The sleuths of the Forbes Advisor Australia editorial team base their reviews on an objective and independent compilation of information.
When it comes to investment and personal finance stories, our goal is to tell our readers that we are proposing money products or express asset classes. While we can mention some positives of a monetary product or asset class, there is no guarantee. that readers will derive advantages from the investment product or technique and possibly, in fact, suffer a loss if they obtain the product or adopt the technique.
To the extent any recommendations or statements of opinion or fact made in a story may constitute financial advice, they constitute general information and not personal financial advice in any form. As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of readers.
Australians are considered some of the most prolific travelers in the world. No matter how far away the destination is, there’s a good chance you’ll meet some other Aussie there.
Our love for travel is underscored by the fact that we have continued to splash out even in the face of high interest rates and a growing cost-of-living crisis that has dampened enthusiasm in many parts of the globe.
So how do Australians fit into their budget?Is this call for (dubbed ‘revenge’ after the lifting of Covid-19 restrictions very likely?
The tourism sector accounts for between 2. 5% and 3% of the Australian economy. According to data from the Australian Bureau of Statistics, tourism gross domestic product (GDP) increased by 60. 1% in the fiscal year ending June 2023 to $57. 1 billion. It remains below the peak of $63. 4 billion reached in 2018-2019.
The uptick comes after two years of the pandemic, in which lockdowns and restrictions around the world led to a collapse in domestic and foreign travel.
The Australian Travel Industry Association estimates the number of outbound passengers recovered to 9.7 million in calendar year 2023, but says this is still below the 2019 peak of 11.2 million. In terms of air travel, nearly 19 million air tickets were issued in 2023, up from roughly 17 million the year earlier.
“We’re basically back on track,” says Dean Long, CEO of ATIA, the leading industry framework representing professionals and businesses.
“So we’re still below pre-pandemic levels overall, but we’re seeing some destinations actually recovering in terms of where Australians need to locate. “
Indeed, Australian visitors to a number of countries, including Indonesia, France and Greece, have hit record numbers in recent months.
While “revenge vacations” or the preference for a recovery vacation to make up for lost pandemic vacations are rarely cited as the cause of increased travel, experts recommend that this was only true in the first few months after Covid-19 travel. The restrictions went into effect and were lifted in 2021 and 2022.
Although the phenomenon eventually worked its way into the system, customer habit is now subject to the general trend of Australians outwards.
Ironically, part of the explanation for the increase is higher interest rates on savings, which has led to an increase in discretionary budgeting for homeowners and retirees.
Ironically, part of the explanation for the increase is higher interest rates on savings, which has led to an increase in discretionary budgeting for homeowners and retirees.
Long says what’s also driving the expansion is overcapacity on some roads to pre-pandemic levels.
“Most of the destinations that are doing well are one-hop or no-transfer destinations, such as Japan, Thailand, Fiji and Bali, all of which are back to the way they were before the pandemic,” he says.
“That’s because they’re easy to access and connectivity is smart and we’re starting to see deflation worth lessening on those routes as well. “
Cost of living pressures have some impact, although this varies depending on other parts of the market. But overall, there has been no significant reduction in total numbers, which is consistent with the long-term patterns of Australians.
“It’s not a discretionary spend for us that some economists classify it as. Regardless of the economic conditions, Australians generally consider travel as non-discretionary,” ATIA’s Long says.
This is partly due to the fact that the vast majority of Australians have one or more foreign-born parents and it is therefore not considered a public holiday.
“You can actually take a vacation as part of the trip, but that point of connection to the rest of the world that most other countries don’t have,” he adds.
However, the domestic market slowed down in all segments. ATIA anticipates that vacations to Australia will continue to decline as other people retire and prioritize other trips they want to take for family ties and also for “one-time trips. “
There has also been a moderation in schemes in areas of Central Australia that take advantage of mortgage loans. While there are signs of a pullback in spending, this has not been significant as costs have also begun to fall.
“In recent months, we have noticed a 3% drop in airfare costs across all agencies, on all routes chosen. Economy class has bigger discounts than business class, but those discounts are now on the market,” Long said.
Travel agents expect ticket prices to stagnate globally, but mostly don’t expect airfares to drop significantly. From an Australian perspective, there is still room for capacity expansion, which would limit price increases; Once again, a first cut is planned. improbable.
According to ATIA, there has been a slow deflation of ticket costs. Ticket prices fell by 2. 5% in November and by a further 3. 5% in December. Long says we’re seeing a slow fade from some of the highs, and that costs are now down about 20% from their highs after the economy reopened.
“We are still above pre-pandemic levels relative to the cost of an airline ticket, but consumers are no longer willing to settle for unreasonably high airfares. People are buying food now,” he said.
While the drop in costs is due to the build-up of routes and capacity to pre-pandemic levels, one logistical constraint has been the decrease in the number of available seats, as airlines now fly smaller aircraft to and from Australia. That means fewer giant A380s and 747s and more A350s and 777s, which is especially evident on North American routes.
Long explains that a number of airlines decreased or removed four-engine aircraft from their fleets during the pandemic in favour of more fuel-efficient options. Airlines are also looking to create single-hop destinations for Australia, such as Project Sunrise for Qantas, and it is easier to fill 50-100 seats compared to the larger aircraft that used to fly previously.
“We’ve noticed post-pandemic changes in the way airlines understand the importance of having physically powerful connectivity and routes. Now they need to make sure they are cost-effective at the road level, not just at the overall network level. ” he said.
Despite this, the number of air travel continues to increase globally. The International Air Transport Association (IATA), which represents the world’s largest airlines, forecasts record cash expansion and even higher profits in 2024. The global airline industry expects to post a net profit of $23. 3 billion by 2023, double the expected amount. IATA expects 4. 7 billion more people to do so by 2024, surpassing the pre-pandemic record of 4. 5 billion people in 2019.
In Australia, the trend has been similar. According to ATIA figures, air sales reached $1. 4 billion in October 2023, $1. 4 billion in November and $1. 7 billion in December, a 9% increase from the same month a year earlier.
“We continue to see a very important point in demand for foreign travel. We don’t see any softening yet, based on the conversations I’ve had with my members,” Long said.
“There will be some challenges, but overall I think the fact is that Australians love it and we care. “
ATIA’s Long expects a bumper year for cruise operators, given the strong demand from Australians to enjoy great cash prices and the variety of itineraries on offer. For holiday travel, expect strong demand for destinations with direct connectivity. Here are their most sensible Foreign Teams for 2024:
The tourism sector accounts for between 2. 5 and 3% of the Australian economy. Tourism gross domestic product (GDP) rose 60. 1% in the monetary year ending June 2023 to $57. 1 billion, according to ABS data. The sector also accounted for around 660,000 jobs at the end of September 2023.
New Zealand continues to be the top destination country for Australians, with nearly 1.2 million visits in the financial year to June 2023. Indonesia was the second-most visited country with 1.13 million visits.
According to the Australian Travel Industry Association, there were 9. 7 million passengers in calendar year 2023. In terms of air travel, only about 19 million airline tickets were issued in 2023, down from 17 million last year.