropolitan areas and cities. Hotels in regional areas along the eastern seaboard were already struggling with reduced tourism demand due to severe bushfires that discouraged tourism in the summer of 2019-20. In comparison, operators in the Caravan Parks, Holiday Houses and Other Accommodation industry are generally located within regional destinations and have had a more subdued demand reaction in response to the COVID-19 pandemic. The Caravan Parks, Holiday Houses and Other Accommodation industry is expected to fall at annualised 8.5% over the five years through 2020-21 to $2.7 billion and the Hotels and Resorts industry is anticipated to decline at an annualised 13.5% to $6.0 billion over the same period. As a result of plummeting demand attributable to the COVID-19 pandemic, employment numbers for both industries have contracted considerably over the past five years.
Interstate travel
Renewed COVID-19 outbreaks over the current year have occurred in most states and territories, which have prompted sudden lockdowns and easing restrictions to be reversed. However, several of these lockdowns only included metropolitan areas and not the state as a whole. For example, the Perth metropolitan area in Western Australia entered a five day lockdown in January 2021 with the rest of the state exempt from the same restrictions. Movement between states and territories without a mandatory 14 day quarantine period is increasing, supporting revenue growth for the accommodation sector. However, constant rule changes to state borders are likely to contribute to further demand uncertainty for accommodation sector operators that are located in metropolitan areas around the country.
Intrastate travel
Prospects for intrastate travel is more optimistic as it bypasses state border restrictions. Most of the Australian population reside in metropolitan or capital cities, making regional destinations preferable for leisure and holiday trips. Additionally, these cities have generally been subject to the strictest COVID-19 restrictions across the country. Subsequently, residents of these cities are more likely to want to avoid travelling to metropolitan destinations. Regional destinations have generally been less exposed to COVID-19, reducing the risk of sudden cancelation due to lockdown measures. These factors are anticipated to support regional travel activity over the next five years.
Regional travel is anticipated to be further supported by government initiatives. All State and Territory Governments have implemented a travel voucher scheme to be used on intrastate travel. Most of these travel vouchers are aimed at supporting regional areas that were also affected by the bushfires in 2019-20. For example, Victorian residents are eligible for $200 travel vouchers if they are intending to travel regionally and spend over $400 on accommodation, tours and sightseeing.
Renewed demand
Revenue for the Caravan Parks, Holiday Homes and Other Accommodation industry is projected to grow at an annualised 7.6% over the five years through 2026, to $3.8 billion, as industry activity rebounds from the COVID-19 pandemic. Domestic tourists are likely to drive demand growth in the short-term, as Australia’s international borders are unlikely to fully reopen until late-2021. However, demand from international travellers may be fast tracked if the trans-Tasman bubble is expanded or if the Australian Government agrees to travel bubbles with other countries that have successfully contained the spread of COVID-19. Additionally, the timing of the industry’s recovery will likely depend on the rollout of a COVID-19 vaccine in Australia. Government travel and border restrictions will significantly affect revenue in the Hotels and Resorts industry, which is forecast to grow strongly at an annualised 17.0% over the five years through 2025-26, to $13.0 billion.
IBISWorld industry reports mentioned in this report:
H4401 – Hotels and Resorts industry in Australia
H4409 – Caravan Parks, Holiday Homes and Other Accommodation industry in Australia
