2
The Victorian tourism industry
2.1
Introduction
The economic value of tourism results from the coming together of visitors, the
attractions and activities that draw them to Victoria, and the businesses that
provide the services needed to support those experiences. It is a significant
source of income and employment for Victoria. In 2007-08,1 the tourism
industry was estimated to account directly for:


3.2 per cent (or $8.6 billion) of the total value of goods and services
produced in Victoria
direct employment of around four per cent of total Victorian employment
(105 000 jobs) (Pambudi et al. 2009, p. 4).
It is estimated that tourism indirectly2 contributed a further $7.2 billion in 2007-08
to the Victorian economy, bringing the total contribution to $15.8 billion,
representing 5.9 per cent of the total value of goods and services produced in
Victoria (Pambudi et al. 2009, p. 27). This makes tourism’s economic
contribution to the Victorian economy larger than industries such as agriculture
and utilities (electricity/gas/water supply) (Ho et al. 2008, p. 10).
The tourism industry covers a diverse but interlinked set of activities, markets
and participants and is difficult to define in practice. This is illustrated in the
standard definition of ‘tourism’ which is based around the visitor:
A visitor is a traveller taking a trip to a main destination outside his/her usual
environment, for less than a year, for any main purpose (business, leisure or
other personal purpose) other than to be employed by a resident entity in the
country or place visited. These trips taken by visitors qualify as tourism trips.
Tourism refers to the activity of visitors. (United Nations World Tourism
Organization 2010, para. 2.9)
This has practical implications for government policy and businesses seeking to
coordinate themselves in producing Victoria’s tourism product and ‘experiences’.
Many businesses provide goods and services that are bought by both tourists and
The Commission understands that these are the latest figures available for Victoria. Disaggregated figures
for states and territories based on the latest Australian Tourism Satellite Accounts (2008-09) were not yet
available at the time this draft report was published.
1
‘Indirect effects occur through flow-on effects to industries which do not themselves have direct contact
with the visitor but nonetheless supply goods and services attributable as tourism consumption. While direct
effects are considered to be the most appropriate measure for comparing the economic contribution of
tourism with other non-tourism industries, the aggregation of tourism’s direct and indirect effects contribute
to a fuller understanding of flow-on effects of tourism to output and employment within other industries, and
across the economy generally’ (Pambudi et al. 2009, p. 2).
2
THE VICTORIAN TOURISM INDUSTRY
11
residents. Businesses that primarily serve locals, but are still important to tourists,
may not associate themselves with the tourism industry. People also visit Victoria
for a range of reasons, which are not mutually exclusive (for example, business,
leisure, visiting friends and family, and education).
The interconnectedness and pervasiveness of the tourism industry can be seen in
the tourism ‘value chain’ (figure 2.1). The tourism industry is based around ‘the
destination’ where demand and supply come together. The value chain
recognises that tourism begins with a visitor deciding to come to Victoria for
some primary purpose. Once in Victoria, tourists often visit a range of
attractions and buy goods and services from many suppliers, including transport
operators, accommodation providers, restaurants and retail stores. It is the
convergence of attractions, transport, supporting services and other tourism
infrastructure that forms the tourism product for visitors to Victoria.
The future of the Victorian tourism industry is uncertain. The industry is
sensitive to a myriad of factors that are outside its control. These include
economic conditions in other countries, weather and natural disasters, the strong
Australian dollar, changing consumer preferences, increasing consumer mobility,
increasing consumer choices for discretionary spending, technology creating
better informed consumers, the emergence of low cost airlines and increased
global aviation capacity.
Some of these trends are ‘game changing’, fundamentally altering the industry’s
operating environment. Increasing competition, especially from international
destinations, will place increasing pressure on Victorian destinations to focus not
only on attracting visitors (the demand side) but also on delivering the
experiences visitors want (the supply side of tourism). To avoid the risks and
capitalise on new opportunities arising from the changes, tourism businesses will
need to be responsive and adaptable, and regulations will need to provide
sufficient flexibility for businesses to adapt. Cooperation and coordination within
and between private and public entities will need to be efficient and effective to
meet the competition and respond to future challenges.
This chapter examines:


12
characteristics of the industry and provides a ‘snapshot’ of the status of each
component of the tourism value chain namely: visitors, attractions and
activities, and businesses (section 2.2)
future opportunities and challenges, including key drivers of change, growth
trends, aspirations and strategic directions for the industry (section 2.3).
UNLOCKING VICTORIAN TOURISM
Figure 2.1
The ‘Tourism Industry Value Chain’
Attractions
(Melb & Regions)
Visitors
Public

Origin



International
Domestic –
Interstate
Domestic –
Intrastate




Purpose





Leisure
Business
Visiting
friends &
relatives
(VFR)
Education
Other


Parks (Great Ocean Road,
Royal Botanic Gardens,
Snowfields Phillip Island
Penguin Parade, Wilsons
Promontory)
Markets (Queen Vic
Market)
Precincts (Fed Square,
Docklands, Southbank)
Galleries & museums
(NGV, Melb Museum)
Other (MCG, Melb Zoo,
Melb Aquarium)
Heritage (incl Indigenous)
Events (cultural/ sport/
business)
Private






Crown casino/
entertainment complex
Resorts (snowfields,
Daylesford, Hepburn
Springs, Macedon)
Wineries
Shops/ retail/ restaurants
Theatre
Events (cultural/ sport/
business)
Supporting Services
Access
(transport)
Air
Accommodation
Food & drinks Transport













International
Domestic
Regional
Rail


Interstate
Intrastate /
regional
Road


Interstate
Intrastate /
regional
Water


International
(cruise ships)
Domestic






Hotels
Motels
Guesthouses
Serviced
apartments
B&Bs
Backpackers
Caravan parks
Campsites
Holiday houses
Specialist
accommodation
(e.g. eco-lodges)

Restaurants
Cafes
Take-away
Markets
Supermarkets
Bars/ pubs/
nightclubs
Wineries and
vineyards







Public
transport
Tourist
trains
Air services
Tour buses
Rental cars
Taxis
Travel
agencies
Entertainment / experiences / shopping /
other







Tour guides & interpreters
Tours & experiences (e.g. adventure tourism, ecotourism, indigenous tourism, dolphin swims, balloon
rides, river cruises)
Retail/ souvenir shops
Casinos and other gambling services
Concerts/ theatre/ shows
Sports (spectator, corporate hospitality)
Sports (participant, equipment hire)
Value
created for
Victoria
$15 billion to
the economy
105 000 jobs
Export revenue
Direct &
indirect
benefits for
community
(liveability)
Source: VCEC
THE VICTORIAN TOURISM INDUSTRY
13
2.2
Key characteristics of the industry
This section examines state of the Victorian tourism industry today. Following
the tourism value chain, the key components of the tourism industry are:



the visitors to Victoria (section 2.2.1)
the attractions, activities and experiences in Victoria (section 2.2.2)
the businesses in Victoria (section 2.2.3).
The Commission considers that the Melbourne tourism market, and Victoria’s
regional tourism markets, have different supply and demand characteristics, and
are therefore described separately. Differences include the distribution of visitor
types and origins, tourism activities, and expenditure patterns. These suggest that
the two key markets may differ in their future growth prospects and constraints,
and the relative impact of different regulatory and other factors on
competitiveness.
2.2.1
Visitors
Businesses in the Victorian tourism industry cater to visitors who differ by their
origin, purpose of visit, length of stay, interests and, hence, the activities they
engaged in during their stay.
Some trends in Victoria’s visitation growth and market share
Overall, tourism in Victoria has been growing as has Victoria’s share of the total
Australian tourism market. There are however, some key differences between
Melbourne and regional Victoria that can be seen in the growth and changes in
the composition of visitor nights over the last decade (figure 2.2 (a), (b) and (c)).
Melbourne has been responsible for virtually all of the overall increase in
Victoria’s total visitor nights over the last decade (figure 2.2 (a)). This has been
driven by the growth in international visitor nights, which almost doubled over
the same period. This has more than offset the slight decline in domestic visitor
nights (figure 2.2 (b) and (c)).
Regional Victoria relies heavily on domestic visitors, which account for 90 per
cent of all visitor nights in the regions (figure 2.2 (b) and (c)). Although the
number of international visitor nights has also doubled in the decade, it was from
a much smaller base. The net result was a slight fall in total visitor nights in the
regions.
Absolute growth however, does not imply competitiveness. Competitiveness is
better illustrated by comparing Victoria’s market share of total visitor nights in
Australia (figure 2.3 (a), (b) and (c)):
14
UNLOCKING VICTORIAN TOURISM




In 2000 Victoria, Melbourne and regional Victoria each held market shares
of around 18 per cent of all visitor nights (international and domestic) in
Australia, in capital cities, and in regional destinations respectively
(figure 2.3 (a)).
However, by 2009 their respective shares have diverged, with Melbourne
gaining market share against all other capitals (rising to 23 per cent), and
regional Victoria retaining its 18 per cent share against regional destinations
in other states and territories (figure 2.3 (a)).
This is likely to reflect the zero or negative growth in domestic tourism not
only in Victoria but across Australia. For example, domestic visitor nights
fell by -0.6 per cent a year in Victoria compared with -0.8 per cent a year
nationally from 2000–2010. This broader trend can be seen in the static
shares of both Melbourne and regional Victoria in domestic visitor nights —
both oscillating under 20 per cent over the past decade (figure 2.3 (b)).
By comparison, Victoria has been successful in winning a larger share of
international visitor nights. Melbourne gained around five per cent and
regional Victoria around three per cent, against other capitals and regional
destinations respectively, over the decade (figure 2.3 (c)).
Given the growth in Victoria’s market share in international tourists, it seems
that Victoria, and particularly Melbourne, might have a competitive advantage in
this area. This may have implications for considering the weaknesses and
opportunities for the Victorian tourism industry.
THE VICTORIAN TOURISM INDUSTRY
15
Figure 2.2
Domestic and international visitor night estimates
in Victoria, Melbourne and Regions, 2000-2010
(a) All visitors
100,000
90,000
Visitor nights ('000)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
Melbourne (int+dom)
Regional Vic (int+dom)
10,000
Victoria (int+dom)
0
2000
(b) Domestic
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
100,000
90,000
Melbourne (dom)
Victoria (dom)
Regional Vic (dom)
Visitor nights ('000)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2000
(c) International
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
100,000
Melbourne (int)
90,000
Victoria (int)
Regional Vic (int)
Visitor nights ('000)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Tourism Forecasting Committee 2010a, pp. 3, 11.
16
UNLOCKING VICTORIAN TOURISM
Figure 2.3
Market shares of Australia, capital city, and
regional visitor nights, 2000-2010
(a) All visitors
30%
Share of visitor nights
25%
20%
15%
10%
Melbourne/Total Capitals (%)
Victoria/Australia (%)
Regional Vic/Regional Aust (%)
5%
0%
2000
(b) Domestic
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2008
2009
2010
2008
2009
2010
30%
Share of visitor nights
25%
20%
15%
10%
Melbourne/Total Capitals (%)
Victoria/Australia (%)
Regional Vic/Regional Aust (%)
5%
0%
2000
(c) International
2001
2002
2003
2004
2005
2006
2007
30%
Share of visitor nights
25%
20%
15%
10%
Melbourne/Total Capitals (%)
Victoria/Australia (%)
Regional Vic/Regional Aust (%)
5%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Source: Tourism Forecasting Committee 2010a, pp. 3, 11.
THE VICTORIAN TOURISM INDUSTRY
17
Expenditure patterns
Visitors to Victoria come from different origins — international, interstate or
elsewhere in Victoria. These different types of visitors stay for different lengths
of time and spend varying amounts of money during their stay. This is of interest
to the tourism industry as profitability can increase by increasing the number of
high yield visitors.


Around one-third of all overnight visitors to Victoria are interstate3 or
international visitors, yet they account for two-thirds of total expenditure.
The majority of visitors are Victorian (almost two-thirds of total overnight
visitors), and they are particularly important for the regional economy, but
they contribute much less to expenditure (about one-third of the total).
International visitors are small both in absolute numbers and proportion of
all overnight visitors in Victoria (only nine per cent) but they accounted for a
much higher proportion of visitor nights (44 per cent) and expenditures (36
per cent).
Figure 2.4 illustrates4 that international tourists are high spending but
concentrate this in Melbourne. In the year to 30 June 2010, it is estimated that 92
per cent of Victoria’s total expenditure from international visitors (or $3546
million) was in Melbourne (TRA 2010d, table 26). This was the widest split in
international visitor expenditure between a capital city and its regions in
Australia. The average capital city share of international visitor expenditure
across Australia is 82 per cent.
By contrast, expenditure by domestic overnight visitors is dispersed more widely
to regional Victoria. They were estimated to have spent, in the year to 30 June
2010, $3549 million or 48 per cent of this expenditure in Melbourne and $3795
million or 52 per cent in the regions (TRA 2010e, table 26).
Domestic day visitors are a separate group. The total expenditure of this group
was estimated to be $3806 billion with 43 per cent and 57 per cent of this spent
in Melbourne and regional Victoria respectively (TRA 2010e, table 21).
Of the interstate overnight visitors the majority were from NSW (2556), Queensland (1482), and South
Australia (906).
3
Based on modelled expenditures for domestic overnight visitors (excluding airfares and long distance
transport costs) and international visitors (excluding package expenditure).
4
18
UNLOCKING VICTORIAN TOURISM
Figure 2.4
Estimated overnight visitors, nights and
expenditure by visitor origin and destination,
year to 30 June 2010
Visitors ('000, % Vic)
Visitors ('000, % Vic)
Internat.
1,555
9%
Interstate
5,229
30%
Regional
Vic
10,492
58%
Intrastate
10,713
61%
Visitor nights ('000, % Vic)
Visitor nights ('000, % Vic)
Interstate
21,500
24%
Internat.
40,950
44%
Regional
Vic
36,845
40%
Intrastate
28,754
32%
Melb
54,360
60%
Expenditure ($m, %Vic)
Expenditure ($m, %Vic)
Interstate
$3,445
32%
Internat.
$3,837
36%
Melb
7,749
42%
Regional
Vic
$4,087
37%
Melb
$7,095
63%
Intrastate
$3,498
32%
Source: VCEC based on TRA 2010d, tables 21, 25, 26, 27 and TRA 2010e, tables 2, 3, 26, 27.
THE VICTORIAN TOURISM INDUSTRY
19
Thus, domestic visitors (overnight and day visitors) continue to be very
important to tourism in regional Victoria. However, as illustrated above, there
has been no growth in domestic overnight visitation in the last decade.
Not only is Melbourne increasing its market share of visitor nights for
international visitors, it also recorded in the year to June 2010, the highest
expenditure per international visitor ($2465) in Australia (higher than
‘Experience Perth’ with $2360 and Sydney with $2035) (TRA 2010d, p. 5). This
implies that Melbourne is capturing an increasing share of the export dollars
from tourism in Australia.
Figure 2.5
Domestic (interstate and intrastate) overnight
visitors and international visitors to Victoria by
purpose of visit (year ended 30 June 2010), %
100%
100%
100%
5%
5%
3%
2%
Other
Employment
11%
10%
Education
16%
Business
23%
Visiting friends
& relatives
46%
Holiday
28%
33%
31%
51%
37%
Interstate
Intrastate
International
Source: VCEC based on TRA 2010d, p. 17 and TRA 2010e, p. 12.
20
UNLOCKING VICTORIAN TOURISM
Differences between Melbourne and regional Victoria also show up in the
primary purpose of domestic and international visits to Victoria. People can
travel to Victoria for holidays, to visit friends and relatives, or for business and
education. For Victoria as a whole, the main purpose of visit for interstate,
intrastate and international visitors was for holidays (figure 2.5). In the year to 30
June 2010, holiday makers accounted for 51 per cent of intrastate, 37 per cent of
interstate, and 46 per cent of international overnight visitors to Victoria.
At a more disaggregated level certain types of travel are concentrated in
Melbourne and regions (figure 2.6):




