Against a backdrop of Australia’s relative success in containing COVID-19, accommodation and hospitality businesses are reeling from the consequences of constrained tourism. Despite easing restrictions and businesses reopening, these businesses continue to face the heavy burden of the pandemic, with complete recovery out of reach in the short-term.
‘Revenue across accommodation and hospitality is not anticipated to approach pre-pandemic levels until 2025-26 and 2026-27, respectively. Minimal inbound tourism and the slow rollout of Australia’s COVID-19 vaccine program are jeopardising the path to recovery,’ said IBISWorld Senior Industry Analyst Suzy Oo.
Weak tourism activity
For the year ending March 2021, total international and domestic tourism losses totalled $82.9 billion, with international visitor expenditure declining by 98.1%.
‘International Tourist Visitor Nights are expected to rise by 486.0% in 2021-22, to reach 213.9 million nights. However, this is significantly below the levels seen before the outbreak, with international tourist visitor nights totalling 290.4 million in 2018-19,’ said Ms Oo.
As New Zealand is one of Australia’s top five inbound tourism markets, the trans-Tasman travel bubble is expected to heavily contribute to international tourist visitor nights rising in the current year. The number of people travelling to visit friends and relatives is anticipated to grow at a robust rate in the current year.
‘A rise in domestic tourism is providing much needed relief for accommodation providers and hospitality firms. Firms in the Serviced Apartments industry are now relying heavily on domestic leisure travellers and corporate clients,’ said Ms Oo.
However, this is unlikely to sustain the accommodation sector. Short-term outbreaks across Australia and fluctuating border closures pose a threat to interstate travel and trans-Tasman quarantine free travel. In particular, the worsening delta strain outbreak in New South Wales is expected to lessen the benefits of the New Zealand travel bubble arrangement.
Worker shortage crisis
Skills shortages represent another challenge for these businesses. Partly due to lower migration numbers, Australia currently has critical shortages in specialised hospitality talent. In May 2021, job vacancies were 159.9% higher in accommodation and food services than in February 2020, reaching a historical high of 38,200 vacancies.
‘The current labour crisis manifested long before the pandemic, due to weak wages growth, workforce casualisation and insufficient quality training to expand the pool of local hospitality talent,’ explained Ms Oo.
Trading restrictions and sporadic lockdowns have exacerbated these factors, with increased job insecurity weakening interest in hospitality jobs. In particular, rising regional property prices are deterring job seekers from applying for regional hospitality jobs, prompting some operators in the Restaurants industry to increase pay to attract new applicants.
Sector outlook
Total tourist visitor nights, which include nights spent in Australia by both international and domestic tourists, is forecast to grow at an annualised 5.5% over the five years through 2026-27. The Hotels and Resorts industry is projected to benefit significantly from this trend, with revenue forecast to expand at an annualised 9.1% over the same period.
‘Leisure travel and staycations are anticipated to drive this growth, as travellers increasingly prioritise the quality of an experience over price in the aftermath of the pandemic. Meanwhile, the hospitality sector will rely heavily on a high level of immunisation against COVID-19 to fully revive business,’ said Ms Oo.
The vaccine rollout, and the pace and extent of easing travel restrictions will shape the tourism and hospitality sectors’ path to complete recovery. Food and beverage services industries, mainly Catering Services and Fast Food and Takeaway Food Services, are projected to expand at a relatively slower pace than the accommodation sector, primarily due to intensifying competition among food service establishments.
‘Reforms by state and federal governments are also required to tackle the hospitality talent shortage. If not addressed, hospitality firms will likely struggle to keep pace with an anticipated rebound in demand from international tourism,’ said Ms Oo.
IBISWorld reports used to develop this release:
- Serviced Apartments in Australia
- Hotels and Resorts in Australia
- Restaurants in Australia
- Catering Services in Australia
- Fast Food and Takeaway Food Services in Australia
- International Tourist Visitor Nights
- Total Tourist Visitor Nights
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
