The Weaker Australian Dollar isn’t the only Thing Fuelling Tourism

Australian One Dollar Coins over Black
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The idea that tourism could replace the mining industry as the pillar of the Australian economy might seem fanciful. But there are signs that tourism is still growing, and that the declining Australian dollar isn’t the only thing propping it up.

The dollar — which has remained below 80 cents against the US dollar since the start of the year — has been only one side of the story for tourism’s growth. Tourism has grown steadily over the past four years, and covers the period when the Aussie dollar was at parity with the US dollar. That suggests that the drop in value of the dollar alone can’t account for the industry’s growth.

Industry experts believe that the growth in tourism has benefitted from an increase in investments on infrastructure and events. This is being led by the federal and state governments, who have identified tourism as a way to offset the drop in revenues from the mining sector.

This new focus on tourism has meant increased spending on stadiums and conference centres. Stadiums now hold all kinds of events year round, and the hosting of non-sporting events has become the primary driver of profitability at many of them.

On top of the spending on infrastructure, better marketing campaigns and an improvement in flight capacity have attracted a larger number of visitors to Australian shores.

The International Visitor Survey, which measures the total number of inbound travellers to Australia, showed that there were 6.8 million arrivals in a 12 month period leading up to September 2014. And that was enough to pump AU$102 billion into the Aussie economy, with the bulk of visitors coming from India and China.

Simon McGrath, the chief executive of Accor SA [EPA:AC] Asia Pacific, which owns a number of hotel chains including Novotel, said the visitor numbers were encouraging further investment in Australia. He believes investors are bypassing other destinations in Asia because they can get solid returns in Australia.

Accor are currently building 12 new hotels across the nation.  That’s been reflected in their stock, which has risen by AU$15 since the start of the year, and is now trading at AU$49.97 a share.

The problem for Australia’s tourism industry comes from within

The major obstacle facing Australian tourism comes from within our borders. Domestic travellers are finding it cheaper to travel overseas than to holiday closer to home. Many people are finding Australian prices too high, so they’re foregoing the local destinations like the Gold Coast in favour of Bali, where their dollar can take them further.

But as long as international travellers keep coming, the industry will remain robust. Further infrastructure investments will continue to push tourism — and events and hospitality industries — to new heights.

Mat Spasic

Contributor, The Daily Reckoning

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The Daily Reckoning offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, The Daily Reckoning delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, The Daily Reckoning is published in 7 countries with a worldwide readership of almost 1 million people.
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