TOURISM FORECASTS 2019 - Destination NSW

6 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA 2. NATIONAL FORECASTS FIGURE 2: VISITOR GROWTH BY MARKET, 2018–19 TO 2020–21 INTERNATIONAL VISITOR ARRIVALS Over the next two years, international visitor arrivals to Australia are expected to increase 9.7%, from 9.4 million in 2018–19 to 9.8 million in 2019–20 and 10.3 million in 2020–21. ASIAN MARKETS These forecasts have resulted in a significant downward revision for the China market from the previous forecast, with visitor numbers only expected to increase 12% from 1.4 million visitors in 2018–19 to 1.6 million in 2020–21. This result is due to visitation transitioning to a more sustainable growth trajectory as the market matures. Further, over the short and medium term, the outlook is affected by the ongoing US-China trade tensions along with an economic slowdown and moderation of aviation capacity growth. Despite this, the China market will continue to be Australia’s largest inbound source market, both economically and in terms of volume. Overall, Asian markets will tend to outperform other overseas markets over the forecast period on the back of increased prosperity and consumerism (Figure 2). Markets expected to experience the greatest growth over the next few years include: nn India – up 20.9%, from 0.37 million visitors in 2018–19 to 0.45 million in 2020–21 nn Indonesia – up 13.5%, from 0.22 million visitors in 2018–19 to 0.25 million in 2020–21 nn Malaysia – up 11.1%, from 0.40 million visitors in 2018–19 to 0.44 million in 2020–21. More traditional Asian markets such as Japan and Singapore are expected to follow a more modest growth trajectory: nn Japan – up 8.3%, from 0.48 million visitors in 2018–19 to 0.52 million in 2020–21 nn Singapore – up 6.4%, from 0.45 million visitors in 2018–19 to 0.48 million in 2020–21. Overall, the volume of Asian visitors is expected to grow 11.8% in the two years to 2020–21, from 4.7 million in 2018–19 to 5.0 million in 2019–20 and 5.3 million in 2020–21. Because it is outpacing other markets, Asia will consolidate its market share, accounting for 51.2% of visitation to Australia in 2020–21, compared with a 50.2% share in 2018–19. Asia will also account for 61% of all visitor growth between 2018–19 and 2020–21, with China alone contributing almost one-fifth (19%), followed by India (8.6%) and Malaysia (4.9%). 21 INDIA 14 INDONESIA 12 CHINA US 11 MALAYSIA 11 10 CANADA FRANCE 8 JAPAN 8 HONG KONG 8 7 THAILAND 7 GERMANY SINGAPORE 6 NZ 6 5 UK 3 KOREA 0 5 10 15 20 25 GROWTH (%) TRADITIONAL MARKETS – US, UK AND NZ By comparison, growth prospects for Australia’s largest traditional markets are mixed. Visitor numbers from the US are expected to grow strongly – up 11.1% from 0.80 million in 2018–19 to 0.89 million in 2020–21. Expected improvements in the US domestic economy, very low unemployment rates and the strengthening US dollar relative to Australian currency will continue to drive this growth. Due to ongoing uncertainty around a post-Brexit economy, visitation from the UK is expected to record modest growth during the forecast period, up 5.3% from 0.72 million visitors in 2018–19 to 0.76 million in 2020–21. Meanwhile, NZ is expected to experience above-trend visitor growth, increasing from 1.40 million in 2018–19 to 1.49 million in 2020–21 – growth of 6% over the two years.

