Tourism Barometer October - December 2023

TiCSA Tourism

Barometer

December Quarter 2023

Outlook continues to improve, but conditions remain subdued The 2023 December Quarter Tourism Barometer shows an improved outlook from the September Quarter Barometer, however it is clear the tourism industry is still facing significant challenges including rising operating costs, labour shortages, high interest rates and a slow recovery in international visitation levels.

Despite the improved outlook, the current Barometer readings showed a deterioration in Business Activity, with the index remaining considerably below the neutral level.

However, there are positive indicators. Business investment levels remain elevated, despite the uncertain economic outlook. Visitor expenditure in South Australia hit another record high level in the December quarter, at $10.3 billion, supported by the continued recovery in visitation and very strong growth in visitor yield Figure 1: TiCSA Tourism Barometer Dashboard Readings > 100

Positive

< 100

Negative

December 2023 Change from previous quarter

Business Activity 74

Business Outlook 102

-7

+8

92

Wages Bill 137

-17

-5

Employment

Investment 126 0

Source: Tourism Industry Council South Australia

Figure 2: TiCSA Tourism Barometer 160

Post Covid Rebound

Initial COVID Recovery

140

Barometer

120 100 80

Bushfires, COVID-19

Interest Rate Rises and Inflation

60

Delta and Omicron Waves

40

20 0 Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Quarter ended Business Activity

Business Outlook

Source: Tourism Industry Council South Australia

TiCSA Tourism Barometer – December Quarter 2023

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Business Activity (Last Three Months) The main reasons for the negative performance in the December quarter were: • • • • •

“A slow to return international visitors are a worry”.

Decreased visitors in the area; Weaker economy; Lack of consumer confidence; Unfavourable weather; and Rising business costs.

“When people are budgeting holidays are the first items to be affected.”

The main reasons for the positive performance in the December quarter were: • • • •

High season / coming out of low season; Increase in interstate travel; Adapted or introduced a product or service; and Increased digital presence.

“Futures looking bright.”

“Things appear to gradually be improving.”

Figure 3: Business Activity in the Last Three Months 160

146 135

90% 80%

116

103

Percentage

70% 60%

86

79

124

140

128

120

100 82

81

50%

64

68

81

100 74

40%

80

Barometer

100%

60 38

30% 20%

40 13

10%

20

0%

0

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Quarter ended Weaker

Stronger

Barometer

Source: Tourism Industry Council South Australia

TiCSA Tourism Barometer – December Quarter 2023

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Business Activity by Market Segment (Last Three Months) While some market segments reported a net gain in the December Quarter, conditions remain weak across all segments. The conference and business meetings and business markets declined marginally from the September Quarter. While there was a pick-up in the leisure market, conditions remain weak, largely related to the increased cost of living.

Figure 3: Business Activity – By Market Segment (December Quarter 2022) Conferences and business meetings

Business

Festivals / Events

Holiday / Leisure

0%

20%

40%

Increased

60%

80%

No change

100%

Decrease

Source: Tourism Industry Council South Australia

Business Outlook (Next Three Months) The business outlook continued to rebound in the December quarter, with the Index now back above the neutral level following two quarters where the Barometer was in negative territory.

Figure 4: Business Outlook for the Next Three Months 100%

80%

130

140 118

117

116 113

Percentage

70% 91

60% 50%

93

94

85

102

100

74 64

55

40%

80

51

60

30%

40

20%

10%

120

Barometer

136

90%

160

144

20 0.7

0%

0 Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Quarter ended

Weaker

Stronger

Barometer

Source: Tourism Industry Council South Australia

TiCSA Tourism Barometer – December Quarter 2023

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Business Outlook (Next 12 Months) Similarly, business confidence improved for the second consecutive quarter following the significant deterioration in the outlook in the March and June quarter 2023 Barometers.

