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Unlocking Victorian Tourism An Inquiry into Victoria’s tourism industry Final Report June 2011 © State of Victoria 2011 This final report is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968 (Cwlth), without prior written permission from the Victorian Competition and Efficiency Commission. Cover images of Chefs in kitchen at Rockpool Bar & Grill, City Circle Tram outside Flinders Street Station and Lochiel Luxury Accommodation reproduced courtesy of the photographer, Mark Chew. ISBN 978-1-921831-40-9 (paperback) ISBN 978-1-921831-41-6 (PDF) Disclaimer The views expressed herein are those of the Victorian Competition and Efficiency Commission and do not purport to represent the position of the Victorian Government. The content of this final report is provided for information purposes only. Neither the Victorian Competition and Efficiency Commission nor the Victorian Government accepts any liability to any person for the information (or the use of such information) which is provided in this final report or incorporated into it by reference. The information in this final report is provided on the basis that all persons having access to this final report undertake responsibility for assessing the relevance and accuracy of its content. Victorian Competition and Efficiency Commission GPO Box 4379 MELBOURNE VICTORIA 3001 AUSTRALIA Telephone: (03) 9092 5800 Facsimile: (03) 9092 5845 Website: www.vcec.vic.gov.au An appropriate citation for this publication is: Victorian Competition and Efficiency Commission 2011, Unlocking Victorian Tourism: An Inquiry into Victoria’s tourism industry, final report, June. About the Victorian Competition and Efficiency Commission The Victorian Competition and Efficiency Commission, which is supported by a secretariat, provides the Victorian Government with independent advice on business regulation reform and opportunities for improving Victoria’s competitive position. VCEC has three core functions: • reviewing regulatory impact statements, measurements of the administrative burden of regulation and business impact assessments of significant new legislation • undertaking inquiries referred to it by the Treasurer • operating Victoria’s Competitive Neutrality Unit. For more information on the Victorian Competition and Efficiency Commission, visit our website at: www.vcec.vic.gov.au Disclosure of interest The Commissioners have declared to the Victorian Government all personal interests that could have a bearing on current and future work. The Commissioners confirm their belief that they have no personal conflicts of interest in regard to this inquiry. 1 June 2011 Mr Kim Wells MP Treasurer of Victoria 1 Treasury Place East Melbourne VIC 3002 Dear Treasurer VCEC Inquiry into Victoria’s Tourism Industry In accordance with the terms of reference received by the Commission on 23 September 2010, we have pleasure in submitting the Commission’s final report Unlocking Victorian Tourism: An Inquiry into Victoria’s tourism industry. Yours sincerely Dr Matthew Butlin Deborah Cope Bill Mountford Chair Commissioner Commissioner Terms of reference I, John Lenders MP, Treasurer, pursuant to section 4 of the State Owned Enterprises (State Body — Victorian Competition and Efficiency Commission) Order (‘the Order’), hereby direct the Victorian Competition and Efficiency Commission (‘the Commission’) to conduct an inquiry into the Victorian Tourism Industry. Background Tourism is a significant economic driver for Victoria. In 2007-08, directly and indirectly tourism contributed 5.9 per cent or $15.8 billion to the economy, it also employed 185 000 people. Victoria is a popular tourist destination for residents in other Australian States and Territories as well as international travellers. The past decade has witnessed periodic surges in tourist numbers from China and other Asian neighbours in particular. The industry has a key role to play in Victoria’s future economic development. The Victorian Government plays a significant role in supporting the tourism industry, through the provision of quality infrastructure, good road and air access and strong marketing of Victoria’s attractions. An inquiry into Victoria’s tourism industry will assist in providing an improved information base on which to frame future State Government policy development for the tourism industry and will identify regulatory and other major impediments to the future development and growth of the industry through a consultative process that has regard to the community-wide impacts of regulatory and broader policies. Scope of the inquiry The Commission is to inquire into and report on: 1) State and local regulatory barriers to the development of the tourism industry and the creation