7 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA TOP 5 – CHINA, NZ, US, UK AND JAPAN Box 1: The scope of international forecasts These international forecasts are reliant on data from the International Visitor Survey (IVS). However, while the IVS is limited to people aged 15 years and over, these forecasts use Australian Bureau of Statistics’ overseas arrival data which includes visitors aged under 15. These forecast adjustments are applied to holiday visitors, international education visitors and those visiting friends and relatives (VFR). Forecasts for the other reasons for travel – business, employment and other categories – remain based on IVS estimates. Over the longer term, Australia will continue to have a high proportion of visitors from the top five inbound markets – China, NZ, US, UK and Japan. Collectively, these five countries are forecast to provide nearly half (46%) of the additional 5.3 million arrivals expected in 2028–29. Around 1.1 million, or almost 21.2% of these additional arrivals, will be from China. This will see an increase in the importance of Chinese tourism, as their share of arrivals grows from 15.3% in 2018–19 to 17.4% in 2028–29. The growing significance of China will result in the relative importance of most other markets declining over this period (Figure 3). FIGURE 3: CHANGE IN VISITOR MARKET SHARE, 2018–19 TO 2028–29 2028–29 ('000) INCREASE ON 2018–19 ('000) CHINA 2,554 1,121 INDIA 879 507 INDONESIA 406 187 1,288 484 MALAYSIA 653 253 FRANCE 220 74 THAILAND 130 30 CANADA 265 76 HONG KONG 451 138 KOREA 403 120 GERMANY 284 74 JAPAN 651 168 SINGAPORE 594 142 UK 940 219 NZ 1,829 420 US CHANGE IN MARKET SHARE (PERCENTAGE POINTS) -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0

TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA DOMESTIC TRAVELLERS TRAVEL PURPOSE International leisure travel – comprising holiday travel and travel to visit friends and relatives (VFR) – dominates Australian inbound tourism, making up more than three-quarters (77%) of total traveller volumes in 2018–19. This dominance is expected to continue over the next two years, with growth of 5% forecast for 2019–20 and 4.9% for 2020–21 (Figure 4). FIGURE 4: GROWTH IN INTERNATIONAL TRAVEL BY CATEGORY 5.7% 6.6% EDUCATION 5.3% VISITING FRIENDS AND RELATIVES 5.3% 4.7% 4.8% HOLIDAY 3.3% BUSINESS 3.5% 3.2% EMPLOYMENT 0.9% 4.7% TOTAL 4.7% 2020–21 8 2019–20 These forecast growth rates will see leisure travel volumes increase from 7.2 million arrivals in 2018–19 to 11.5 million in 2028–29. Outside the leisure category, there is expected to be relatively slow growth in business travel and employment-related travel, extending a longer running trend. By contrast, educationrelated travel – a major export for Australia – will continue to grow strongly in 2019–20 (up 6.6%) and 2020–21 (up 5.7%). In 2019–20, modest increases are forecast for domestic visitor nights, up 1.4% to 404 million nights, and day trips up 1.2% to 227 million trips. This reflects a situation where Australian economic growth is expected to remain at below its historical average, and where discretionary spend is limited by sluggish wage growth. Domestic travel costs, particularly for accommodation in capital cities, are also likely to remain high, while low growth in domestic air capacity could result in higher airfares in the next two years. There is, however, the strong likelihood that petrol prices will remain at, or near, current levels, reflecting weakening global oil demand. As economic growth picks up through 2019–20 due to record low interest rates and the impact of income tax cuts, there will be a slight increase in growth rates, with domestic overnight visitor trips up 1.1% and day trips up 1.2%. Over the longer term, both overnight and day trips are forecast to increase for the 10 years to 2028–29 by an average annual rate of 1.2% and 1.1%, respectively. Box 2: The impact of National Visitor Survey (NVS) changes on domestic tourism forecasts With 97% of the Australian population aged 15 years or over owning a mobile phone, TRA has transitioned NVS sampling to 100% mobile phone interviewing and discontinued landline sampling. This new data series will improve the accuracy of national, state and territory estimates, but the transition from the original 50% mobile phone and 50% landline split creates an unavoidable break in series between 2018 and 2019 NVS data. To address this issue, TRA has adopted a new methodology for forecasting domestic tourism. Under this approach, travel propensities of all age groups were calculated from the new NVS data series. This was combined with demographic growth projections for the Australian population to forecast growth rates of domestic overnight and day trips.

