Australian Tourism Business Changes, Impact and Opportunities

Australian Tourism Business Changes, Impact and Opportunities

The tourism sector is a vital component of the Australian economy by making a noteworthy contribution to the country’s GDP as well as generating significant employment. AU$60.8 billion was generated in Australian direct tourism gross domestic product in the year 2018-2019, indicating a growth of 3.5 per cent over the previous year quicker than the national GDP growth.

With international visitors spending AU$44.6 billion in 2018-19 (a growth of 5 per cent) compared to the previous year, Australia is presently amongst the highest yielding destinations in the world.

Things are no longer the same for the Australian tourism industry with the advent of COVID-19 and the necessary travel restrictions that followed the pandemic, including lockdown, closed borders, social distancing measures. Currently, the tourism industry in Australia, as well as across the globe, has been a major area for concern since COVID-19 has placed a significant burden on the industry. Tourism and related businesses like aviation, hospitality and entertainment players have been undergoing a hard time due to the staggering impact of the COVID-19.

Impact on Businesses

As an effect of the travel restrictions, companies dealing in tourism business remained grounded. Corporations like Sydney Airport (ASX:SYD) have been compelled to implement strict operating expenditure reduction measures like reducing directors’ fees and fixing CEO remuneration.

On the distribution front, SYD had declared that it is unable to announce an interim distribution for the half-year period ending June 2020 citing the significance of liquidity as well as the prevailing impact of COVID-19 and the uncertain near-term trading outlook.

Gaming, entertainment and hospitality business, The Star Entertainment Group Limited (ASX:SGR) deferred the payment date of the 1H FY2020 dividend from 1 April 2020 to 2 July 2020 citing the exceptional circumstances posed by the COVID-19. Moreover, the Company also revoke its dividend payment policy of paying out a minimum of 70% of normalised profits after tax until further notice and informed that no final dividend shall be declared for FY2020.

Even worse happened with Virgin Australia Holdings Limited (ASX:VAH) which was announced to undergo voluntary administration following the continued efforts to seek financial support from several parties, to help it navigate in the unprecedented crisis; however, the business was yet to secure the required support.

Several other companies constituting the tourism sector of Australia rolled back their financial guidance and either deferred their dividend payments or cancelled the same. Tourism businesses have been experiencing severe liquidity crisis due to which many have resorted to capital raising, like Flight Centre Travel Group Ltd (ASX:FLT) that raised a total of AU$138 million through a retail entitlement offer to strengthen the balance sheet and liquidity position of the Company and ensuring smooth trading for Flight Centre through this period of dislocation and uncertainty across the travel sector.

In addition to this, Auckland International Airport Limited (ASX:AIA) undertook NZ$200 million Share Purchase Plan as part of Auckland Airport's equity raising. Further, Qantas Airways Limited (ASX:QAN) had secured an additional debt funding of AU$550 million against three of its wholly-owned Boeing 787-9 aircraft placing the net debt at AU$5.8 billion, within the middle of the target range.

Initiatives from Tourism Australia

In order to ensure a bounce-back of the tourism industry from the coronavirus crisis, various stakeholders like Tourism Australia, State and Territory Tourism Organisations, tourism businesses as well as other government bodies shall play a pivotal role.

Tourism Australia has opened applications for Business Events Australia Advance Program 2020-21, which is a partnership marketing initiative that aims to offer financial support to help marketing and distribution projects aimed at steering business events visitation to Australia.

During the current year, Tourism Australia has also introduced some amendments to the program to grow industry's access to available funding with a view to assisting in the recovery of the industry from the coronavirus pandemic, including

  • Lowering the minimum project request amount to $10,000 to support smaller projects
  • Offering two rounds of applications per year
  • Streamlining the application process

Live From Aus Initiative

Moreover, Australia’s incredible tourism offerings shall be brought to the living rooms of hundreds of thousands of Australians through a curated live program of virtual travel experiences that shall highlight the best offerings of Australia as a travel destination, from its unique culture to its stunning natural beauty, world-class food and drink as well as exceptional wildlife. The program also aims to trigger the Australians to dream about their next Australian holiday.

The “Live From Aus” program was scheduled to kick off on Friday 15 May while a continuing streaming program from 18 May shall reconnect Australians with the unique wildlife, landscapes, food and wine, Indigenous, arts and cultural experiences in Australia by way of digital and social media channels of Tourism Australia.

Tourism Australia believes that although the demand for travel remains on hold and the timing of the recovery continues to be uncertain, it is vital that the tourism organizations representing Australia don’t go quite as a destination and ensure that people continue to dream and plan for their upcoming holidays.

Government’s Role

Through its economic response package of AU$320 billion representing fiscal as well as balance sheet support, the Australian Government seeks to extend its support to the households and businesses and address the significant economic consequences of Coronavirus on them.

Moreover, the government has been actively engaged in monitoring the substantial reduction in the demand for goods and services in tourism as well as hospitality industries.

Bottomline

The international border restrictions that have helped to keep Australians safe have simultaneously inflicted enormous pain on tourism businesses across Australia and have taken the fun out of life right now. Optimism is what the world needs the most right now, especially the crippling tourism industry, that has no clear timeline as to when it shall be able to operate in full swing.

 


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