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There’s no place like home!

New data points to strong rebound in consumer spending on domestic travel post-lockdown

Since the COVID-19 pandemic struck Australia, each state has faced lockdowns and border closures to varying degrees. Unsurprisingly, as a direct result, the Australian tourism sector has suffered and operators have been forced to adapt to a new world.

Likewise, consumers have had to adapt to the ‘new normal’, adjusting how they plan their holidays. Saving up towards an overseas trip or booking an interstate getaway six months in advance has become a thing of the past; indeed, most of us have had to cancel at least one flight or accommodation booking due to a snap lockdown or change in border restrictions, making it harder for people to forward plan their travel.

But what’s next now that state leaders (mainly) appear to be easing their once-rigid restrictions, and Australia is on the verge of ‘re-opening’ after a hiatus since early 2020?

Recent ANZ spending data points to a strong rebound in consumer spending on retail and travel post-lockdown to pre-delta levels, which is fantastic news for the Australian tourism sector. But while this is encouraging, there is still no real clarity as to when Australia will re-open its borders to inbound international travel.

Photo by Troy Mortier on Unsplash

Against this backdrop, Australian consumers have been left to fill the void left by our overseas guests and inject funds into domestic economy.

But can domestic travel make up the gap in room night stays to return to pre-delta levels?

The immediate spike in occupancy numbers in Melbourne and Sydney in the weeks following residents’ ‘freedom’ being granted, points to the fact that people are keen to travel within Australian borders.

STR data has demonstrated an almost doubling in national occupancy levels to the end of October, compared with just three months earlier.

This sentiment of local support was echoed by the Marriott’s Australian Vice President, Mr Sean Hunt, who commented positively on the uptake from Australian travellers, “We’ve had the strongest pick-up [in bookings] in the past few weeks since 2019 and the biggest spike in revenue generation since the pandemic started”.

There’s no place like home, is the sentiment of the local tourism groups, and with many domestic operators offering ‘escape packages’ with built-in bonuses such as free breakfast, return transfers, kids stay free packages and more, it’s likely that Australians will continue to embrace the benefits of domestic holidays, even once our international borders have officially opened.

Quality guest-focused operators always manage to navigate through difficult periods and the upcoming 12 to 18 months will undoubtedly see the gap grow between a vanilla offering, and those operators who are prepared to go above and beyond to ensure a quality guest experience.

In line with this newfound emphasis on operators and their more tailored focus on local holidaymakers, many travellers are now cutting out third-party booking services by picking up the phone.

While platforms such as Booking.com and Expedia were the go-to booking channels, it is now increasingly the case that guests are contacting operators directly.

Typical commissions payable to these platforms range between 10 – 25 percent of a booking price, with direct bookings, operators gain the full amount substantially increasing their income for the same stay.

With most businesses now accustomed to align with the ever-changing COVID restrictions, 2022 will likely herald the return of the corporate traveller.

This will undoubtedly be a huge relief to Australian hotel operators, who have long reaped the benefit of domestic corporate travel. In 2019, business guests comprised of a staggering 40 percent of total travellers in the Australian domestic market (Boston Consulting Group research indicates), and this trend looks set to return in 2022.

While it is not expected that larger functions or conferences will return immediately, it is anticipated that the present trend of escalating vaccination rates and the domestic easing of restrictions will provide Australian businesses with the peace of mind to kick-start planning their next large-scale corporate events.

Whilst outbound flights have commenced to some limited overseas destinations, Australia has created a travel bubble with early data shows that the take up has been underwhelming. Put simply, Australians on whole are not ready to take the plunge and head abroad. The recent announcement by Air New Zealand to cancel more than 1,000 flights citing “continued border uncertainty between Australia and New Zealand” with the airline expressing their sympathy for customers is another telling example. Again, this points to the idea that there simply is “no place like home” for the Aussie traveller.

The reality is, for Australians who are now faced with the impending easing of border restrictions, potential benefits of overseas travel overseas during a pandemic don’t outweigh the risks and costs for most people.

Getting ‘stuck’ in another country following a snap policy change or government direction, the inconvenience and costs associated with COVID testing and compliance, or worst case, catching COVID abroad, simply isn’t worth the perceived benefits of overseas travel. In this light, once popular holiday spots for Australians such as Bali, Thailand and Vietnam are likely to seem a risky option given their comparatively poor health systems and low immunisation rates.

Silverton, NSW Photo by Dylan Shaw on Unsplash

In keeping with this, there is an ever-growing trend of people re-visiting their bucket list and looking at the travel options on their doorstep rather than abroad. Given the breadth and depth of Australia, the only island continent in the world, we all seem to have a local destination we have been eyeing off and just not found the time and effort to get too. Perhaps this is our chance.

So the question is, given the uncertainty around global travel, can domestic travel make up the gap in room night stays to return to pre-delta levels?

The long-term answer would have to be ‘no’, but in the short to medium-term, the Australian accommodation market should see a strong bounce back, likely to be in line with pre-COVID levels. So pack your bags – but there is no need for you to look for your passport just yet!

By Gareth Closter, Senior Vice President, Investment Sales, Hotels & Hospitality Group, JLL

 

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