Australian States Ponder Opening Borders: A Potential Booster Shot for Travel Industry

Summary

• South Australia opened state borders to Western Australia, Northern Territory and Tasmania, while Queensland is still resisting the move.
• International borders of Australia to remain closed until the beginning of 2021.
• ATIC is supporting small and medium tourism enterprises via initiatives to provide good experience to returning visitors; leading travel companies striving to maintain liquidity and preparing as bookings have started to gain momentum for domestic travel.

As coronavirus (COVID-19) pandemic took the world by storm, some countries like the United States and Brazil suffered high death tolls and infected population. However, at the same time, there are several other countries including Australia that seem to have learnt from their experience, and pro-actively dealt with the situation to avoid a worst-case scenario with limited testing kits and no vaccine to address the problem.

Australia is actually winning the battle against COVID-19 and is gradually lifting restrictions and easing social distancing guidelines to send people back to work. Moreover, several businesses, including companies from the retail sector, are operating again with their physical stores re-opened.

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There were close to 100 coronavirus deaths with over 7,300 confirmed cases in Australia (WHO data, as on 18 June 2020, 10 AM CEST), and some jurisdictions have not registered a single new case for consecutive days, owing to the country’s geographical location and efficient leadership.

Total Government’s support for the economy stood at ~$ 320 billion across the forward estimates, representing ~16.4% of annual GDP, and came in the form of financial stimulus packages including the $ 130 billion JobKeeper Payment, a wage subsidy package, to support the Australian citizens working in the adversely impacted sectors; another financial injection of $ 17.6 billion; as per the Treasury.

With business continuity strategies in place, Australian companies have been working hard to maintain liquidity and operations while keeping an eye over the stimulus packages being released by the Government.

Australia Moves Towards Opening Domestic Borders

Stringent travel restrictions have been imposed by the Government on people coming to Australia from around the world to contain the spread of coronavirus, with current border restrictions allowing only Australian citizens, residents and immediate family members to enter into the country. Consequently, some sectors like hospitality, travel and tourism have been adversely impacted over the last few months.

For this reason, the state and territory leaders in Australia have been holding discussions around re-opening the internal borders to provide some revival to the dormant domestic tourism industry. While the leaders are contemplating re-opening of borders, they remain focussed on avoiding a second wave of infections at the same time.

According to market participants, Australian Prime Minister Scott Morrison is planning to lift all social distancing restrictions by July 2020 under a three-step plan, as COVID-19 seems to be subsiding in the country. The ultimate decision still lies with the individual state leaders who are prioritising safety.

In fact, South Australia has already opened borders to Western Australia, Northern Territory and Tasmania. This is because the COVID-19 transmission rate has continued to diminish in South Australia with no new infection recorded in the past three weeks, which perhaps indicates a return to normality.

Read: 5 Tips for dealing with reopening of the economy during COVID-19

New South Wales is supporting the opening of borders to recuperate its ailing economy, while others like Queensland are still resisting the move. According to the government of Queensland, starting from 1 July 2020, people arriving in the state from overseas will be required to pay a fee for getting quarantined in accommodation arranged by the government.

As the debate over opening domestic borders continues, international borders in Australia are certain to remain closed by the beginning of 2021, as indicated by Trade Minister Simon Birmingham. Thus, the citizens of Australia would be prohibited from travelling overseas, except for some special provisions for limited business travel.

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What does this mean for Travel/Tourism Industry?

Australia has a sophisticated services sector, backed by a highly educated labour force. Moreover, the country is also a leading education provider, attracting students and talent from around the world to its globally ranked universities and research & development institutions.

Multinational companies in Australia have largely benefitted from its network of free trade agreements, in addition to strong business and cultural ties with Asia and longstanding trade, investment and research links with regions including Europe and North America. The country has continued to enjoy a robust economic performance relative to other developed economies over the last 30 years, and travel and tourism industries form a crucial component of its GDP.

As per the Australian Federation of Travel Agents (AFTA), COVID-19 has presented major challenges and the whole travel industry ecosystem is under immense pressure.

Although, easing of travel restrictions in Australia is encouraging improved economic activity, people are still cautious to move around or even travel across state or international borders unless absolutely urgent. Due to this reason, the hard-hit travel and tourism industries are still subdued, and recovery is estimated to take some time after the virus led to wiping out of billions from this industry over the last three months.

In late-May 2020, a complimentary online program called the COVID Clean Practising Business was launched by the Australian Tourism Industry Council (ATIC) to assist small and medium tourism enterprises to provide satisfying experiences to the returning visitor, on the back of a COVID-19 safety plan.

ATIC Executive Director Simon Westaway foresees revival in the tourism industry only by end-2020. Thus, he has requested for extension of the JobKeeper Scheme, covering visa and seasonal workers until end-1Q2021 when international borders are expected to open.

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It has been a long period of hibernation and unimaginable challenges, and ATIC is committed to instil renewed confidence in prospective customers by fully supporting small and medium tourism enterprises, the backbone of this industry, as they are being encouraged to adopt practical and essential measures to maintain COVID safe workplaces and operations.

Airline companies, tour and cruise operators, and other industry players have unilaterally altered their cancellation policies, in line with which credits are being offered instead of cash refunds for future travel. Moreover, several customers are accepting future travel credits, subject to waiver of cancellation fees.

Leading industry players like Flight Centre Travel Group Limited (ASX: FLT), Apollo Tourism & Leisure Ltd (ASX: ATL), Corporate Travel Management Limited (ASX: CTD) and Helloworld Travel Limited (ASX: HLO) are focused on maintaining a strong liquidity position, owing to the uncertain operating landscape. Additionally, few of the industry players are making preparations, as domestic travel restrictions are easing, and bookings have started to gain momentum for pick up in the upcoming period.

Good Read: Is there Light at the End of Tunnel for International Flights in Australia?