of new tourist infrastructure, particularly in localities with substantial growth potential; 2) opportunities to improve the management of state assets to better meet the needs of the tourism industry without compromising their primary management objectives; and 3) the impact of international and domestic aviation policy on the Victorian tourism industry and broader economy, and any implications for policy positions that the Victorian Government might adopt in its own right or present to the Commonwealth Government. VI TERMS OF REFERENCE In undertaking this inquiry, the Commission should take into account any substantive studies or developments by the Commonwealth and other States, and international best practice. In particular, the Commission’s Inquiry is meant to complement and not duplicate work undertaken by Commonwealth and State Tourism Ministers under the auspices of the Council of Australian Governments. Inquiry process In undertaking this inquiry, the Commission is to have regard to the objectives and operating principles of the Commission, as set out in section 3 of the Order. The Commission must also conduct the inquiry in accordance with section 4 of the Order. The Commission is to consult with key interest groups and affected parties, and may hold public hearings. The Commission should also draw on the knowledge and expertise of relevant Victorian Government departments and agencies. The Commission is expected to produce the following documents: • an issues paper at the beginning of the inquiry process • a draft report containing analysis and draft recommendations after the receipt of public submissions; and • a final report to be provided to me as soon as possible, but not later than ten months after receipt of these terms of reference. JOHN LENDERS MP Treasurer 23 September 2010 TERMS OF REFERENCE VII Contents Terms of reference VI Contents IX Abbreviations XIII Glossary XVII Key messages XXI Summary report XXIII Recommendations LI 1 Introduction 1 1.1 Background to the inquiry 1 1.2 The terms of reference 2 1.3 The Commission's approach 3 1.3.1 The diverse nature of the tourism industry 3 1.3.2 Focusing the inquiry 4 1.3.3 Setting tourism in a wider context 6 1.3.4 Capacity of Victoria to effect change 6 1.4 Recent reviews of the tourism industry 7 1.5 Conduct of the inquiry 8 1.6 Report structure 9 2 The Victorian tourism industry 11 2.1 Introduction 11 2.2 Key characteristics of the industry 14 2.2.1 Visitors 14 2.2.2 Attractions and activities 25 2.2.3 Businesses 29 2.3 Future opportunities and challenges 34 2.3.1 Exogenous factors and ‘mega-trends’ 34 2.3.2 Domestic and international visitation forecasts 36 2.3.3 The growth from China 37 2.3.4 Future strategic directions and priorities 39 2.3.5 Regional dispersal 41 2.3.6 Nature-based tourism 43 2.3.7 The Commission’s view 44 3 Land-use planning regulation 45 3.1 Victoria’s land-use planning system 45 3.1.1 State and local policies relevant to tourism 46 3.1.2 Zones affecting tourism activities 48 3.1.3 The permit application process 51 CONTENTS IX 3.2 Issues raised by participants 51 3.2.1 Regulatory barriers to the development of tourism in Victoria’s land-use planning regulations 52 3.2.2 Complexity and costs of land-use planning regulation 62 3.2.3 The Commission’s view 65 3.3 Opportunities for improvement 66 3.3.1 Improving strategic planning 68 3.3.2 Removing regulatory barriers to tourism-related investment 76 3.3.3 Improving the administration of land-use planning regulation 83 3.3.4 Systemic improvements to planning processes 86 4 Public land regulation 89 4.1 Introduction 89 4.2 Public land in Victoria 90 4.2.1 What is public land? 90 4.2.2 Importance of public land to Victoria’s tourism industry 91 4.3 The regulatory framework for public land 94 4.3.1 The broad structure of public land regulation 94 4.3.2 Regulatory requirements for new tourism developments 97 4.3.3 The tour operator licensing system 104 4.4 Participants’ views on Victoria’s public land system 105 4.4.1 Barriers to investment 105 4.4.2 Uncertainty for investment 106 4.4.3 Restrictive lease terms 107 4.4.4 Unclear roles and responsibilities 109 4.4.5 Impact on investment 112 4.5 Opportunities for improvement 114 4.6 Removing restrictions on private development in national parks 116 4.6.1 Demand for investment 118 4.6.2 Protecting environmental values 119 4.6.3 Confining investment to outside national parks 126 4.7 Removing other regulatory barriers 131 4.7.1 Maximum lease durations 131 4.7.2 Terms and conditions of leases 133 4.7.3 Other regulatory barriers 134 4.8 Improving the development approval process 135 4.8.1 Simplifying the development approval process 135 4.8.2 Improving decision-making guidelines 138 4.9 Roles and responsibilities 139 4.9.1 Roles