Tourism and hotel market outlook Executive summary Edition 1, 2021 Tourism and hotel market outlook | Edition 1, 2021 About the tourism and hotel market outlook The Deloitte Access Economics Tourism and Hotel Market Outlook provides insights into the issues facing the Australian tourism and hotel sectors, including in-depth analysis of recent trends and their underlying drivers across the domestic and international tourism markets. Against the backdrop of Deloitte Access Economics’ While our forecasts are based on a forecasting latest economic forecasts, projections are provided methodology and a hotel market model developed for domestic and international tourism over the next over 15 years, due to the COVID-19 pandemic, we three years. Building on projected travel demand have overlayed bespoke behavioural and operational and an assessment of the hotel pipeline in Australia, adjustments such as short and long term sentiment detailed three-year forecasts are provided for indicators, and quarantine requirement implications occupancy, room rates and RevPAR for 11 of the on demand for hotel nights. Tourism and Hotel country’s major hotel markets (including Market Outlook is designed for a general audience. all capital cities). Please contact us to discuss how this capability can be tailored to a bespoke market or market segment. The 2021 edition of the Tourism and Hotel Market Outlook has introduced an interactive dashboard for each of the hotel market forecasts. We look forward to client feedback to refine in future editions. 2 Tourism and hotel market outlook | Edition 1, 2021 Forward Australia has endured Australia enters 2021 in a much-envied The recovery of the sector will also be unprecedented hardships position, with low manageable virus cases, affected by capacity challenges, including and a stronger than expected economic aviation capacity, tourism business viability over the summer of 2019-20 rebound which looks to continue. Despite in the short to medium term and the loss including the summer bushfire delays, the vaccine roll-out is expected to of human capital, along with consumer season and the subsequent positively influence both consumer and confidence and travel sentiment. business confidence. Australia’s success on COVID-19 pandemic. While now the health and economic fronts has come When international travel restrictions lift, deemed an overused term, the with a particularly heavy burden on the Australia will face an extremely competitive challenges of 2020 have truly country’s tourism sector. landscape with countries looking to reactivate their tourism industries as been unprecedented. The operating environment for tourism part of the recovery from the impacts businesses across many regions of of the pandemic. the country continues to be extremely challenging. The tourism sector was Given the anticipated prolonged the first to be impacted by measures uncertainty that Australia and the rest of introduced by governments in response to the world face during these difficult times, the COVID-19 pandemic and will be among this edition of the Tourism and Hotel Market the last to recover. Outlook provides the best view at the time of preparing the publication. The forecasts, These testing and uncertain times provide while providing a prediction of likely future the backdrop for this 2021 edition of the performance levels, need to be considered Deloitte Access Economics Tourism and alongside the challenges and many Hotel Market Outlook. unknown factors discussed. The forecast is best used as a reference guide as the The projections in this publication also tourism and hotel industries navigate out reflect the continued global uncertainties of the pandemic. around the COVID-19 pandemic.With countries at different stages in containing the virus and in rolling out their vaccination program, the outlook for the return of international travel to Australia remains highly uncertain. At the time of writing this publication, international tourism is unlikely to return in any meaningful way until early 2022, with the exception of travel bubble with New Zealand in the first instance. The uncertainty around the timeframe for lifting international travel restrictions represents a significant variable in the current forecast, and material shifts in timeframes will impact the forecasts presented. 