9 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA AUSTRALIANS TRAVELLING OVERSEAS Domestically, subdued economic conditions combined with low wages growth and the lower value of the Australian dollar are having a negative impact on discretionary spend, including international travel. FIGURE 5: AUSTRALIAN RESIDENT DEPARTURES, GROWTH BY MAIN DESTINATION, 2019–20 AND 10-YEAR AVERAGE TO 2028–29 CHINA The net effect is expected to be a slight slowdown in growth in outbound travel for the next two years, with departures expected to increase 4% to 11.7 million in 2019 20 and a further 4% to 12.2 million in 2020–21 (Figure 5). HONG KONG The fastest growing outbound destinations over this two-year period are expected to be: SINGAPORE nn Other Europe2 – up 10.5%, from 1.3 million departures in 2018–19, to 1.33 million in 2019–20, and 1.4 million in 2020–21 nn China – up 10%, from 0.61 million in 2018–19, to 0.64 million in 2019–20, and 0.67 million in 2020–21 nn Indonesia – up 9.8%, from 1.3 million in 2018–19, to 1.36 million in 2019–20, and 1.43 million in 2020–21 nn Other Asia (including Japan and Vietnam) – up 9.3%, from 1.91 million in 2018–19, to 2.0 million in 2019–20, and 2.1 million in 2020–21 nn Hong Kong – up 7.3%, from 0.25 million in 2018–19, to 0.26 million in 2019–20, and 0.27 million in 2020–21. Slower growth is expected for the following traditional destination markets: nn UK – up 5.7%, from 0.68 million departures in 2018–19, to 0.7 million in 2019–20, and 0.7 million in 2020–21 nn US – up 6.6%, from 1.1 million in 2018–19, to 1.13 million in 2019–20, and 1.16 million in 2020–21 nn Thailand – up 6.6%, from 0.56 million in 2018–19, to 0.58 million in 2019–20, and 0.6 million in 2020–21 nn NZ – up 5.8%, from 1.44 million in 2018–19, to 1.47 million in 2019–20, and 1.52 million in 2020–21. INDONESIA THAILAND UK US FIJI NZ MALAYSIA 0.0 1.0 2.0 3.0 4.0 5.0 6.0 GROWTH (%) 2019–20 GROWTH 10-YEAR AVERAGE ANNUAL GROWTH These differing rates of growth will see some changes in the top five outbound destinations, with China expected to overtake the UK as our 4th largest single outbound market in 2024–25. Over a longer 10-year horizon, the average growth rate for outbound travel is forecast to be 3.6%. This will result in outbound departures reaching 16 million by 2028–29. Under this future growth scenario, Australia’s top five destinations (in order) will be Indonesia, NZ, US, China and UK. 2 Europe excluding UK, France and Germany

10 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA SPEND BY INTERNATIONAL VISITORS AND DOMESTIC TRAVELLERS Total tourism spend (including spend by international visitors, plus overnight and day trip spend by Australian residents) is forecast to increase 4.6% to 155.6 billion in 2019 20. Total spend will then increase a further 4.9% to 163.1 billion in 2020–21. Over this period, the most rapidly growing spend segment will be international travel (Figure 6). These trends are expected to persist over the longer term, with the 10-year average growth rate of 4.7% being the net effect of: nn 7.6% average annual growth in international spend, from 45.7 billion in 2018–19 to 94.9 billion in 2028–29 nn 3.4% average annual growth in domestic overnight spend, from 78.4 billion in 2018–19 to 109.6 billion in 2028–29 nn 2.6% average annual growth in day trip spend, from 24.6 billion in 2018–19 to 31.9 billion in 2028–29. FIGURE 6: SPEND GROWTH BY TRAVEL CATEGORY Due to these differing growth rates, there will be substantial changes in shares for each type of travel. Therefore, by 2028–29, the forecast total visitor spend of 236.5 billion is expected to comprise a: nn 40.1% share of spend from international visitors, up from 30.7% in 2018–19 nn 46.4% share of spend from domestic overnight travel, down from 52.7% in 2018–19 nn 13.5% share of spend from day trips, down from 16.6% in 2018–19. By 2028–29, the five largest inbound markets in terms of visitor spend will be China, US, India, UK and Japan, which collectively will contribute over 55% of inbound visitor spend (Figure 7). China’s importance as a key tourism market is expected to continue over the next decade, accounting for 31% of the increase in spend between 2018–19 and 2028–29. FIGURE 7: SHARE OF SPEND BY MARKET, 2018–19 AND 2028–29 27% 8.0% INTERNATIONAL 7.5% 42% 7.6% 2018–19 9% 8% 4% 5% 6% 3.2% DOMESTIC OVERNIGHT 3.9% 3.4% 2.7% DAY TRIPS 29% 2.7% 2.6% 41% 2028–29 2019–20 GROWTH 2020–21 GROWTH 9% 10-YEAR AVERAGE GROWTH TO 2028–29 6% CHINA US INDIA OTHER 6% 4% 4% UK NZ JAPAN

