- Delivering 'Destination Australia'
The complex tourism ecosystem
2.1Delivering ‘Destination Australia’ is a complex undertaking – a multi-faceted industry, the size and significance of Australian tourism involves the contribution and interplay of a lot of factors and participants. Before delving into the detail of the issues this inquiry, it is important to understand the ‘complex ecosystem’ that is the tourism sector. That is the purpose of this chapter.
2.2Understanding this complex landscape is an important foundation for policy makers to support the sector, and for tourism operators who must navigate it to operate successful businesses. Each part of the ecosystem must aim to work seamlessly with all other parts if Australia is to have the best chance of re-establishing itself as a global leader in tourism post-COVID-19. The chapter also explores the importance of the sector working collaboratively, given its complex make-up and the amount of engagement it has across all levels of government.
2.3An easy way to begin to understand the sector is to consider it as having two parts: a ‘supply’ side and a ‘demand’ side. Supply side participants (primarily tourism businesses) must bring together all the necessary elements to provide quality experiences – including a skilled workforce and well-maintained assets – and leverage and navigate enablers like transport and visa systems. Demand side participants (predominantly government marketing agencies and research bodies) have the important roles of targeting the most lucrative markets and conducting effective marketing campaigns to attract visitors. It is then the role of governments to establish a favourable operating environment and provide regulatory settings that give the sector the best opportunity to succeed. These sides and their functions are described in more detail below.
‘Supply side’ – satisfy the visitor
Developing experiences and products visitors want
2.4Providing visitors with the type and quality of experience they want is fundamental to the success of any tourism sector around the world. This was articulated clearly by Mr Evan Hall, Chairperson of the Australian Tourism Industry Council (ATIC):
Looking at it from an Australian perspective, what we absolutely must do is create high value experiences that are going to either retain Australians travelling in Australia or will attract international guests.
2.5The Australian Trade and Investment Commission (Austrade) reinforced this in its submission, highlighting the focus the Australian Government’s national tourism strategy, THRIVE 2030, has on product development:
THRIVE 2030 notes that we must develop new and innovative products, and refresh existing ones, to attract first time and repeat visitors. This can be done by leveraging factors we know drive destination choice for high-value travellers and which align to our unique offerings.
2.6Tourism experiences must meet customer needs, which can evolve over time. Tourism Australia (TA) flagged that post COVID-19, the desires, expectations and patterns of travellers have changed, and so new product identification, development and investment must be informed by consumer research.
2.7The Australian Tourism Export Council (ATEC) cautioned that regional Australia in particular lacks the ‘available product, capable product, staffing and local infrastructure’ to meet the demands of international travellers.
2.8Further comment and recommendations in relation to product and experience development are included in Chapters 3 and 4, particularly in relation to First Nations tourism and improving product and promotion in regional Australia.
Infrastructure and investment
2.9The THRIVE 2030 strategy highlights the importance of visitor infrastructure to create a competitive visitor economy. Pillar number five of the strategy is devoted to enhancing visitor infrastructure.
2.10THRIVE 2030 goes on to note that visitor forecasts, understanding visitor needs and planning are key to delivering tourism infrastructure, with the aim, if done correctly, that the right infrastructure can be established in the right place at the right time to meet visitor needs. The Committee provides observations and recommendations in relation to investment and infrastructure in Chapter 5.
Providing visitors with easy access to destinations
2.11Australia’s remote location and vast space forms part of its appeal to international and domestic visitors. However, the Committee heard that it also drives up the costs of travel and can discourage international visitors from making the long journey. Facilitating easy access to and within Australia by air, land and sea, and having a cost competitive and efficient visitor visa system are therefore critical to encouraging growth of the visitor economy.
2.12Many witnesses and submitters emphasised the need to increase the ability and capacity for more for tourists to travel to Australia, and to make it easier for visitors to travel within the country – particularly to remote and regional areas. There were many calls for the costs associated with transport to and within Australia to be brought down. Chapter 5 contains a further discussion of transport challenges and potential reforms.
2.13The Committee heard calls for reform of Australia’s visa system to make it easier and more affordable for tourists and workers to obtain visas. Austrade, for example, argued that reforms to tourism visas are required to ‘ensure Australia remains competitive in attracting international visitors’. See Chapter 5 for a further discussion of opportunities for visa reform.
Providing visitors with quality service
2.14To provide high quality visitor experiences, the tourism sector requires a large workforce as well as workers with specialised skills.
