Tourism has been recognised as an engine of growth for many countries (Sharpley, 2002; Vanegas & Croes, 2003). Proponents of this school of thought claim that tourism provides much-needed foreign exchange, creates jobs and generates government revenue (Vanegas & Croes, 2003). Tourism has played a major role in Australia’s economic development. Both inbound and domestic tourism have contributed significantly to the national and regional economies. However, measuring the impact of tourism on the Gross Domestic Product (GDP) and economic growth is problematical because of leakages and the difficulty of estimating the multiplier4 (Ayres, 2000), and the fact that tourism statistics are estimates subject to several errors and produced with differing levels of accuracy (Lundberg, Krishnamoorthy & Stavenga, 1995). Lundberg et al.
(1995) also argue that tourism statistics are further fraught with problems of definition because tourism is a composite industry made up of several other industries.
Notwithstanding these problems, Ayres argues that estimates from planning and statistics bureaus can still be used to indicate the impact of tourism in an economy.
Briefly, since 1997/89, the ABS has published annual Australian Tourism Satellite Account (ATSA)5, which contain estimate of tourism’s direct economic contribution to the national economy.
Table 2.2 provides a summary of figures showing the total contribution of tourism from 1997/98 to 2001/02. Tourism accounted for nearly $32.5 billion of total GDP6
4 The ‘multiplier effect’ is concerned with the process in which expenditure on tourism filters throughout the economy, stimulating other sectors as it does and can be regarded as “a coefficient which expresses the amount of income generated in an area by an additional unit of tourist spending. …It is the ratio of direct and secondary changes to the initial change itself” (Hall, 2003, p. 236).
of $891.5 billion in 2004-05. This represents a 3.7 per cent share of GDP and is the lowest share of GDP since the ATSA was first compiled in 1997-98. The tourism industry share of total
5 TSA is part of a worldwide effort by national statistics organisations to quantify tourism’s contribution to the national economy.
6 ABS (April 2006, p. 3) notes that “tourism GDP represents the total market value of Australian produced goods and services consumed by visitors after deducing the cost of goods and services used in the process of production.”
industry Gross Value Added7 (GVA) declined from 4.5 per cent in 1997-98 to 3.9 per cent, representing the lowest share since the ATSA was first compiled.
Table 2.2: Tourism industry share of gross domestic product (GDP)
Direct contribution 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Tourism gross value
added at basic prices
($m) 21 894 23 054 23 994 25 044 25 250 25 939 26 016 26 479
plus Net taxes on
tourism products ($m) 3 048 3 213 3 321 5 817 5 637 6 041 5 935 6 083 equals tourism GDP
($m) 24 942 26 267 27 316 30 861 30 887 31 980 31 952 32 562
Gross domestic product
($m) 577 422 607 863 645 153 689 340 735 783 782 798 838 251 891 524 Tourism share of gross
value added a (%) 4.1 4.1 4.0 4.0 3.8 3.6 3.4 3.2
Tourism share of gross
domestic productb (%) 4.3 4.3 4.2 4.5 4.2 4.1 3.8 3.7
a. Only the direct tourism shares are included here. For an activity to be included as tourism, there must be a direct relationship between the visitor and the producer of the good or service.
b. Percentage change on preceding year.
Source: ABS (April 2006, p. 10).
2.3.1 The inbound tourist market
The number of international tourists visiting Australia has risen rapidly in the past thirty years (Hall, 2003, p. 86). The major area of significant growth for short-term arrivals has been New Zealand, Japan, the UK and North America. Table 2.4 shows the major Australian tourism market between 1995 and 2004. Combined, Asia (China, Japan, Singapore, South Korea and other Asian countries) remains the largest major Australian tourism market, accounting for 40.7 per cent of international tourist arrivals in 2004.
These figures also show that international tourism arrivals have increased from 3,726 million in 1995 to 5,215 million in 2004. Hall, (2003) argues that although still significant, the ‘traditional’ markets of New Zealand, UK and Ireland, Europe, and the USA are declining in relative importance as Australia becomes more closely integrated with the economies of the Pacific Rim.
7 The DVA is calculated as the value of output at basic prices minus the value of intermediate consumption at purchasers’ prices.