11 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA 3. STATE AND TERRITORY FORECASTS nn Victoria – up 3.5% to 164 million nights due to a 2.8% increase in domestic nights and a 4.2% increase in international nights Nationally, total visitor nights in Australia are forecast to increase by 2.8% to 708.5 million in 2019–20 and increase by a further 3.3% to 731.5 million in 2020–21. At 2020–21, around 44% of nights will be from international visitors, with the remaining 56% from domestic overnight travel by Australian residents. nn Western Australia (WA) – up 3.3% to 74.2 million nights due to a 9.8% increase in international nights Visitor growth rates for 2019–20 (Figure 8) will be largest for: For other states and territories, forecast growth in visitor nights for 2019–20 is between 0.5% for Tasmania and 2.6% for South Australia (SA). nn Queensland – up 3.2% to 163.3 million nights due to a 2.3% increase in domestic nights and a 4.7% increase in international nights. nn Australian Capital Territory (ACT) – total visitor nights will increase 3.6% over the year to 14.3 million nights. This will be the result of a 3.5% increase in domestic nights and a 3.8% increase in international nights For 2020–21, the best performing states are expected to be Tasmania, ACT, Victoria, NSW and Queensland, with growth rates between 3.2% and 5.8% (Figure 9). FIGURE 8: GROWTH OF VISITOR NIGHTS, BY STATE AND TERRITORY, 2019–20 9.8% 4.6% 4.7% 4.2% 3.5% 2.8% 2.2% 3.2% 2.3% 4.5% 3.7% 3.3% 2.6% 2.2% 2.9% 1.2% 0.5% 0.0% -0.2% 3.8% 3.6% 3.5% -0.9% -3.8% NSW VIC QLD SA INTERNATIONAL WA DOMESTIC TAS NT ACT TOTAL FIGURE 9: GROWTH OF VISITOR NIGHTS, BY STATE AND TERRITORY, 2020–21 8.6% 7.5% 7.5% 6.4% 5.8% 4.8% 4.6% 4.9% 4.7% 4.5% 3.6% 1.8% 2.2% 2.7% 1.7% 0.7% 0.3% 0.0% -0.4% -1.4% -2.3% -1.6% -1.5% -4.9% NSW VIC QLD SA INTERNATIONAL WA DOMESTIC TAS TOTAL NT ACT

12 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA Over a ten-year time frame, a 34.8% increase is forecast in total visitor nights from 689 million in 2018–19 to 928.5 million nights in 2028–29. Over the same period, domestic nights are expected to increase 13% from 398.6 million to 450.7 million nights – an average annual growth rate of 1.2%. FIGURE 10: 10-YEAR AVERAGE ANNUAL GROWTH FOR VISITOR NIGHTS, BY STATE AND TERRITORY, 2018–19 TO 2028–29 3.5% In comparison, international nights will increase at an average 5.1% annually from 290.4 million to 477.8 million nights. Due to this more rapid growth, international visitation will account for a 51.5% share of all visitation in 2028–29; up 9.3 percentage points from its 42.1% share in 2018–19. Among the states and territories, there will be above average growth in visitor nights between 2018–19 and 2028–29 (Figure 10) for: ACT 2.0% 5.1% 1.6% NT 1.3% 2.3% 2.8% nn Victoria – growing 3.5% annually to 224.8 million nights, increasing its share of total nights from 23% to 24.2% TAS 1.6% 5.6% nn ACT – growing 3.5% annually to 19.5 million nights, increasing from a 2.0% to 2.1% share of total nights nn NSW – growing 3.3% annually to 304.9 million nights, increasing its share of total nights from 31.9% to 32.8%. 2.0% WA 0.4% 4.6% 2.1% SA 1.4% 3.7% 2.8% QLD 1.4% 4.9% 3.5% VIC 1.5% 5.4% 3.3% NSW 1.1% 5.3% 0.0% 1.0% 2.0% TOTAL Image courtesy of Destination NSW 3.0% DOMESTIC 4.0% 5.0% INTERNATIONAL 6.0%