2.15The Committee heard evidence of a chronic workforce shortage among skilled and non-skilled workers which was slowing the tourism sector’s growth post-COVID-19. Many submitters and witnesses described workforce shortages as the biggest challenge for the sector. There were also observations that workforce and skills challenges have existed in the sector for years and had just been exacerbated by the COVID-19 pandemic. It was also noted that recovery of the tourism workforce had lagged behind the rest of the economy.
2.16Chapter 5 puts forward the evidence received by the Committee on the many challenges in relation to workforce, some of which are linked to structural workforce issues present in the Australian economy more broadly.
‘Demand side’ - attracting the visitor
Destination marketing
2.17The success of a nation’s tourism sector is dependent on, among other things, its popularity. To persuade visitors to come to their country or region, governments –through their destination marketing organisations (DMOs) – undertake marketing to promote their destination.
2.18TA is the lead tourism promotion agency at the national level for Australia. It is an Australian Government agency which sits in the Foreign Affairs and Trade portfolio. The challenge for TA, and all DMOs, is that marketing activities do not generate additional demand for travel – they are competing amongst one another for the same pool of customers. As noted by TA, attracting visitors is incredibly competitive:
There is a limited pool of demand around the world at any one time, so we seek to capture as much of that global demand for travel as possible. The big problem is that our competitors seek to do the same thing.
2.19TA stressed the competitive nature of visitor attraction:
On average, when they are undertaking travel planning international travellers only consider three international destinations to visit in the next four years. It’s a very short list…
Australia is often competing for consideration with the following high profile destinations: Japan, New Zealand, South Africa, Canada, France and Hawaii.
2.20Evidence received by the Committee regarding TA’s marketing performance was positive and included calls for the Government to increase its funding so it can increase its activity. The highly competitive global market, escalating marketing costs, and often unrealistic expectations on TA are considered further in Chapter 5.
Market choice and diversification
2.21Choosing which markets to pursue and how to balance marketing efforts across markets is a key challenge for all DMOs, and a key to success for tourism. THRIVE 2030recognises the significance of market choice and market diversification:
Emerging trends and pressures on traditional long-haul markets mean we must adopt a unique and targeted approach to market development…
In the longer term, improved data, market research and strengthened bilateral relationships will support a strategy to build a diversified portfolio of markets, incorporating historical core markets as well as new and emerging markets that present growth opportunities.
2.22Recognising the importance of market diversification, Austrade is developing an international diversification strategy for the visitor economy. It notes that a broad and balanced portfolio of source markets and market segments is core to building a more resilient visitor economy in coming decades.
2.23The Committee provides further observations and recommendations in relation to market diversification in Chapter 4.
Managing the tourism ecosystem
2.24As the tourism sector is so complex, it is important to have robust cooperative, management and governance arrangements to deliver strong performance and outcomes. As stated in THRIVE 2030:
The visitor economy is a complex ecosystem of many stakeholders. It therefore requires comprehensive and effective collaboration to ensure stakeholders act in concert to support achievement of industry goals. The COVID-19 pandemic has been a catalyst for increasing levels of collaboration across the visitor economy and calls for ongoing national leadership in cooperative approaches to address a host of complex and interconnected issues across both demand and supply side factors.
2.25This section summarises the key Australian Government agencies involved in the tourism sector, and the participation that occurs at state and regional levels. Discussion and observations on improving collaboration is contained in Chapter 5.
The Australian Government
2.26Three key government agencies work to support and promote tourism at the federal level: Austrade, TA, and the Department of Foreign Affairs and Trade (DFAT). In addition to these key agencies, the tourism sector intersects with other Australian Government agencies who have responsibility for areas such as First Nations, transport, immigration (for visas), infrastructure, and employment.
Austrade
2.27Austrade is responsible for tourism policy at the federal level. It is:
… responsible for tourism policy, programs, tourism research and official data. This includes oversight of the long-term strategy for the visitor economy – THRIVE 2030. To help visitor economy businesses recover from COVID and grow, we administer a range of grants and other programs. Through Tourism Research Australia, Austrade provides the official tourism statistics and research to assist the government and the sector make informed policy and business decisions.
