Australia domestic travel: businesses may be more constrained than individuals in reinstating plans

14 December, 2021

The COVID-19 pandemic has had a "devastating effect" on Australia's visitor economy, and a new report from the Australian Government estimates tourism losses since the start of the pandemic and the middle of 2021 at more than AUD101 billion. Domestic tourism, which accounts for a large majority of the total visitor economy, has also been severely affected by the pandemic, however, the recovery is already underway in this sector and is expected to continue in 2022, albeit it is acknowledged that businesses may be more constrained than individuals when reinstating travel plans.

The latest Domestic Tourism Forecasts 2021-2022 to 2025-26 from the Australian Trade and Investment Commission, which combine evidence based models with market intelligence, relevant research, and current available data projects domestic tourism to rebound at a rapid pace to most recent lockdowns, return to around its pre-pandemic level in 2022-23, then surpass that previous peak in 2023-24.

Domestic visitor nights declined sharply but recovered rapidly

The report shows domestic visitor nights declined sharply in early 2020 as a result of the nationwide pandemic-induced lockdown. But, as those restrictions eased, domestic tourism demand started returning fairly swiftly to pre-pandemic 2019 levels with domestic visitor nights in Jan-2021 to Apr-2021 only down -6% on the first four months of 2019, and +35% above the same period in 2020.

Domestic visitor nights declined again in mid-2021 as several states experienced widespread lockdowns in response to Delta variant outbreaks. The report expects domestic tourism to rebound at "a similarly rapid pace" from these lockdowns, supporting a return to around its pre-pandemic level in 2022-23, and then surpassing that previous peak in 2023-24.

Future lockdowns likely to be 'much more isolated and infrequent'

In the future the impact of pandemic-related restrictions is anticipated to be much diluted, based on the National Plan to transition Australia's National COVID-19 Response. The report anticipates them to be "much more isolated and infrequent" in what would be a very positive outcome for the domestic visitor economy.

The forecasts indicate that domestic tourism has resumed its recovery from Oct-2021, following the easing of restrictions in parts of Australia. It projects that growth in visitation for the rest of 2021-22 to continue through 2022-23. Domestic tourism is forecast to return to an average pre-pandemic level in 2022-23, and to surpass its 2018-19 peak the following year, then a more moderate growth trajectory is forecast for the period between 2023-24 and 2025-26.

Day trips and overnight trips will grow at varied rates

The number of Australian domestic day trips is forecast to increase +14% in 2021-22 and +15% in 2022-23, according to the forecast. The recovery in domestic day trips is stronger than overnight trips in the current year (2021-22) as the continued near-term risk of lockdowns and state border closures during part of this period imposes a larger negative impact on overnight trips than on day trips - day trips generally require less pre-planning than overnight trips and can be undertaken closer to home.

Day trips are expected to see continued growth in 2022-23, returning to pre-pandemic levels, as Australians take advantage of opportunities to reconnect with family and friends, attend events, and explore their surroundings.

The number of domestic overnight trips is expected to increase +4% in 2021-22 and then +21% in 2022-23 to reach over 111 million overnight trips. The forecast visitation in 2022-23 represents an average of five overnight trips per year for each person aged 15 years or older. This is a similar rate of travel per person as in pre-pandemic years.

Leisure travel (holiday and VFR) to recover faster than business travel in coming years

All three major travel segments, holiday, visiting friends and relatives (VFR), and business travel, are forecast to rebound, but by travel purpose, leisure travel (holiday and VFR) is projected to recover faster in coming years than business travel.

Travel for VFR will be the first segment to fully recover, as Australians seek to reconnect with family and friends after an extended period of separation during the pandemic, while travel for holiday purposes, the largest category, will contribute most to growth over the next two years. The report shows holiday travel declined by more than the other categories relative to the 2018-19 level, reflecting its discretionary nature and restrictions in place for this type of travel.

Slower growth in business travel expected in the near-term

The report foresees a slower growth in business travel in the near-term and overcoming community concerns regarding travel safety will be "critical" to the recovery in business travel.

The availability of efficient alternative communication methods will be one area influencing the rate and scale of business travel recovery as businesses permanently adopt some changes to business communication methods that were implemented during the pandemic, such as virtual meetings instead of face-to-face meetings for more routine matters.

The upturn will also be less pronounced as there is less pent up demand in this sector because essential business travel was permitted during travel restrictions. Also, business travellers tend to have shorter stays and undertake date dependent travel.

The forecast acknowledges the risk of changes to travel schedules may deter business travellers more than travellers planning longer visits that are not tied to a particular date, but this is seen as "not expected to present a significant constraint to business travel beyond the near term", as the risk of lockdowns/quarantine requirements and border closures diminishes.

As travel restrictions ease, Australians are expected to return to their previous travel habits

As travel restrictions ease, Australians are expected to return to their previous travel habits, seek opportunities to reconnect with family and friends, and participate in events that support the visitor economy, says the forecast. This, however, will be fully dependent upon Australia's National Plan suggesting that lockdowns are now less likely as a result of high double-dose vaccination rates.

Sentiment indicators suggest that Australians are keen to travel once internal borders reopen, and many are actively planning their next getaway. Tourism Research Australia data suggests that some activity resumed immediately after lockdown measures were eased with increases in trip rate levels in both Oct-2021 and Nov-2021.

The Tourism Research Australia data clearly shows that domestic tourism rebounded rapidly from lockdowns in 2020 and a similar trajectory is envisaged in the near-term forecasts from the Australian Government.

This provides an optimistic outlook, but the numbers are conditioned to Australia's National Plan. We are already seeing some countries adopting stronger restrictions against the new Omicron variant - even in heavily vaccinated populations. Until we have a greater epidemiological understanding of this new variant it will be hard to positively look into the future with any confidence.