The prolonged ban on international flights has prompted Australians to replace their international travel plans with domestic travel, accelerating domestic tourism in Australia. The government has attempted to support this trend through large stimulus packages, discounts on domestic flights, and the “Holiday Here This Year” campaign. Authorities are also encouraging domestic travelers to seek out longer and more immersive experiences at regional attractions to spread spending across the country as opposed to concentrating it in the state capitals. 

Our View

The government’s efforts have provided some succor to the struggling tourism sector. However, the levels of domestic tourism in Australia and spending have not improved enough to make up for the halt in international travel. Domestic travel has likely been hobbled by ad hoc inter-state restrictions due to the recent spike in COVID-19 cases. The slower-than-expected pace of vaccinations in Australia also makes it likely that this experience of sudden outbreaks and snap lockdowns will likely continue until at least early 2022.

Business Implications

Firms serving the tourism sector should expect prolonged demand weakness in this sector due to tight travel restrictions. During this period, companies should assess whether they qualify for financial support under the various government stimulus packages, most recently aimed at supporting the tourism sector and firms based in New South Wales. Additionally, in order to make up for revenue losses, companies should continue to gear their offerings to domestic travelers until mid-2022, after which international travel to Australia is likely to resume.

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