In March 2022, the Australian Government released THRIVE 2030, a national strategy for recovery and long-term and sustainable growth of Australian’s visitor economy through to 2030. THRIVE 2030 was developed by Austrade in consultation across government and industry. It includes policy priorities and actions for governments and industry under three key themes: Collaborate, Modernise and Diversify. These policies and actions have been put forward to support achieving the goal of returning visitor expenditure to pre-COVID-19 levels of $166 billion by 2024 and growing it to $230 billion by 2030, with regional Australia to capture about 40 per cent of this target. Progress of THRIVE is well under way, with the tourism sector spend ahead of the interim target at $208 billion in 2023. THRIVE 2030 is being implemented over three phases. The first phase, Recovery, is from 2022–2024 and focused on driving domestic and targeted international visitation, and addressing priority supply issues, such as workforce shortages. The next phases are the Consolidation (2025–2027) and Acceleration (2028–2030) phases which will focus on market diversification, new products and building workforce capability and improvements in business processes and technology. |
Tourism Australia
2.28TA is the national body responsible for attracting international visitors to Australia. Its purpose is to grow demand to enable a competitive and sustainable tourism industry. TA is active in 15 international markets and its activities include advertising, public relations and media programs, trade shows and industry programs, consumer promotions, online communications and consumer research.
2.29TA advised that its current priority is to support a full recovery to 2018–19 expenditure levels in line with THRIVE 2030. While it undertook domestic marketing during the pandemic due to the absence of international visitors, TA stressed that since international borders re-opened, it returned its focus to international marketing. TA works with Austrade and DFAT on tourism policy and programs, and also works closely with other agencies to support policy initiatives including visas, air service agreements, and sports diplomacy.
The Department of Foreign Affairs and Trade
2.30DFAT promotes and protects Australia’s international interests to support security and prosperity. DFAT works with international partners and other countries to increase trade and investment for Australia and takes a leading role in promoting open and transparent services markets, including tourism, in international forums such as the Organisation for Economic Co-operation and Development (OECD), the G20, the Asia-Pacific Economic Cooperation (APEC), and the Association of Southeast Asian Nations (ASEAN). It also supports services exports by negotiating free trade agreements with other countries.
2.31DFAT told the Committee it is extensively involved in promoting Australia as a tourism destination through its global network of posts and missions, working alongside TA, Austrade, and other stakeholders.
States and Territories
2.32Government agencies supporting tourism at the state and territory level broadly reflect those at the federal level. There are state marketing agencies in each state and territory (commonly referred to as State Tourism Organisations (STOs)) that are responsible for attracting visitors to their state or territory (‘demand-side’ issues). Separately, there is typically an area within a department of state responsible for tourism growth and development (‘supply-side’ issues).
2.33Also, similar to the federal level, there are other state or territory government departments with policy responsibility for areas that intersect with tourism businesses such as planning, transport and infrastructure, employment and training, business licensing, and consumer affairs.
Local government and regional arrangements
2.34Local government authorities (LGAs) are also relevant to the sector as they regulate businesses in their region and also, in some instances, engage in destination marketing. As noted in THRIVE 2030:
Collaboration and engagement at the local government level is also critical, as local governments intersect with the visitor economy in many ways, including visitor attraction, service delivery, and facilitation and regulation of infrastructure development.
2.35In addition to LGAs, two other bodies commonly operate at the regional level relevant to the tourism sector. These are:
- Regional Tourism Organisations (RTOs): dedicated tourism industry specific bodies that support tourism promotion and growth at the regional level. RTOs structure and operation vary from state to state and region to region, depending on the level of funding they receive (predominantly from state government) and the support from the local operators.
- Regional Development Australia (RDA) Committees: the RDA network is administered by the Australian Government. RDAs are made up of local leaders working across government, business, and community to improve their local region through supporting economic and workforce development, local procurement, regional planning and informing government programs and investment. The strength of an RDA’s engagement with tourism in their region will depend on the importance and potential of the tourism sector in the region.
Good data
2.36The Committee heard that quality and timely data is critical for sound policy development and commercial decisions, with the tourism sector no exception:
Better quality and more granular data provided more quickly will help the visitor economy respond and capture opportunities to drive growth.
2.37It has also been observed that marketing strategies are most likely to succeed where they are based on research:
In its 2015 research paper into the international tourism industry, the Productivity Commission concluded that international destination marketing has the best chance of providing net benefits when based on research. The research should consider factors such as: which visitors are most likely to be persuaded by marketing to come to Australia; what aspects of Australia’s tourism product are most likely to persuade visitors to come; and which potential visitors are likely to result in the greatest net benefits.
2.38Witnesses from regional areas highlighted the importance of data for tracking visitor numbers and tailoring products. For example, the Australian Capital Territory (ACT) Government advised the Committee that data is used extensively for decisions about future investments in tourism offerings and events.
2.39The Committee’s observations and recommendations regarding data is dealt along with collaboration and governance in Chapter 5.