Faulkner and Walmsley (1998) argue that the growing significance of inbound tourism in the Australian economy is a corollary of a combination of factors operating at the global, regional (Asia-Pacific), and local levels. At the global level, they argue that there has been widespread and sustained economic growth particularly in North America, Western Europe and East Asia, which has resulted in increasing levels of affluence and thus an increasing interest in, and the ability to undertake travel. They further argue that this growth has been accompanied by general improvement in conditions of employment, with such benefits as paid annual leave, incentive travel packages, and generous retirement conditions. According to Faulkner and Walmsley, innovations in transport and communication technology, and advances in information technology such as computerised reservation systems (CRS) have made it easier for overseas travel itineraries to be organised.
At a regional level, Faulkner and Walmsley see Australia’s geographical proximity to emerging markets (South Asia and East Asia-Pacific regions which have experienced very strong growth in tourism since 1950) as an important contributing factor to the country’s spectacular growth in international visitor arrivals (see Table 2.4). Faulkner and Walmsley (1998, p. 94) also maintain that there are several local factors which have made it possible for Australia to take advantage of relative proximity to “the bourgeoning Asian market.” These include Australia’s move in expanding tourism infrastructure and upgrading services to internationally competitive standards - making Australia gain a competitive edge over many of her Asia-Pacific neighbours, depreciation of the Australian dollar against major currencies - making the Australian tourism products cheaper in world markets, aggressive marketing, and ‘hallmark’ events (i.e. the 2000 Olympic Games).
2.3.2 Domestic tourism
The domestic tourism market in Australia is the main driver of growth for the industry, accounting for at least 75 per cent of the total tourism sector in terms of visitor nights and contribution to GDP (Fairweather, 2002, p. 15; Department of Industry Tourism and Resources, 2003, p. 2). Australia’s domestic tourism market consists of two main segments, namely overnight travel, which accounts for 75 per cent of the domestic
tourism market and day travel (Fairweather, 2002, p. 15). Table 2.3 shows the total inbound and domestic economic value based on ABS ATSA consumption estimates.
This table shows that the main driver of growth for the industry is domestic tourism, contributing $56.5 billion compared to $17.7 billion of inbound tourism in 2004. The Tourism Forecasting Committee [TFC] (2005, p. 66) observes that there are varying economic and social factors driving the downward trend in domestic activity and, subsequently, economic value and the recent and forecast strong growth in outbound travel. These factors include but are not limited to: actual and anticipated interest rate rises; asset price bubbles; increases in household savings; changes to the labour market;
busier lifestyles; competition from other goods and services and tourism’s declining share of ‘wallet’; increasing fuel costs; solid growth in Australian inbound tourism;
continued strong demand for outbound travel; and recent strength of the VFR market.
Table 2.3: Total inbound and domestic economic value
Year TIEVa
Growth in economic value (per cent)
00 -3.1 6.9 -6.0
05 23.3 3.7 8.4
10 31.9 3.0 11.3
Average annual growth (per cent), 2005 to 2014
6.4 1.3 2.8
Numbers in bold are forecasts
aTotal inbound economic value: based on ABS ATSA consumption estimates bTotal domestic economic value: based on ABS ATSA consumption estimates cconstant dollars, inflation adjusted
Source: TFC (2005, p. 80).
Table 2.4: International tourist arrivals 1995-2004
New
Zealand Japan UK USA Singapore China
South Korea
Other Asia
Other Europe
Rest of the World
TOTAL
‘000
% Annual Change
1995 538 783 348 305 202 43 168 676 404 259 3726
1996 672 813 368 317 223 54 228 772 431 287 4165 11.82
1997 686 814 411 330 239 66 234 775 464 299 4318 3.72
1998 709 751 468 374 247 77 67 647 483 344 4167 -3.52
1999 729 707 528 417 267 93 109 691 543 375 4459 7.02
2000 817 721 580 488 286 120 157 735 614 413 4931 10.62
2001 815 674 617 446 296 158 176 713 563 398 4856 -1.52
2002 790 715 643 434 287 190 190 696 539 357 4841 -0.32
2003 839 628 673 422 253 176 207 653 539 355 4745 3.6
2004 1033 710 676 433 251 251 212 699 568 382 5215 9.92
2005 1110 689 717 456 274 286 250 751 603 412 5548 6.42
2006 1140 720 749 485 283 335 271 800 632 445 5860 5.62
2007 1171 737 779 515 293 401 294 852 672 475 6189 5.62
Number in bold are forecasts
Other Asia includes all Asian countries except Japan, Singapore, China, and South Korea.
Other Europe includes all European countries except the UK.
Rest of World comprises countries not included in the above two groups and not individually listed in the table.
Source: TFC (2005, pp. 10-11).