Melbourne is the primary destination for business tourists. Around 66 per
cent of all domestic business visitor nights and 90 per cent of all
international business visitor nights were in Melbourne. Business travel
includes purposes such as meetings, company incentives for employees,
conventions and business events. These visitors also tend to spend much
more than international leisure tourists.
Regional Victoria attracts more domestic holiday visitor nights than
Melbourne. Domestic holiday visitors spent around 77 per cent of their
nights in regional Victoria. In contrast, international holiday makers spent 81
per cent of their nights in Melbourne.
Regional Victoria and Melbourne both receive a similar number of visitor
nights from domestic travellers visiting friends and relatives (VFR) in
Victoria. International VFR visitors however spent 86 per cent of their
nights in Melbourne.
Melbourne is the dominant destination for international education visitors to
Victoria (classified within ‘Other’). Students account for about 10 per cent of
all international visitors to Victoria (figure 2.5). But because students tend to
stay longer than other types of visitors, they account for 40 per cent of total
international visitor nights in Victoria (TRA 2011b). Almost all of these
visitor nights were spent in Melbourne.5 This visitor segment is discussed
below.
Around 97 per cent of international student nights were spent in Melbourne. Based on tables 9 and 10 in
(TRA 2010d)
5
THE VICTORIAN TOURISM INDUSTRY
21
Figure 2.6
Domestic and international visitor nights by
purpose, Melbourne and regions (2009 actual)
100%
929
242
1,4 17
1,54 3
2 ,16 4
% Total visitor nights (Vic)
80%
Regional
Victoria
8 ,8 0 3
1,54 2
18 ,8 3 9
60%
16 ,6 2 4
2 ,13 8
8 ,717
6 ,758
40%
4 ,2 0 6
Melbourne
7,0 75
20%
1,0 4 9
5,772
0%
B us D O M
B us IN T
H o lida y D O M
H o lida y IN T
VF R D OM
V F R IN T
O t he r D O M
O t he r IN T
Purpose of visit, Domestic (DOM) or International (INT) visitors
Source: VCEC based on Tourism Forecasting Committee 2010b.
International education Sector
In response to the Issues Paper, TTF, VTIC and Victoria University (VU)
emphasised the impact that the international education sector and overseas
student visitors have on the demand side (visitation) and supply side (labour) 6 of
the tourism industry.
On the demand side, VU noted that ‘Travel by students and their visiting friends
and relatives has been one of the few growth segments of inbound tourism to
Australia in recent years, but has been under-researched and under-estimated’
(VU, sub. 51, p. 2). Despite their relatively smaller numbers, their average length
of stay is considerable. The Tourism Forecasting Committee stated that:
As such, any movements in their visitation patterns can be significant … In
addition, there are close links between education and VFR travel as many
international students are visited by family and/or friends while in Australia.’
(Tourism Forecasting Committee 2010a, p. 6)
On the supply side, international students are an important source of labour and
skills to the tourism industry (VTIC, sub. 40, p. 54).
VTIC argued that ‘While investment in accommodation and aviation is important, it is the availability, or
lack, of labour and skills that represents the greatest supply side challenge’ (sub. 40, p. 53).
6
22
UNLOCKING VICTORIAN TOURISM
Recent changes to migration regulations are expected to affect this sector.
Recently the Tourism Forecasting Committee revised down the forecasts for
inbound visitors:
Coinciding with implementation of measures to improve the integrity of
processing student visa applications, Department of Immigration and
Citizenship (DIAC) data shows there was a sharp fall in grants in the 2009-10
financial year, particularly from India and to a lesser extent Thailand, Malaysia
and South Korea. In recent times, international education visitors have also
started to decline. As a result, there has been a downward revision (from 7.5%
to 2.7%) in the growth forecast for inbound arrivals for ‘other’ reasons (which
includes those visiting for education and employment) in 2011. The longer term
annual average growth forecast has also been reduced from 6.4% to 5.1%.
(Tourism Forecasting Committee 2010a, p. 6)
According to VU, ‘Many of the migration issues are more Commonwealth
related, but the impact is felt strongly in Victoria which attracts a
disproportionate share of international students’ (VU sub. 51, p. 2). TTF
expressed similar views (sub. 44, p. 5). TTF went on to suggest that to recover
lost competitiveness against rival destinations, the Victorian Government should
actively participate in the Commonwealth government’s review of education
export policy measures (including visa processing fees) and introduce transport
concessions for international students (sub. 44, p. 14).
The Commission acknowledges that visiting students are important to Victoria’s
tourism industry. They engage in activities as leisure tourists in and outside their
place of study (Davidson et al. 2010); attract visiting friends and relatives; are a
source of labour and skills; and often return as leisure tourists after their studies
are complete. However, the regulatory issues relating to students (such as visas
and work permits), the competitiveness of the international education sector, and
workforce development in the tourism industry are considered by the
Commission to be connected to, but not the core focus of, this inquiry.
Changing composition of international visitors to Victoria
As illustrated above, growth in Victoria’s market share has been driven by
growth in international visitors. This is in turn driven in a large part by the
growth of Asian visitors, particularly from China.
The most important source markets for international visitors to Victoria are New
Zealand, United Kingdom, United States and China (or ‘Tier 1’ countries). In the
last decade these four countries accounted for 43 to 51 per cent of all
international visitors, and 35 to 41 per cent of international visitor nights in
Victoria (Tourism Victoria 2010e). However, as illustrated in figure 2.7, their
relative contributions to total visitations and stays have been changing.
THE VICTORIAN TOURISM INDUSTRY
23
China’s importance as a source of visitors has grown rapidly, overtaking the
United States in 2006, and about to overtake the United Kingdom to become the
second largest source of visitors in Victoria. The growth in China’s contribution
to international visitor nights has been even more dramatic, rising from around
712 000 nights (four per cent share of total international visitor nights in
Victoria) in 2000, to 7.7 million nights (19 per cent share of total international
visitor nights in Victoria) in 2010 which represents an annual growth rate of 27
per cent over the decade. Expenditure by this group has also increased by an
average of 23 per cent a year in Australia between 1999–2009. In Victoria,
Chinese visitor expenditure reached $528 million in 2009 — 14 per cent of
international expenditure in Victoria (Tourism Victoria 2009b, p. 3). China now
contributes, by far, the largest share of international expenditure in Victoria.
Figure 2.7
Share of international visitors and visitor nights in
Victoria, by Tier 1 countries, 2000-2010
20%
Share of international overnight visitors
18%
16%
14%
12%
10%
8%
6%
4%
China
2%
New Zealand
UK
USA
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
20%
Share of international visitor nights
18%
16%
14%
12%
10%
8%
6%
4%
China
2%
New Zealand
UK
USA
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: VCEC based on Tourism Victoria 2010e.
24
UNLOCKING VICTORIAN TOURISM
The tremendous growth in China’s share of visitors and visitor nights
overshadows somewhat the impressive annual growth of visitors from other
Asian countries. Between 2006–2010:



Malaysia — average annual growth of 17 per cent in visitor numbers and 12
per cent in visitor nights
India — average annual growth of 16 per cent in visitor numbers and 24 per
cent in visitor nights
Indonesia — average annual growth of 20 per cent in visitor numbers and
12 per cent in visitor nights (Tourism Victoria 2010e).
Prospects for the tourism industry in the China market is further discussed in
section 2.3.3.
2.2.2
Attractions and activities
Tourism is a discretionary spending item. Victoria is competing with numerous
destinations in Australia and globally to attract domestic and international
visitors. While attractions based on well-known natural and built assets are
important, it is notable that the Government also cited that Victoria’s tourism
‘assets are our sophistication, diversity and reputation for cosmopolitan and
cultural experiences’ (DIIRD 2006, p. 12).
In its 10 Year Tourism and Events Industry Strategy the State Government identified
the following key strengths of the Victoria tourism industry:






distinctive, consistent and well-targeted advertising highlighting Victoria’s
diversity within a compact area
lifestyle experiences associated with Melbourne’s theatres, shopping, world
class restaurants, cafes, bars and nightlife; as well as Victoria’s ranking as a
‘great place to tour by car’, and for ‘boutique wineries’
regional tourism opportunities arising from Victoria’s diversity, compactness
and good road networks
attractions such as major sporting, cultural and business events
capacity on direct inbound flights and recent increases in the number of
international airlines flying directly to Melbourne
a strong tertiary education sector which has helped to attract large numbers
of international students (DIIRD 2006, p. 12).
The policy settings to enhance the competitiveness of Victoria’s tourism industry
should take into account these advantages. The Government’s strategic
directions for the industry are further discussed in section 2.3.4.
THE VICTORIAN TOURISM INDUSTRY
25
Where do tourists go in Victoria?
Table 2.1 ranks the top attractions for domestic and international overnight
visitors. Melbourne-based attractions dominate the patronage of overnight
visitors to Victoria, more so for international visitors (with 7 of the top 10 within
walking distance of Melbourne’s CBD). This is broadly consistent with other
surveys undertaken of Victoria’s top attractions.7 Many of these are ‘state assets’
in the sense that they involve state or local government-owned or managed land,
buildings or other tourism infrastructure.
Attractions such as the Queen Victoria Market, Federation Square, Crown
Casino, Southbank, and Docklands rank highly for both international and
domestic visitors. Top regional attractions include: Great Ocean Road; Phillip
Island; Dandenong Ranges/Puffing Billy/Healesville Sanctuary; Yarra Valley;
Ballarat/Sovereign
Hill;
Mornington
Peninsula;
Bendigo;
and
Daylesford/Hepburn Springs/Macedon.
Table 2.1
Top attractions in Victoria by visitor numbers, year
ending June 2010
Domestic Overnight
Attraction
Southbank/Southgate *
Federation Square *
Great Ocean Road
Crown Casino/Entertainment Complex *
Docklands/Telstra Dome/Etihad Stadium *
Queen Victoria Market *
Mornington Peninsula
Ballarat or Sovereign Hill
Bendigo
Phillip Island
Melbourne Cricket Ground (MCG) *
National Gallery of Victoria (NGV) *
Daylesford, Hepburn Springs or Macedon
Melbourne Museum *
Yarra Valley
Dandenong Ranges
International Overnight
Rank
Visitors
(,000)
Rank
Visitors
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
1,331
1,308
1,113
1,105
953
942
852
741
737
533
443
374
334
329
293
210
4
2
5
3
6
1
14
13
15
8
12
9
16
7
11
10
497,459
709,945
462,056
523,437
431,810
738,657
142,055
146,351
59,265
282,349
156,530
253,396
25,938
333,620
176,746
197,405
* Melbourne-based attractions
Source: VCEC based on Tourism Victoria Correspondence (4/11/10). Based on National Visitor Survey,
Year ending June 2010, Tourism Research Australia, Canberra; International Visitor Survey, Year
ending June 2010, Tourism Research Australia, Canberra.
For example, (Only Melbourne nd) and the City of Melbourne’s survey of users of their visitor services (sub.
53, p. 13). By comparison, visitors on RACV’s ‘Victorian 101 things to do’ campaign (sub. 51, p. 9) voted all
regional Victorian locations and events as their top 10.
7
26
UNLOCKING VICTORIAN TOURISM
What do tourists like to do in Victoria?
The activities that are most popular with domestic and international visitors are
presented in table 2.2.. Eating out and shopping are popular with both domestic
and international visitors. Appendix B, table B.1 provides a further breakdown of
the most popular activities for visitors of different nationalities. The top three
activities enjoyed by visitors from different countries to Victoria tend to be the
same. These include: eating out, sightseeing/looking around, and shopping for
pleasure. There are also some activities that frequently make the top five of many
nationalities such as: going to the beach; visiting pubs/clubs/discos; and markets.
Table 2.2
Top 15 activities of visitors to Victoria (% of
visitors), year ending 2008
Rank Domestic Overnight Visitors
% International Visitors
%
1
Eating out at restaurants
55 Eating out at restaurants
68
2
Visit friends and relatives
44 Sightseeing/looking around
59
3
Go shopping (pleasure)
28 Go shopping (pleasure)
48
4
General sight seeing
25 Go to the beach
28
5
Pubs clubs discos etc
22 Pubs clubs discos etc
26
6
Go to the beach
18 Go to markets
23
7
Going to markets (street,
weekend or art craft)
9 Visit national parks or State parks
20
8
Bushwalking or rainforest walks
8 Visit museums or art galleries
17
9
Visit national parks or State
parks
7 Visit historic buildings/sites
17
10
Visit museums or art galleries
6 Visit botanical or other public
gardens
17
11
Attend an organised sporting
event
6 Visit casinos
14
12
Go on a daytrip to another
place
6 Visit wildlife parks/zoos/
aquariums
13
13
Go fishing
5 Bushwalking or rainforest walks
10
14
Play other sports
4 Attend Movies/Cinema
10
15
Go on guided tours or excursions
9
Source: Tourism Victoria 2009c, pp. 3, 5.
THE VICTORIAN TOURISM INDUSTRY
27
However, there are also differences between nationalities. For example, Chinese
visitors to Victoria were much more likely than the average international visitor
(and notably, visitors from the traditional markets of the UK, New Zealand, and
USA) to have visited national parks, historic buildings and sites, and casinos.
However, they are less likely than the average international visitor to eat out and
visit markets.
More generally, similar data for other Australian destinations show that
international visitors to Victoria were more likely to visit markets, museums or
art galleries, history or heritage buildings, sites or monuments, botanical or other
public gardens and go to the casino (Tourism Victoria 2009c, p. 5).
Understanding the interests of international visitors from countries where the
market is growing is important for considering how Victoria might respond to
this growth. A challenge for industry will be in responding to the fact that the
preferences of international visitors from the high growth markets may be
significantly different from visitors from traditional markets. New approaches,
tourism products and infrastructure may need to be developed to ensure these
visitors enjoy their stay and want to return.
The Business Events Sector
While many visitors are drawn by existing attractions and experiences, effort is
also dedicated to design one-off attractions, such as events. Business events are a
good example.
The business events (or the Meetings Incentives Convention Events) sector is
important to Victoria for a range of reasons, not least because of the significantly
higher yields of its visitors, but also for its effects on accompanying (leisure)
visitors, regional dispersal, and repeat visitations (box 2.1). In addition, it is
suggested that business events can enhance Melbourne’s profile as the capital for
events (sporting, cultural and business) and build the city’s reputation as a place
for innovation, attract international business leaders and investors, and provide
opportunities for Victorians to build their knowledge and capabilities (Melbourne
Convention & Visitors Bureau nd). This type of tourism also contributes to
developing business, scientific and educational networks. There has been
substantial growth in business events, but there is also increasing competition
from other states and countries.
28
UNLOCKING VICTORIAN TOURISM
Box 2.1
Business convention sector facts and figures
According to the Melbourne Convention & Visitor Bureau (MCVB), the business
events industry (conferences, incentive travel, meetings, conventions, exhibitions) is
the highest yielding sector of the tourism industry. MCVB suggests that the benefits
of the business events sector are far reaching, including:
Convention Yield


