TTF View – August 2011

The economy is more important than the exchange rate in travel decisions


TTFThe economy is more important than the exchange rate
in travel decisions

By John Lee, chief executive, Tourism & Transport Forum


IT’S the economy, stupid was a catchphrase which gained prominence during Bill Clinton’s successful 1992 US presidential campaign.

It was an effective political tool then, and can equally be used now to describe the challenges facing Australia’s tourism industry.

Despite uncertainty on global markets, the Australian economy has grown steadily over recent years. This relative economic strength and stability, coupled with the availability of affordable international airfares and travel offers targeted at prosperous Australians, has seen an acceleration in outbound travel by Australians.

For the 2010/11 financial year, the number of overseas trips taken by Australians rose 9.9 per cent. That includes June, a month which saw significant disruption to aviation, thanks to the ash cloud from the Chilean volcano, especially between Australia and New Zealand.

International arrivals grew by 3.8 per cent over the year, with falls from Europe and North America made up for by rises in annual arrivals from New Zealand and Asia.

Indeed, arrivals from the 11 Asian countries among our top 20 source markets increased by 10.4 per cent. China led the charge, up almost 27 per cent, with double digit rises from Malaysia, India and Indonesia.

The common factor among these figures is the economy. Australians are travelling overseas more frequently because they have the means and the opportunity and because they are confident about their financial and job security.

In turn, visitors to Australia are increasingly being drawn from Asia, where the middle classes are growing apace as their economies continue to develop, while we are seeing falling arrivals from many of our traditional long-haul markets, whose economies are struggling to deal with repeated crises and the spectre of some countries defaulting on their debts.

These factors all contribute to consumer sentiment, which particularly influences decision-making on discretionary spending, including travel.

Such is the nature of economic cycles, it is surely only a matter of time before the global economy is back on more even keel and we will again see growth in arrivals from Europe, however it is clear that the burgeoning economies of Asia will continue to provide a growing share of visitors to Australia in the coming decades.

Yes, currency movements have an impact on tourist activity, but most international visitors to Australia plan their trips months, if not years, in advance, taking into account a host of factors.

The exchange rate at the time of planning the trip is among those, however given the commitment required for international travel, the logistics involved and the potential cost of postponing travel, the biggest impact of the current exchange rate is on the choices visitors make while they’re here – where they stay, how much additional travel they do, where they eat, the number and the attractions they visit.

A far bigger determinant in the initial travel decision is that underlying confidence in one’s financial security. Almost two decades on Clinton’s phrase is still relevant: It’s the economy, stupid.


TTF View appears quarterly.





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