More than 60% of businesses are now ‘extremely confident’ or ‘confident’ in the outlook, while the proportion of respondents ‘worried’ or ‘extremely worried’ fell to 20%, significantly lower than the recent high of 41% recorded in June quarter 2023.

Figure 5: Business Outlook for the Next Twelve Months 100% 90%

80%

Percentage

70% 60% 50% 40% 30% 20% 10% 0% Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Quarter ended

Extremely worried

Worried

Neutral / no opinion

Confident

Extremely confident

Source: Tourism Industry Council South Australia

Table 1: The Top Factors Influencing the Future Outlook Positive Factors Negative Factors • Increase in forward booking; • Cost of living; • New product developments; • Increase in wages; • Better sales and marketing; • Low consumer confidence; • More events in area; and • Government regulations; • Increase in tourism infrastructure. • Insufficient cashflow.

Source: Tourism Industry Council South Australia

“Our sector is receiving some wonderful support.”

“Lots of trouble ahead in 2024 unless government policies change.”

“Kangaroo Island has been marketed very well.”

“The government has destroyed our industry.”

“Futures looking bright.”

“More investment needed for regional tourism products.”

TiCSA Tourism Barometer – December Quarter 2023

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Employment and Wages Employment continued to soften from recent highs, with 25% of tourism businesses reporting an expectation for a decline in employment levels, double the September quarter result. Further, the proportion of businesses expecting more employees declined to just 18%. The proportion of businesses reporting increasing wage bills remained elevated and well above the pre-COVID level, as it has since mid-2022. This is consistent with a very tight labour market, with the unemployment rate in South Australia at a near 45-year low, putting upward pressure on wages. Labour shortages have also been an on-going concern with many survey respondents identifying rising staff costs, a lack of staff and maintaining staff as key issues or challenges facing their business moving forward.

Figure 6: Employment Trends 100% 90%

80%

Percentage

70%

60% 50% 40%

30% 20%

10% 0% Dec-20

Jun-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23

Jun-23

Dec-23

Quarter ended

Decreased

No change

Increased

Source: Tourism Industry Council South Australia

Figure 7: Wages Bill 100% 90%

80%

Percentage

70%

60% 50% 40% 30% 20%

10% 0% Dec-20

Jun-21

Dec-21

Jun-22

Decreased

Quarter ended No change

Dec-22 Increased

Source: Tourism Industry Council South Australia

TiCSA Tourism Barometer – December Quarter 2023

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According to the ABS Labour Force Survey, total employment in the accommodation and food services industry decreased a further 3,000 persons in to 53,300 in November quarter 2023, primarily driven by a decrease in part-time work. Of concern, total employment in the industry has now declined more than 13,000 persons (or 20%) since the recent high in November quarter 2022. Based on feedback in the Barometer, the trend of employment decreases is likely to continue.

Figure 8: SA Employment, Accommodation and Food Services Industry 70 60

Persons ('000)

50

40 30 20

10 0

Total employed

Full-time

Part-time

Source: ABS Labour Force, Australia, Cat. No. 6291.055.003

Continued recovery, but challenges remain Visitor expenditure continues to rebound strongly from the COVID-19 pandemic impacted years, with all visitor expenditure types now exceeding their pre-pandemic levels despite total visitation still being 10% below the pre-pandemic level. Interstate visitation and expenditure rose more than 30% in the year ending September 2023 from the prior year, with interstate expenditure now more than 40% above its pre-pandemic level.

However, the South Australian tourism industry still faces a range of challenges moving forward. Numerous survey respondents cited elevated inflation (particularly rising insurance costs) and labour shortages as issues clouding the outlook.

Elevated inflation and high interest rates reduce consumers disposable incomes, impacting demand for tourism, but also make future hiring and investment decisions more difficult for businesses as they grapple with limited certainty around the economic outlook.

On a more positive note, the continued weakness in the A$ will support the South Australian tourism industry.