international convention delegates spend (on average) five to six times that of
the international leisure tourist.
28 per cent of international delegates also bring a partner.
Convention Delegate Dispersal


46 per cent of all international convention delegates participate in pre or posttouring to other parts of regional Victoria and Australia.
58 per cent of international convention delegates indicate that they will come
back to Australia for a holiday within the next five years after the convention
has been held.
Economic Impact to Victoria




business events are directly responsible for more than 22 000 jobs in Victoria.
business events generate $1.2 billion annually for the Victorian economy.
more than 192 000 room nights were secured by MCVB in the last financial year
(2009–10).
in 2009–10, MCVB’s activities attracted in excess of 70 000 delegates and their
partners and families to Victoria, injecting AUD$269 million into the State
economy.
Source: Melbourne Convention & Visitors Bureau nd.
2.2.3
Businesses
On the supply-side a wide range of different products and services are produced
along the tourism value chain. Tourism industry output and employment are
therefore distributed across many sectors. Figure 2.8 shows the composition of
tourism output for 18 product sectors. Major supplier sectors include longdistance transport, takeaway and restaurant meals, accommodation, and
shopping. Services growth has been an important part of the Victorian economy,
and a substantial portion of the tourism industry is highly service-oriented
(labour intensive). Major employment sectors are therefore in retail,
accommodation, cafes and restaurants, and education, which together account
for about 58 per cent of the jobs in the tourism industry (Pambudi et al. 2009).
THE VICTORIAN TOURISM INDUSTRY
29
Businesses that contribute to the tourism industry vary in the degree to which
their business relies on tourists. According to its latest Tourism Businesses in
Australia report, Tourism Research Australia (TRA) estimated that in June 2007:
‘around 29 per cent (or 586,000) of the two million actively trading businesses in
Australia were tourism-related … around 20 per cent of these businesses depend
on tourism for their survival’ (TRA 2010a, p. 22).
Figure 2.8
Composition of Victorian tourism output 2007–08
Travel agency services 2%
Gambling and betting 2%
Recreation, culture, sports 3%
Long distance transport 15%
Rent on holiday houses 4%
Other 4%
Other transport 5%
Education 5%
Shopping 15%
Fuel 7%
Food products & Beverages
13%
Takeaw ay and restaurant meals
15%
Accommodation services 10%
Source: Based on Tourism Victoria 2010a, p. 6 and Pambudi et al. 2009. Nb. ‘Other transport’ includes
local transport, motor vehicle hire, motor vehicle maintenance, taxi fares and vehicles.
Figure 2.9 illustrates the significance of various industries (by ANZSIC industry
division) to the Victorian tourism industry, and conversely, the significance of
tourism to each industry — in terms of the extent to which tourism accounts for
each industry’s total Gross Value Added (GVA) and employment respectively.
Industries that are further away from the origin (lower left corner of the chart)
are relatively more reliant on tourists for their business. The following
observations can be drawn from this chart:

30
The Accommodation, Cafes & Restaurant sector and the Transport sector
— industries that are strongly connected to and reliant on tourism — clearly
UNLOCKING VICTORIAN TOURISM

generate a lot of economic value from tourism. However, a lot of value is
also extracted by the Retail Trade; Education and Manufacturing sectors
despite being relatively less reliant on tourism. More than half of the GVA
and employment in the tourism industry is produced in sectors that are less
reliant on tourism. Specifically, ANZSIC industries that attribute less than
eight per cent of their industry’s GVA and employment to tourism generate
56 per cent and 59 per cent of the total GVA and employment in the
tourism industry respectively.
The Cultural & Recreational Services sector relies on tourism for only about
six per cent of its employment and five per cent of its GVA but this sector is
also a crucial driver of the tourism dollars derived by the other sectors
because it provides tourist attractions, activities, and ‘draw-cards’. Similarly,
the indirect value to the tourism industry of public assets, including those
with historical, natural and indigenous heritage used for ‘sight seeing’ or as
backdrops for other tourist activities, may not show up in national accounts.
This illustrates the difference between ‘attractions’ and supporting services in
the tourism value chain.
Figure 2.9 therefore underscores: the diversity and complexity in the ‘tourism
industry’ and problems in recognising ‘tourism businesses’; what sector(s) would
be particularly sensitive to changes affecting Victorian tourism; where the
tourism dollars are being extracted; and why coordination could be more
important and difficult in the tourism industry compared with other industries.
THE VICTORIAN TOURISM INDUSTRY
31
Figure 2.9
Tourism GVA by ANZSIC industry division, and
tourism’s share of each industry’s total GVA and
employment, Victoria 2007-08
50.0%
Accommodation, cafes &
restaurants
Tourism share of industry total GVA
40.0%
30.0%
20.0%
Transport & storage
Retail trade
10.0%
0.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Tourism share of industry total em ploym ent
Selected area magnified...
8.0%
Retail trade
Tourism share of industry total GVA
7.0%
6.0%
Education
5.0%
Cultural & recreation services
4.0%
Personal & other services
3.0%
Communication services
Manufacturing
2.0%
Health & community services
1.0%
Property & business services
Finance & insurance
0.0%
0.0%
Government administration &
defence
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Tourism share of industry total em ploym ent
Source: VCEC based on data from Pambudi et al. 2009, pp. 14, 19. The volume of each circle
represents the size of the economic contribution ($million GVA) generated by each industry
division attributed to tourism.
32
UNLOCKING VICTORIAN TOURISM
Tourism Research Australia estimated that there were 150 000 ‘tourism-related’8
businesses in Victoria (TRA 2010b). Of this, two-thirds (101 000 businesses)
were in Melbourne, with the remaining one-third in the regions (figure 2.10)
(TRA 2010c). This split in the location of tourism businesses between capital
cities and regions is similar to that for the whole of Australia. The distribution of
businesses presented in the map in figure 2.10 illustrates that tourism has a
presence in every region of Victoria. Many of Victoria’s tourism-related
businesses are small — 51 per cent of these were non-employing, and 42 per
cent were micro or small businesses (TRA 2010b).
Figure 2.10
Number and distribution of tourism-related
businesses in Victoria, June 2007
2,148
543
1,803
3,249
1,473
2,826
609
1,917
444
1,002
1,260
468
2,166
3,705
1,719 101,142
4,866
7,068
4,425
6,669
717
Source: VCEC compiled from Regional Tourism Profiles 2009/10 TRA 2011a.
The Australian Bureau of Statistics makes a distinction between ‘tourism characteristic’ and ‘tourism
connected’ businesses, both of which are ‘tourism-related’ businesses. See glossary.
8
THE VICTORIAN TOURISM INDUSTRY
33
2.3
Future opportunities and challenges
This section outlines the key trends, future aspirations, and challenges facing the
Victoria tourism industry, and the strategic directions identified by government
for the industry. This includes:




the exogenous factors and ‘mega-trends’ impacting on the industry
domestic and international visitor trends and forecasts
the growth from China
future strategic directions and priorities identified by government including,
among other things, ‘regional dispersal’ and ‘nature-based’ tourism.
This informs the Commission of opportunities and constraints relevant to this
inquiry and where reforms might have the largest impact on the industry in the
future.
2.3.1
Exogenous factors and ‘mega-trends’
The terms of reference note that the Victorian Government plays a significant
role in supporting the tourism industry. However, some critical determinants of
industry performance are beyond the influence of state or local governments.
Tourism is a risky business, which faces uncertainties that make the feasibility of
certain business cases difficult to predict. In its recent State of the Industry 2010
report, TRA listed ‘mega-trends’ that will affect the tourism industry, these
included:








increased world wealth (especially Asia)
increased integration of the world economy
increased role of the entrepreneur/greater innovation
demographic changes – ageing populations
increased urbanisation
increased female participation in the workplace
climate change and changes in consumer behaviour
increased technology intensity and sophistication (including information and
technology transfers) (TRA 2010a, p. 27).
Global economic and other conditions, changing demographics and consumer
preferences, and evolving technology and business models are discussed in more
detail below. The challenge for the Victorian tourism industry is how to
effectively respond to these changes, which can represent productivity growth
opportunities or, as the TRA suggest, ‘if ignored, could adversely impact on the
competitiveness of the industry’ (TRA 2010a, p. 27).
34
UNLOCKING VICTORIAN TOURISM
Global economic and other conditions
The tourism industry can be highly sensitive to external factors including global
economic volatility (such as the Global Financial Crisis), exchange rates, security
and terrorism (such as September 11), fuel prices, health scares (such as SARs
and swine flu), and other crises (such as drought, bushfires and floods). These
can all have dramatic effects on visitor numbers and business profitability.
Global economic growth will continue to be a driver of domestic and
international tourism. The expectation is that there will be:
stronger economic growth in 2011, particularly in Asia and Australia, but
remaining patchy in Europe and the United States, a continuation of the strong
Australian dollar and solid growth in international aviation capacity in 2011 and
2012 (particularly from China and South East Asia). (TRA 2010a, p. 18)
According to TRA, ‘Asia is expected to contribute the majority of the growth in
inbound arrivals in the period to 2020’ (TRA 2010a, p. 18).
A stronger Australian dollar however represents a double threat to the Victorian
tourism industry: (1) there would be some downward pressure on inbound
visitors; and (2) domestic (especially regional) tourism will have to compete more
vigorously against overseas destinations for domestic visitors (both intrastate and
interstate). The combination of a strong currency, increased international air
capacity and a strong Australian economy ‘has increased opportunities for
Australians to travel overseas, while at the same time reducing the
competitiveness of Australia as a destination for international visitors’ (TRA
2010a, p. 3).
The challenge for the industry will be to maintain and improve Victoria’s share
of the global tourism market given these uncertainties and macro conditions.
Changing demographics and consumer preferences
The Victorian Government has stated that:
… competition for the tourism and events dollar is fierce and tourists are
becoming increasingly discerning, constantly in search of new experiences and
better standards of service. (DIIRD 2006)
The demand for tourism will continue to shift from changes in visitor
demographics and preferences — domestic and international. It is said that
demographic shifts are intensifying the demand for new and exciting tourism
experiences:
The Generation Y and new Generation Z segments will also influence the future
of the tourism sector. Although these segments value holidays highly, they are
also more discerning and typically seek very unique travel experiences. They are
THE VICTORIAN TOURISM INDUSTRY
35
also more mobile and casual in their approach to life and work, creating
challenges for tourism marketing. (Tourism Victoria 2008b, p. 6)
Australia’s ageing population will also have an impact on the tourism industry:
‘driven by the Baby Boomer generation entering retirement. This may create
greater demand for appropriate travel experiences for this segment: e.g. Grey
Nomads’ (Tourism Victoria 2008b, p. 6). Changing consumer preferences are
also driving business re-orientation, for example, increasing specialisation in the
accommodation and hospitality markets, such as growth in niche
accommodation, food and entertainment offerings (IBISWorld 2010, pp. 11-12).
Evolving business models and technology
The introduction of low-cost airlines and cut-price domestic airline tickets has
also made interstate and international travel more affordable, increasing access by
non-Victorians to Victoria’s tourism offerings but also travel by Victorians to
other destinations.
New online technologies are giving consumers more information, empowering
them to purchase directly when selecting destinations and booking travel, making
quality and value for money more transparent and important for businesses
(Tourism Victoria 2008b, p. 6).
These trends suggest that the tourism industry will need to respond to fiercer
competition with tourists being better informed and more mobile in switching to
alternative destinations. Sophisticated marketing will need to be backed by
products and experiences that deliver on tourists’ expectations.
2.3.2
Domestic and international visitation forecasts
The trends in domestic and international visitation have implications for the
approach to developing Melbourne and regional tourism destinations. Forecasts
by the Tourism Forecasting Committee (2010) suggest that the growth in
domestic overnight visits to Victoria will be minimal with little or no change in
the shares of the various segments (for example, metropolitan or regional, and
visitor purpose):


