Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 29 December 2015

Destination Australia

Land Down Under

Growing up in Britain, until I was a teenager in the 1990s I think I'd only met two families who had been to Australia - one was itself an immigrant family to England, and the other lot were the extended family of a well known round-the-world sailor (who I guess had travelling in the blood). 

It wasn't just that Australia wasn't well known about, although that was a factor, it was largely the twin tyrannies of cost and distance.

The relative few who travelled to Australia returned telling tall tales of big bananas and three day train journeys (both I've since corroborated).

Back then of my school friends a few were from families that holidayed in Majorca, or Menorca, or even "Lanza-grotty", but before the advent of the cheap package holiday most Brits either holidayed at home, drove to Wales, or chanced a ferry to Calais.

Much has changed!

1986 was the year of Crocodile Dundee, and perhaps more significantly, the superbly cheesy soap opera Neighbours was first aired in the UK in October of that year. 

The impact of Aussie soaps shouldn't be underestimated, for these were days when a popular episode - Scott and Charlene's wedding, for example - could attract an extraordinary 20 million viewers, well over a third of the entire UK population, let alone television viewing figures.

Home and Away followed in 2008, and helped to perpetuate the excellent myth that all Aussies lived in very large houses by the beach, despite apparently working part time in coffee shops and surf clubs.

By the beginning of the 1990s around 20,000 short term arrivals Down Under per month hailed from the UK as the word spread, a number which had soared to nearly 600,000 per annum by the time of the Sydney Olympics, with the pound sterling periodically buying up to three Australia dollars (ah, the halcyon days!).

The annual number of UK visitors to Australia reached a crescendo of 741,000 by the early part of 2007, before a UK recession, a spate of quantitative easing, and a crumbling currency ended the party, knocking around 20 per cent from those figures.

Drivers of tourism

Touched upon above are a few of the drivers of short term arrivals into Australia. The headline numbers tend to be impacted particularly by exchange rates, awareness of Australia as a destination, household wealth and consumption patterns, proximity, mobility, and economic cycles.

People come to Australia for a range of reasons: predominantly for holidays, or to see friends and family, but also for business, for conferences, for education, employment, or for other pursuits.

We have already considered above the surge of UK visitors, fuelled by a strong currency, awareness of the desirability of Australia as a holiday destination, and a booming British economy, before a punishing recession led to a partial decline.

Troubled times in Japan's domestic economy has seen Japanese visitors decline too. By 1996 some 814,000 Japanese short term visitors were making the trip to Australia annually, but a prolonged economic malaise has seen this number shrink to just 326,000 today.

On the other hand, following a dramatic increase in Chinese living standards and levels of consumption, the number of visitors from China, Taiwan and Hong Kong has exploded from just 382,000 in 2003 to 1.34 million today. Amazingly China alone is poised to surpass New Zealand as the pre-eminent country of origin within the next year or two.

Oprah Windrey helped to raise awareness of Australia substantially for Americans upon her visit to the "Oprah House" in December 2010. But it wasn't until the exchange rate moved in favour of the greenback that visitor numbers jumped, from 447,000 in 2012 to an impressive 594,000 today.

Canadian visitor numbers have followed a near-identical trajectory in rising to 144,000.

New Zealand has always had a relative proximity to Australia, of course, but increased mobility has seen the number of annual short term arrivals almost triple from about half a million Kiwis a quarter of a century ago to nearly 1.5 million today.

The outlook

The latest available data suggests that continued downward pressure on the Australian dollar will send total short term arrivals to beyond 7.5 million for the first time in 2016, following on from the record 7.3 million vistors in the year to October 2015, a welcome boost to the Aussie economy.

This is one of the ways in which a lower dollar can help to rebalance growth, with increasing tourist numbers combined with the gentle encouragement for more Aussies to holiday at home.

Key trends to watch in 2016 will almost certainly include record high visitor numbers from China and its provinces, and record high international student arrivals. Follow the hyperlinks for more.