Tourism Australia View April 2017

JOHN O’Sullivan, managing director Tourism Australia

Partnerships key to success

A lot has been written about China and its impact on Australian tourism industry. And quite rightly so.

With 1.2 million visitors spending more than A$9 billion annually, China is now Australia’s most valuable tourism market, with the potential to grow by a further 50 per cent – to between A$13-$14 billion before the end of this decade.

It’s an amazing story for our tourism industry and one which is certainly far from over, with further chapters still to be written. But can we continue to grow and do we have sufficient tourism infrastructure to meet future demand?

Over the last six years this market has grown at a compound annual growth rate of around 20 per cent. Can we maintain these high levels of growth? In my view, the answer is no we can’t.

The sheer volume of Chinese arrivals today is such that it’s just unrealistic to expect to be able to maintain such stellar increases. Numbers will continue to grow strongly, but the rate of growth will inevitably temper. It has to. And that’s not necessarily a bad thing.

You can now fly direct to Australia from a dozen different cities in mainland China. And the slew of new Chinese services that have started or been announced in recent months suggests that Australia remains as popular as ever amongst China’s rapidly growing middle classes. Last year, capacity from mainland China to Australia grew at around five times that of the overall average.

Many of these new flights are from China’s secondary cities such as Kunming, Hangzhou and Wuhan, effectively opening up parts of China which are, as yet, largely untapped. And the recent announcement removing restrictions on air services between our two countries is a further positive move.

Where Australia’s great tourism opportunity lies is in the mix of our Chinese visitors. We are already witnessing and will continue to see an acceleration in the growth of free and independent Chinese travellers. These are higher yielding travellers who stay longer, disperse more widely and spend more, which is great for our industry.

On average, today’s Chinese visitor spends more than A$8,000 per trip compared to the average of A$5,000 spent by international visitors overall.

Nearly 50% of Chinese arrivals today are also repeat visitors – a clear sign that their experience of Australia is a positive one and one that they want to do over again. The introduction of 10-year multi entry visas — available in 48 hours, online and in Mandarin – should give a significant boost to this trend and to regional dispersal.

Australia is a high cost destination. We can’t compete on price nor, I’d argue, do we really want to. Our proposition is around delivering high value.

Whilst the Chinese market is undoubtedly a highly competitive one, our strategy is deliberately high yield and we have made a very conscious decision to go after the free and independent (FIT) Chinese traveller, rather than the group tour market. And I believe it’s working. What we saw over the recent Lunar New Year period was that those operators whose business is built around this FIT market did very well. Those relying upon the traditional group market did less well, with a big factor being Australia’s higher cost versus some of those other destinations aggressively courting this lower yielding segment.

Our industry still has much work to do to be China ready, but progress is undoubtedly being made. And market forces should ensure this continues.

I see much to be optimistic about the future of Chinese inbound tourism. The designation of 2017 as China Australia Year of Tourism has already given us a wonderful boost. It’s up to us all now to keep this momentum going.