TiCSA Tourism Barometer – December Quarter 2023

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Investment Outlook Given the immense uncertainty surrounding the business outlook, it is not surprising that the proportion of businesses planning to invest in the future fell marginally in the December quarter. On a more positive note, businesses planning future investment outnumber those planning less, and the proportion planning to invest has recovered since the COVID-19 pandemic low in 2021 to be near pre-COVID levels.

With expectations building that the RBA is finished raising interest rates, and that interest rate cuts could be delivered before the end of the year, this could support the proportion of businesses seeking to invest.

Figure 9: Planned Investment 100%

90% 80%

Percentage

70%

60% 50%

40% 30% 20%

10% 0% Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Less

Quarter ended No change

More

Source: Tourism Industry Council South Australia

Statistical Note: The TiCSA Tourism Barometer December Quarter 2023 survey was conducted online 10 January – 24 January. A total of 247 responses were received, representing a margin of error of +/- 6.0% at a confidence level of 95%.

Airport Passengers Domestic and international passengers through the Adelaide Airport continue to recover, nearing pre-COVID levels. Based on visitation statistics, the increase in passenger numbers is likely showing the on-going recovery of interstate and international markets.

Table 2: Adelaide Airport Quarterly Passenger Statistics Passengers ('000) Sep-23 Sep-22 Sep-21 Sep-20 Domestic 1,798 1,659 371 227 International 234 132 9 4 Total 2,032 1,791 380 231 Note: Domestic movements include regional. Source: BITRE (2023)

TiCSA Tourism Barometer – December Quarter 2023

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Visitation and Expenditure The rebound in visitor expenditure in South Australia has accelerated, to be now at a record $10.3 billion in the year ending September 2023, up $2.9 billion from the prior year. While all visitor types experienced increases in visitor expenditure, interstate and international visitor expenditure rose sharply in the year, with both up just under $1.0 billion respectively.

The recovery in international visitor expenditure has been supported by the reopening of international borders and the ongoing weakness in the A$ exchange rate.

Figure 10: Visitor Expenditure by Type, South Australia (2023) 12,000

Expenditure ($m)

10,000 8,000 6,000

4,000 2,000 0 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23

International

Interstate

Year ended Intrastate

Day trip

Total

Note: Year ending September.

Source: Tourism Research Australia

Table 3: Visitor Expenditure ($m) by Type (2023) South Australia All States Sep-23 % Annual Change Sep-23 % Annual Change International $1,218 296.7% $25,656 193.0% Interstate $3,597 37.2% $48,701 36.3% Intrastate $3,207 17.6% $59,993 15.3% Day trip $2,224 30.4% $33,679 34.1% Total $10,246 39.2% $168,029 38.1% Note: Year ending September. % change is from previous year.

Source: Tourism Research Australia

TiCSA Tourism Barometer – December Quarter 2023

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The latest visitor data shows growth in the year ending September 2023 across all visitor types except intrastate visitors. In particular, interstate (up 33%) and international (up 328%) visitors continued to rebound during the year. A 12% decline in intrastate leisure visitation suggests South Australians are opting for travel outside of the State.

While visitor expenditure continues to surge, total visitation remains 10% below pre-COVID levels.

Table 4: Visitors and Nights by Type, South Australia (2023) Day trip Annual % Change 3-year trend % Change 10-year trend % Change Intrastate Annual % Change 3-year trend % Change 10-year trend % Change Interstate Annual % Change 3-year trend % Change 10-year trend % Change International Annual % Change 3-year trend % Change 10-year trend % Change Total Annual % Change 3-year trend % Change 10-year trend % Change

Visitors 15,102 16.3% 1.5% 2.9% 4,574 -0.3% 2.1% 2.6% 2,869 33.0% 19.8% 5.0% 407 328.1% 15.9% 0.2% 22,952 15.8% 3.6% 3.0%

Holiday 7,055 17.7% 3.1% 2.3% 1,941 -12.2% -1.3% 0.9% 1,073 32.2% 29.2% 5.2% 127 636.9% 1.8% -3.0% 10,197 12.9% 4.0% 2.2%

