Tourism Investment Monitor 2019–20

Future changes in the investment landscape

The changing nature of the Australian tourism industry is likely to have a significant impact on tourism investment. Many of these changes aren’t tourism specific. They hinge on human behaviours and the way these might adapt through, and because of, the pandemic.

Moving towards more flexible work

People will likely work more flexibly. This will reduce the need for office spaces in city centres and may reduce future business travel. This could have 2 major impacts:

  • A reduced need for inner city hotels. In 2019, business travellers accounted for 46% of all domestic nights in capital city hotels or equivalent. This was only a quarter of all domestic business nights (23.4 million nights).
  • New investments could be lower value. They could be centred on the redevelopment of office buildings (brown field investment), rather than higher valued new developments (green field investment) which often occur in the tourism investment pipeline.

A stronger consumer focus on hygiene, safety and preserving greater physical distances could see new opportunities for smaller and more spaced out establishments and establishments that demonstrate strong adherence to safety protocols without compromising the visitor experience.

Shifting toward outdoor and nature activities

People will shift towards outdoor and nature activities. Outdoor and nature activities have strong appeal as the world looks to recover from COVID-19. The reasons for this are economic and health-related:

  • They are often a low cost experience, and allow for spontaneity as they usually need limited bookings.
  • Outdoor and nature experiences provide clean air and allow for adequate social distancing.

The tourism industry has already experienced early signs of this. In the June quarter of 2020, domestic overnight trips involving arts heritage or social activities fell by more than 90%. In comparison, outdoor and nature activities fell only 60-75%. This was likely driven by a limited ability to participate in indoor activities.

Even when demand for arts and cultural activities recovers, COVID-safe restrictions such as capacity constraints will affect overall profitability for current and future ventures. This could have an impact on the arts, recreation and business services pipeline, with a future focus on outdoor activities and attractions.

Shifting towards more regional holidays

People generally don’t stay home for a holiday. More than two-thirds of Australia’s population live in a state capital city. This means the 17.1 million people who reside in capital cities may be looking towards regional destinations. Only around 10% of domestic overnight trips are ‘intra-regional’. This means either more trips to nearby locations by car, or more reliance on domestic aviation for longer trips to other capital cities. Both of these could have an impact on the investment landscape.

The more likely event in the short-term is a shift towards short, drive getaways to nearby regional locations. 53% of hotel rooms were located in capital cities (151,707 rooms) in 2019–20 (Source: STR, Australian Accommodation Monitor, 2019–20). However, capital cities only received 50% of hotel nights.

While regional areas generally have lower occupancy rates, domestic holiday patterns focus on weekend and school holidays, which creates surge demand.  Increased visitation to regional areas will need investment in new tourism infrastructure to meet growing demand.

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A surge in capital city breaks will increase the use of pre-existing tourism supply, particularly arts and recreation and accommodation. However, in the longer term it may strain the current transport and access infrastructure.