13 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA Below average growth over this period will be experienced for: nn Tasmania – 2.8% annual growth to 22.8 million nights, maintaining its share of total nights at 2.5% nn Queensland – 2.8% annual growth to 208.6 million nights, decreasing its share of total nights from 23% to 22.5% nn SA – 2.1% annual growth to 44.5 million nights, decreasing its share of total nights from 5.2% to 4.8% nn WA – 2.0% annual growth to 87.7 million nights, decreasing its share of total nights from 10.4% to 9.4% Between 2018–19 and 2028–29, ‘Other travel’ is forecast to account for a substantially greater share of total visitor nights – growing from an 18.7% share in 2018–19 to a 21.5% share in 2028–29. The growth will be driven by an increase in employment-related travel and education travel, and will make a substantial contribution to forecast spend. The share of VFR travel will remain approximately the same (moving from 29.5% to 29.8% of visitor nights); holiday travel will fall from 37.5% to a 35.4% share; and business travel will drop from a 14.3% to a 13.3% share. The shares attributable to these types of travel vary among different states and territories (Figure 11). nn NT – 1.6% annual growth to 15.8 million nights, decreasing its share of total nights from 2.0% to 1.7%. FIGURE 11: CHANGES IN TYPES OF TRAVEL, 2028–29 COMPARED TO 2018–19 21% 11% 22% 25% 11% 11% 16% 25% 15% 17% 15% 16% 18% 18% 17% 10% 13% 16% 24% 11% 11% 12% 12% 31% 31% 34% 33% 26% 28% 30% 19% 29% 34% 22% 31% 27% 4% 33% 24% 26% 9% 18% 16% 17% 17% 31% NSW HOLIDAY VIC QLD SA VISITING FRIENDS AND RELATIVES Image courtesy of Tourism and Events Queensland/Vince Valitutti 45% 45% 34% WA 21% TAS BUSINESS 32% NT 19% 20 18 –1 9 20 28 –2 9 36% 20 18 –1 9 20 28 –2 9 35% 20 18 –1 9 20 28 –2 9 38% 20 18 –1 9 20 28 –2 9 42% 20 18 –1 9 20 28 –2 9 43% 31% 20 18 –1 9 20 28 –2 9 33% 20 18 –1 9 20 28 –2 9 34% 20 18 –1 9 20 28 –2 9 36% 55% 53% 33% ACT OTHER

14 TOURISM FORECASTS 2019 TOURISM RESEARCH AUSTRALIA 4. THE ECONOMIC FACTORS INFLUENCING THE FORECASTS GLOBAL ECONOMIC OUTLOOK WEAKENING The global economic outlook has weakened since TRA released its last issue of tourism forecasts in August 2017, with conditions softening across both advanced and emerging economies. US-China trade tensions, the Brexit deal uncertainty and political and economic challenges in the Eurozone have triggered some prominent economic agencies to downgrade their outlook for global economic growth. For instance, in its latest World Economic Outlook update, the International Monetary Fund (IMF) projects the global economy to grow at 3.3% in 2019 and 3.6% in 2020, 0.4 and 0.1 percentage points, respectively, below its previous projections.3 The downward revisions of the economic growth forecasts have weighed down these tourism forecasts significantly. CHINA China’s economy is moving towards a slower growth trajectory as it pivots from investment and export-led growth to one more driven by consumption and services. This presents both opportunities and challenges for the Australian tourism industry. On one hand it will encourage increased consumerism, which will translate into greater demand for outbound tourism. However, cyclical fluctuations in the Chinese economy and ongoing trade tensions will affect consumer confidence in the near term. Against this backdrop, China’s economy is forecast to grow 6.2% in 2019–20, and 5.8% in 2020–21; substantially lower than during recent periods. NZ Economic growth has been subdued largely due to a cooling housing market and lower business confidence. This has reduced household consumption, including discretionary spend on tourism. However, there are some positive economic signs with net exports at record highs and falling unemployment – due in part to changes in monetary policy. These should support growth in consumer spending, with flow-on effects to

Tourism Research Australia's (TRA) forecasts support these goals by providing policymakers, planners and investors with a ten-year view on changes in the following indicators: n inbound arrivals, focusing on Australia's main international markets n purpose of travel for inbound arrivals