VFR 4,512 19.2% 5.5% 2.9% 1,475 23.3% 5.5% 2.7% 940 33.5% 21.2% 4.9% 189 271.5% 32.6% 4.8% 7,115 24.0% 7.6% 3.2%

Business 1,923 37.5% -2.4% 6.9% 876 -0.5% 9.0% 7.2% 781 29.4% 12.5% 4.5% 44 272.0% 21.7% -1.4% 3,624 25.2% 3.0% 6.3%

Visitor Nights

13,513 2.4% 2.1% 2.4% 13,013 15.4% 17.1% 5.0% 12,018 208.0% 23.5% 0.6% 38,544 35.9% 12.4% 2.6%

Note: Year ending September.

Source: Tourism Research Australia

TiCSA Tourism Barometer – December Quarter 2023

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The rapid ascent of visitor expenditure is due to very strong growth in visitor yield (i.e. $/night). One of the main drivers for these increases is the increase in various input prices that has been occurring (as identified in previous Barometers). Faced with labour shortages and rapidly increasing costs, tourism businesses have been forced to increase their prices, which is now being represented in increasing yields and record setting visitor expenditure.

As discretionary incomes are now under a full assault from elevated inflation and interest rates, demand growth may soon subside, particularly if the national labour market softens over 2024 as the RBA is forecasting.

More welcoming is that the long-established trend of losing market share to other states appears to have subsided, with market share broadly unchanged in this most recent quarter, both in terms of visitors and expenditure. While this may appear only minor, it hopefully signals the halt to a worrying trend of declining market share in the post-COVID recovery period.

Table 5: Expenditure and Yield, South Australia, by Type (2023)

Day trip Annual % Change 3-year trend % Change 10-year trend % Change Intrastate Annual % Change 3-year trend % Change 10-year trend % Change Interstate Annual % Change 3-year trend % Change 10-year trend % Change International Annual % Change 3-year trend % Change 10-year trend % Change Total Annual % Change 3-year trend % Change 10-year trend % Change

Expenditure ($m) $2,224 30.4% 15.6% 6.7% $3,207 17.6% 17.5% 6.7% $3,597 37.2% 33.5% 9.4% $1,218 296.7% 25.2% 5.1% $10,246 39.2% 22.7% 7.3%

Yield ($/visitor) $147 12.2% 13.7% 12.6% $701 18.0% 15.1% 14.2% $1,254 3.1% 11.4% 14.4% $2,993 -7.3% 8.0% 17.5% $446 -11.5% -3.0% -0.7%

Yield ($/night)

$237 14.5% 15.0% 14.7% $276 18.5% 13.9% 14.3% $101 27.8% 1.4% 15.8% $266 -2.6% 2.3% 1.0%

Market Share Visitors (%) 6.8% 6.9% 8.1% 6.8% 5.8% 6.1% 7.0% 6.7% 8.2% 7.8% 8.3% 7.1% 6.7% 4.6% 6.3% 6.8% 6.8% 6.8% 7.9% 6.9%

Market Share Expenditure (%) 6.6% 6.8% 7.5% 6.3% 5.3% 5.2% 6.1% 5.9% 7.4% 7.3% 7.8% 6.3% 3.1% 2.4% 2.8% 2.6% 6.1% 6.1% 6.5% 5.7%

Note: NA – not applicable. Year ending September. Market share represents the historical market share currently, for the previous year and from three/ten years ago.

Source: Tourism Research Australia

TiCSA Tourism Barometer – December Quarter 2023

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Report prepared in partnership with Lucid Economics.

Tourism Industry Council South Australia (TiCSA) 25 Pirie Street Adelaide SA 5000 Ph: (08) 8110 0123 TiCSA Tourism Barometer – December Quarter 2023 Email: info@ticsa.com.au

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