3 Tourism and hotel market outlook | Edition 1, 2021 Executive summary Hearteningly, the roll out of For the tourism sector, the path and pace However, the global economic recovery vaccines underway across of recovery remains highly uncertain, with will extend well beyond 2021 as there the outlook depending on a wider range remain considerable challenges ahead the globe are bringing greater of factors than in past years – requiring including the more difficult than expected hope that the health impacts consideration of economic conditions logistics for large-scale vaccine rollouts, of COVID-19 can be brought here and overseas, ongoing government new COVID-19 variants on top of fraught responses to manage health crisis, geopolitical conditions. There will also be under control, and that consumer and business confidence, travel lingering economic scars, particularly when economies and communities sentiment and whether some of the it comes to unemployment which is set to hard hit by the dual crises will changes in travel patterns we’ve seen in stay high for a number of years. 2020 are here to stay. make strides on their Chart i shows that following an estimated recovery journey. With international borders expected to fall of 4.3 per cent in global economic remain shut for the much of 2021, the growth (measured by real GDP) in 2020, outlook for the tourism sector in the short a rebound of almost 5 per cent is forecast term is almost entirely dependent on the for 2021. Including 2021’s strong rebound, domestic market. global economic growth over the coming decade is forecast to average an annual The economic context rate very similar, but just slightly lower, Global economic conditions than pre 2020. The world is looking to 2021 to be a year of recovery and this will likely be the case as COVID-19 vaccines roll out and the growth in cases around the world slows. Chart i Annual global economic growth forecast, worldwide real GDP 6% 5% 4% 3% 2% 1% Pre-2020 decade average 3.75% Forecast next decade average 3.66% 0% -1% -2% -3% 2020, -4.3% -4% -5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: Deloitte Access Economics, Business Outlook January 2020. 4 Tourism and hotel market outlook | Edition 1, 2021 Domestic economic growth Chart ii Annual Australian economic growth forecast, real GDP Following the recession that occurred as a result of COVID-19 and the restrictions 5% that pandemic control necessitated, the 4% Australian economy had already started 3% to recover in the September 2020 quarter. 2% Victoria’s emergence from its second-wave 1% lockdown added further momentum to 0% this recovery, seeing Australia stepping into 2021 with an economy about the same size -1% as it was pre-pandemic. -2% -3% This bodes well for near-term economic 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 growth which Chart ii shows forecast to rebound sharply in 2021 (4.3 per cent) Source: Deloitte Access Economics, Business Outlook January 2020. before settling back into a more ‘typical’ pace of growth. Chart iii Economic growth forecasts by state and territory, real GDP Both the speed and size of Australia’s recovery thus far have come as a pleasant 6% surprise. Australia’s success in supressing 5% 5.3% 4.6% 4.4% the virus has been a key driver, as has the 4% 3.5% 3.4% 3.4% 3% 3.2% 0.1% fiscal stimulus provided by federal, state 2.4% 1.8% 2% 1.1% and local governments. 1% -2.2% -2.4% 0% -2.5% At a state level, those hardest hit in 2020 -1% -4.8% -1.5% can expect the largest recoveries in 2021. -2% -3% This is shown in Chart iii, with Victoria -4% forecast to have the strongest economic -5% ACT NT TAS SA WA NSW QD VIC growth in 2021. 2020 2021 Jobs and unemployment Along with economic growth will also Source: Deloitte Access Economics, Business Outlook January 2020. come jobs growth. More than 270,000 people are forecast to gain jobs in 2021, followed by 140,000 more in 2022. And this is off the back of nine out of every ten jobs lost in Australia during the pandemic already having been gained back by the end of 2020. Unfortunately, the jobs recovery has not been as positive across all industries. At the end of January 2021 there were just 1.7 per cent fewer jobs in Australia than in mid-March 2020. However, in the three industries most exposed to tourism1, there were still 7.8 per cent fewer jobs. 1 Accommodation & food services, arts & recreation services, and transport, postal & warehousing. 5 Tourism and hotel market outlook | Edition 1, 2021 Incomes and savings Household spending While there were widespread disruptions Despite record high savings rates, to employment across the year, the household spending rebounded with disposable income of Australian strength from the impacts of COVID-19. households grew strongly through 2020 Government stimulus keeping employees due in part to the coronavirus supplement connected to their employers and ensuring for JobSeeker recipients, greater than them a wage (the JobKeeper scheme) usual wages for some workers receiving along with increased payments to the JobKeeper in the initial round of the unemployed (JobSeeker coronavirus scheme and tax relief and moratoriums on supplement) helped boost consumer rental increases and debt repayments for confidence as COVID-19 case numbers some households.