36
The forecast predicts almost zero growth in domestic visitor nights in
Melbourne or the rest of the state, with compound annual growth in the
next five years (2009–2014) of 0.9 per cent (1.5 per cent in Melbourne, 0.5
per cent in the rest of the state) and in the next 10 years (2009–2020) of only
0.5 per cent (0.8 per cent in Melbourne, 0.3 per cent in the rest of the state)
(Tourism Forecasting Committee 2010b, table 12).
The ratio of domestic visitor nights between the capital city and the rest of
the State has roughly stayed the same for the last 10 years, and the forecast
UNLOCKING VICTORIAN TOURISM
suggests that this is expected to continue. This implies that little additional
‘regional dispersal’ is likely to come from domestic visitors.
By comparison, the outlook is that international (inbound) visitor nights will
continue to grow more quickly than domestic visitors:


The forecast predicts growth in international visitor nights in Victoria both
in Melbourne and the rest of the state, with a compound annual growth in
the next five years (2009–2014) of 5.6 per cent (5.4 per cent in Melbourne,
7.1 per cent in the rest of the state) and in the next 10 years (2009–2020) of
4.4 per cent (4.3 per cent in Melbourne, 4.7 per cent in the rest of the state)
(Tourism Forecasting Committee 2010b, table 3).
Over the 10 year period, the ratio of international visitor nights between the
capital city and the rest of the State is forecasted to remain roughly the same.
This also implies little ‘regional dispersal’ of international visitors.
Attracting international visitors to Victoria is seen as important due to their
relatively higher expenditures and longer stays.
There appears to be overwhelming evidence and a broad consensus among
industry and government participants that the main driver of growth and key
source market for Victoria’s tourism industry in the future will be China.
2.3.3
The growth from China
Forecast for the next 10 years are consistent with the trend over the last 10 years
in that Asia (excluding the Middle East) is expected to be the growing source
market for international visitors to Victoria.
In the case of China, both the number of visitor arrivals and their Total Inbound
Economic Value (TIEV)9 are forecasted to grow rapidly, with a compound
growth rate in the next 10 years (2009–2020) of 8.5 per cent and 7.5 per cent
respectively (figure 2.11). China alone is expected to contribute almost 28 per
cent of the total growth in tourism exports for Australia to 2020 (figure 2.12).
The challenge for the Victorian tourism industry will be to respond and tap into
this demand from China and other Asian economies. Different approaches,
products and infrastructure may be needed that better cater for different
consumer preferences. The aviation industry, capacity, access, and aviation policy
will also need to be responsive to the changes in the market demand.
Represents the total amount of money that flows to the Australian tourism industry from international
visitor spending.
9
THE VICTORIAN TOURISM INDUSTRY
37
Figure 2.11
China: International visitor nights and Total
Inbound Economic Value (TIEV)
Source: Tourism Forecasting Committee 2010a, p. 26.
Figure 2.12
Contribution to growth in tourism export dollars
(Australia), from 2009 to 2020 (forecast), %
% 0
China
Other World
Middle East
Other Asia
Indonesia
South Korea
United Kingdom
India
United States
Malaysia
New Zealand
Singapore
Other Europe
Canada
France
Hong Kong
Germany
Japan
Nordic Countries
Italy
Taiw an
Thailand
South Africa
Ireland
Netherlands
Sw itzerland
5
10
15
20
25
30
27.9
6.8
5.2
5.0
4.9
4.6
4.6
4.4
4.2
3.7
3.3
3.3
2.7
2.5
2.5
2.3
2.2
2.1
1.7
1.3
1.2
1.1
0.7
0.6
0.6
0.5
Source: TRA 2010a, p. 19.
38
UNLOCKING VICTORIAN TOURISM
2.3.4
Future strategic directions and priorities
The Victorian government and others have considered many of the implications
of these trends for the tourism industry. A wide array of tourism strategies and
action plans have been promulgated by all levels of government. These
documents identify opportunities and challenges for the tourism industry and set
out strategic directions for responding to these. Box 2.2 outlines some of the
guiding documents.
Box 2.2
Key tourism industry strategies and plans at
each level of government
National level:


National Long-Term Tourism Strategy 2009
National Tourism Investment Strategy (March 2006)
State level:

10 year Tourism and Events Industry Strategy (October 2006)

Victorian Tourism Workforce Development Plan 2010–2016

Victoria’s Arts, Theatre & Cultural Heritage Tourism Action Plan 2010–2014

Regional Tourism Action Plan 2009–2012

Victoria’s Nature-Based Tourism Strategy 2008–2012

Backpacker Tourism Action Plan 2009–2013

Victoria’s Golf Tourism Action Plan 2009–2012

Victorian Trails Strategy 2005–2010

Victoria’s Spa and Wellness Tourism Action Plan 2005–2010

Victoria’s Aboriginal Tourism Development Plan 2006–2009

Food and Wine Plan 2004–2007
Capital city level:

City of Melbourne Tourism Plan 2007–2012
Source: VCEC. Regional tourism organisations and councils may also have strategies and plans
for tourism, as will various industry and business associations.
It is not the role of the Commission to comment on these planning documents
individually, or to predict what tourism opportunities will be profitable and what
this might mean for Victoria. The Commission takes into consideration,
however, existing government policy, research and other work done in
identifying priority opportunities and threats for the Victorian tourism industry
and uses this as background in considering the implications of aviation policy
and regulatory impediments for the future development of tourism.
THE VICTORIAN TOURISM INDUSTRY
39
The Commonwealth Government in its National Long-Term Tourism Strategy 2009
(NLTTS) identified the following overarching issues and priorities for the
Australian tourism industry:









