The Department of Resources, Energy and Tourism, Tourism
Australia and the Australian Trade Commission recently teamed up and published
a Tourism Investment Guide to promote Australia as an attractive tourism
investment destination in an attempt to reverse investment activity in that
sector, that can be described as sluggish at best. Burdened by strict labour
laws that award workers double or even triple pay for overtime, as well as an
exceptionally strong currency, the country now finds itself in the unusual
situation where despite high occupancy and record profitability, hotel
investment is flat. While not all is doom and gloom, and there are a number of
projects on the horizon, there are some worrying developments that may stunt Australia’s
tourism investment efforts before they even take off.
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| Image courtesy terradaily.com |
Is Australia ready
for Asia?
Given that Asia is the fastest growing tourism market in the
world, Australia sees demand from that region playing a key role in achieving
their projected tourism growth targets. And, not surprisingly, China stands on
top of the table.
Australia’s Tourism Forecasting Committee (TFC) expects that
between now and 2020, international visitor arrivals will grow by 3.2 per cent
per annum, with China at the forefront of delivering tourists to the Lucky
Country. While this year travelers from China to Australia are expected to
exceed 600,000, estimates see this number swelling to one million by 2020, bringing
a A$9 billion windfall to the country.
The aforementioned Tourism Investment Guide firmly positions
the country within Asia by referring to the ‘Asian century’ that is upon us. But
is the country’s tourism sector ready for the influx of Asian travelers?
A number of speakers at the recent ANZPHIC hospitality
conference in Sydney mentioned that the quality of travel experience in
Australia still leaves a lot to be desired for travelers spoiled by their Asian
experiences. And this not only counts for rural areas, but even the major
cities like Sydney, Melbourne and Brisbane where experiences don’t quite match other
major cities throughout the region.
Then there’s of course the worrying shortfall of
accommodation, which, based on the predicted influx of Chinese travelers, sees
the country in need of a whopping 40,000 plus rooms by 2020.
So high labour costs and strong currency notwithstanding,
why aren’t global hotel investment firms knocking down the doors to get a slice
of the Australian tourism action? Perhaps it is because there are two developments
on the horizon that are making people increasingly nervous: the dramatically
slowing Chinese economy and the slowing mining investment boom.
Australia’s Mining
Boom – not all good news
Just recently, Accor put out a statement claiming that
investing in new hotels in Australia's mining capital Perth was risky business
despite high occupancy rates and government incentives. In the hotel chain’s
view, hotel developers are not convinced the mining industry will guarantee
sustained room demand.
This is echoing the concerns about the impact of what is
generally known as Australia’s two-speed economy, which refers to the boom in
mining on one side and a gloomy outlook and heavy job cuts in most other
industries. With predictions that the mining boom will fade in the next two to
three years, the scenario of a two-speed economy stuttering to a halt are becoming
uncomfortably real indeed.
The China Bubble –
about to burst?
With dark clouds on the mining horizon, the efforts by the
Australian government to boost tourism, particularly from China, should be
commended, although you may argue that this initiative comes a little late in
the game.
But will China deliver on the high expectations? The recent
trickle of uneasy news about the state of the Chinese economy has certainly brought
up warning lights. China’s manufacturing activity is at a nine-month low and
contracting further, despite government intervention. What’s more, a recent piece by the Financial
Times outlined the worrying trends in China that are pointing to the “mother of
all credit bubbles” created by the property boom. What goes up, must come down
and when the bubble bursts it will have a huge domino effect that is likely to
engulf the whole country.
How deeply this will impact China’s emerging middle class,
which Australia targets as its new core inbound travel market, is anyone’s
guess. China is a big country and even with a slowed down economy will have
plenty of people moving into the middle class ranks and fulfilling their
appetite for travel. So for my money, even if the numbers don’t stack up quite as
rosily as predicted by the government, China remains a fairly solid target for
inbound tourism, particularly to offset a potentially disastrous slowing in the
mining industry.
But however big the influx of travelers may turn out to be,
Australia can’t be complacent when it comes to delivering a sophisticated
travel experience. Australia lacks quite dramatically the
quality of lodging and service levels found elsewhere in Asia and has to be a
lot more accommodating to win over the Chinese middle class traveler. Natural
beauty is just not enough of a draw card, particularly not when there are many
countries within easier reach to China than Australia.
Having said that though, Australia has a distinct advantage
compared to the US, which is only a marginally longer flight distance from
China. While the Chinese call the US Měiguó
or “the beautiful country”, given that the ‘Asian Century’ is upon us they may
be more drawn to “ao da li ya”, the phonetic name of Australia in Chinese, which
means “harbour, big, advantage, Asia”.