positioning for long-term growth — stimulating consumer demand and
securing jobs
leadership — strategic and coordinated leadership that will drive the national
tourism agenda
informing industry and government — a research and development agenda
that will inform industry and government
facilitating investment and regulatory reform — investment that will ensure
Australian tourism product remains competitive in a global marketplace
labour and skills — labour and skills development that will support tourism
industry needs
responding to challenges — tourism businesses that will adapt to the impact
of change, climate change and other external shocks
excellence in product and service delivery — product quality and service
delivery that will ensure Australia is a high-value destination
strengthening our competitiveness with industry and product development
— destinations and tourism product that will make the most of our unique
attributes
measuring our performance — performance indicators that will track
progress and support strategic priorities (DRET 2009).
The 10 year Tourism and Events Industry Strategy and other strategies and action
plans developed by the Victorian Government focus on the state priorities.
These cover opportunities in specific product, visitor or destination categories
(for example, nature-based tourism, backpacker tourism, tourism in regional
Victoria) and industry development priorities (for example, tourism workforce,
regional industry structures, and the supply and quality of tourism experiences).
An underlying theme of the various strategic directions is that the future of the
tourism industry in Victoria (and Australia generally) depends not only on
demand conditions and actions, but also on addressing supply side constraints.
Addressing the supply side involves, among other things, removing unnecessary
regulatory barriers to investment in tourism infrastructure (chapters 3 and 4),
constraints in aviation capacity (chapter 5) and improving other tourism-related
regulations (chapter 6). This coincides with a gradual shift in the emphasis of
many government and non-government tourism bodies, from a mostly
destination marketing focus to broader destination planning and management.
There is growing recognition that effective industry and government cooperation
and coordination is an increasingly important source of competitive advantage
for destinations in a competitive market (chapter 7).
40
UNLOCKING VICTORIAN TOURISM
The Commission’s consultations with stakeholders suggested two future priority
areas of particular relevance to this inquiry: (1) ambitions for greater ‘regional
dispersal’; and (2) the potential to better utilise Victoria’s natural assets to grow
nature-based tourism. These are discussed in more detail below.
2.3.5
Regional dispersal
An aspiration shared by industry and the government is to attract a higher
proportion of the growing and higher-yielding international tourists to more
regions of Victoria and encourage them to stay longer and spend more outside
Melbourne. This is referred to as ‘regional dispersal’.
A parliamentary inquiry in 2008 into rural and regional tourism found that
tourism had ‘the potential to contribute to the economic viability and
sustainability of many towns and communities’ (Victoria Parliament Rural and
Regional Committee 2008, p. 244). The overall thrust of the report was the need
to consider sustainable destinations and communities in rural and regional
Victoria using a ‘three pillars’ approach ‘where economic social and
environmental values are balanced’ (Victoria Parliament Rural and Regional
Committee 2008, p. 224). This relies on focussing on the foundations of tourism
businesses, host communities and the environment. Such an approach is
particularly important given the strong link between nature-based tourism and
regional tourism.10
In the long run the capacity of regional Victoria to attract more tourists will
depend on its accessibility and whether it offers the experiences tourists want.
According to Tourism Victoria: ‘Visitation results indicate that the performance
of regional Victoria in attracting visitors varies depending on key factors such as
proximity to Melbourne and access to facilities such as airports.’ (Tourism
Victoria 2008b, p. 8). As noted above (section 2.3.2), the regional market is
currently reliant on domestic visitors and growth in domestic tourism has been
stagnant or negative in the last decade. The forecasts also suggest that the current
trends will continue. International tourists are seen as a potential growth driver in
the regions but, as illustrated above, it is starting from a very low level. The
future challenge for regional dispersal is likely to be particularly difficult for the
growing Asian visitor market:
Attracting inbound tourists is a significant challenge for regional Victoria as
international visitors, especially from high growth markets such as China and
India typically have lower levels of regional dispersal. (Tourism Victoria 2008b,
p. 9)
Regional tourism is also closely linked to other segments identified including spa and well-being, trails, food
and wine, alpine resort, arts, theatre and cultural heritage, and golf tourism.
10
THE VICTORIAN TOURISM INDUSTRY
41
This is further illustrated in figure 2.13 which shows that visitors from Asia tend
to stay and spend in Melbourne rather than regional Victoria. This includes the
market with the largest total expenditure — China — which has one of the
lowest rates of regional dispersal of any country. Generally, visitors from western
markets (especially Netherlands, Scandinavia, Switzerland, and Germany) have
the greatest propensity to stay in regional Victoria.
Figure 2.13
International dispersal in regional Victoria
450
400
United Kingdom
China
Total expenditure ($ million)
350
New Zealand
300
Singapore
250
USA
Malaysia
200
Indonesia
India
150
Thailand
Korea
100
50
Switzerland
Japan
Hong Kong
Middle East
Taiwan
0
0
Germany
Canada
Italy
South Africa
10
Scandinavia
France
20
Netherlands
30
40
50
Regional dispersal (% of nights)
Visitor volume of Victoria’s key international markets are depicted by the size of the circles (the larger
the circle the higher the volume).
Source: Tourism Victoria 2008b, p. 9, based on the International Visitor Survey, Tourism Research
Australia, June 2008.
More detailed studies of regional dispersal behaviour of international tourists
have suggested that for most nationalities, dispersal does not change quickly over
time (Allcock 1996, p. 3). The study showed that, from 1989–1994, markets with
high distribution indexes (higher regional and economic dispersal) were all based
in Europe, while low distribution markets were predominantly Asian countries
(Allcock 1996, p. 3). This suggests that, at least in the medium term, regions will
continue to face a challenge in trying to tap into the emerging Asian markets.
2.3.6
Nature-based tourism
Both government and industry identified nature-based tourism as a growth
sector for Victoria’s tourism industry. Nature-based tourism is tourism that relies
on experiences directly related to natural attractions including: ecotourism,
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UNLOCKING VICTORIAN TOURISM
adventure tourism, extractive tourism (for example, fishing), wildlife tourism and
nature retreats (Tourism Victoria, DSE, and Parks Victoria 2008, p. 4). Victoria’s
Nature-Based Tourism Strategy 2008–2012 is an interagency strategy that sought to
provide ‘a coordinated approach to policy, planning, sustainable development
and marketing of the nature-based tourism sector’ (Tourism Victoria, DSE, and
Parks Victoria 2008). According to this Strategy:
For Victoria, the strongest nature-based tourism growth from 2006 to 2016 is
forecast to come from international markets. Visitation is expected to grow from
1.11 million nature-based tourism visitors in 2006 to 1.61 million in 2016, with
China being the largest source market. (Tourism Victoria, DSE, and Parks
Victoria 2008, p. 4)
Some key impediments identified in the Strategy included:







lack of an integrated policy and planning framework to enable private
investment (‘enabling environment’)
low consumer awareness and perception of Victoria as a nature-based
tourism destination
limited coordination and focus on sustainable destination planning
development and management of key nature-based tourism destinations
climatic events affecting travel behaviour and industry viability
lack of a unique brand to position Victoria in a competitive marketplace
failure of Victoria’s national parks to capture yield, despite high visitor
numbers (Tourism Victoria, DSE, and Parks Victoria 2008, p. 5).
More recently, investment attraction and facilitation was identified as a priority
for progressing nature-based and regional tourism. This included:



funding assistance programs to leverage new major tourism investment to
Victoria
attracting new investment in iconic accommodation and facilities (for highyield tourism markets at priority destinations)
facilitating appropriate changes to the State Planning Framework to assist
the development of new regional tourism investment (Tourism Victoria nd,
p. 19).
2.3.7
Commission’s view
This chapter has highlighted the key trends and factors that are driving Victoria’s
tourism industry. It is an industry that faces many uncertainties and is dealing
with some ‘game-changing’ business trends. It is exposed to global, economic,
climatic and other events that are largely beyond the control of national, state
and local governments.
THE VICTORIAN TOURISM INDUSTRY
43
The historical and forecasted trends in domestic and international visitation point
squarely at Asia, most notably China, as the driver of future growth in the
industry. Traditionally Asian tourists, including the Chinese, spend most of their
time in Melbourne. This predisposition is likely to continue.
Governments at all levels have highlighted opportunities and challenges for the
industry. For Victoria, regional dispersal and nature-based tourism have been
highlighted as strategic priorities, where the biggest tourism infrastructure gaps
might be, but also where the challenge of investment attraction is especially
difficult. This includes overcoming the investor perceptions and experience that
planning and regulatory processes, particularly on crown land, are complex and
not conducive to investment (Tourism Victoria 2008b, p. 14).
Competition, especially from international destinations, will place increasing
pressure on Victoria to focus not only on the demand side but also the supply
side of tourism. Regulatory processes need to be considered and integrated with
the move towards more supply side focused destination planning and
management. This requires some rethinking around what is efficient and
effective competition, cooperation and coordination for the industry. The nature
of tourism industries around the world is such that better coordinated
destinations will more efficiently and effectively align the demand and supply
sides with have a competitive advantage (chapter 7).
A refocus on the impediments to the supply of tourism services is important.
These can inhibit the industry’s capacity to respond and adapt to the challenges
brought about by the rapidly changing operating and competitive environment.
The ways of minimising these impediments are discussed in the following
chapters.
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UNLOCKING VICTORIAN TOURISM