TAA report shows regional destinations missing out on tourism growth

October 31, 2014

A new research report undertaken by TAA NSW reveals that many regional accommodation operators have been under-performing in recent years – and have the potential to slip back even further if the Government ignores the need for significant investment in regional tourism and infrastructure.

The report – Addressing the poor performance of the Accommodation sector in regional NSW – specifically examines NSW operators, but there are many parallels that can be applied to regional operators across the country.

Regional accommodation operators have been doing it tough for many years: regional Australia used to make up 61.2% of all tourist visits in 2005-06, but that slipped to around 60% in 2012-13, while visitor nights in regional Australia have declined from 50.5% to 48.1% over the same period.

Overnight visitor expenditure in regional NSW has been in decline even before the GFC, with hotel, motel and serviced apartment accommodation affected by the increasing attractiveness and affordability of overseas destinations, the lack of reasons to stay, poor infrastructure and the decline in business events.

The figures show that while more people might be travelling to regional destinations, they aren’t necessarily staying in paid accommodation. This can have a profound impact on many regional centres, and will require an urgent redress if NSW and Australia are  to meet the targets outlined in the 2020 Tourism Industry Potential document.

The NSW Government adopted a goal of doubling overnight visitor expenditure from $18.3 billion in 2009 to $36.6 billion in 2020, but this target is rapidly getting out of reach, because half of the expenditure has historically come from regional NSW, a market which is expected to decline in market share without serious remedial action.

Investment in regional destinations will be essential for most States to reach the 2020 tourism targets, and – even more importantly – help grow employment, which is now beginning to feel the impact of the mining sector slowdown.

In NSW, the accommodation sector directly employs 20,700 people, which is 13% of total tourism employment in NSW and accounts for $4.17 billion, or 12.6% of total tourism consumption. The accommodation sector contributes the largest share of direct tourism GVA, equating to $2.2 billion or 18.2 per cent of the total state direct tourism GVA. In other words, the health of the regional economy relies heavily on the strength of the tourism and hospitality industry.

Our latest study follows the 2013 TAA report into the importance of regional business events, which was designed to input into a NSW Regional Business Events Strategy. This was a year one commitment of the Visitor Economy Taskforce Report. It is now year two and the industry has still not seen the Regional Business Events Strategy.

There is limited scope for most regional operators to reduce costs further, given the continuing high level of employment-related costs, so the aim must be to generate increased demand through infrastructure development, marketing and events.

We welcome the Federal Government’s National Stronger Regions Fund, but that doesn’t take effect till the 2015-16 financial year, while the projects for the NSW Government’s new $110 million Regional Tourism Infrastructure Fund are still to be defined.   However they are an excellent start and it is important the tourism sector is proactive in identifying  funding and feasibility for key infrastructure projects that drive demand to the regions.

If Governments are to allocate funds for tourism and infrastructure development, then the schemes need to be easy to access. The feedback from our regional operators has been that current funding processes are overly complex and lacking transparency with no ability to secure quarantined or contestable funding for periods greater than 12 months.

The issue of regional tourism requires a far more comprehensive strategy built around addressing three major challenges:

1. Improving the Reason to Visit. Investment in tourism infrastructure is the key with the requirement for product gap audits in each region, a necessity. Our recommendation is that this process is built into the Destination Management Plans.

2. Diversifying the Visitor Profile. Business events can have a major – and very beneficial – impact on regional economies, especially to fill the mid-week troughs, which can improve the sustainability of visitor accommodation and the overall contribution to the economy. NSW needs to restore a Regional Business Events Fund (BERN), funded by a mix of state and industry, to grow the market share of business events in regional NSW. Queensland and Victoria actively support their business events sectors and NSW needs to regain lost ground.

3. Addressing Barriers to investment. This can only occur through co-ordination between state and local government planning authorities and Destination NSW to ensure barriers to growth in tourism investment – such as excessive red tape – are minimised. Consistent and reliable data in the regions is an absolute for priority for potential investors, and NSW lags behind States like Victoria which has access to strong data streams. To address this we recommend Destination NSW invests in improved and consistent data collection initiatives for the tourism sector.

Governments need the regional tourism and hospitality sector to ensure that employment opportunities grow and local economies flourish, but at the moment there is a serious gap between intent and delivery, a situation that TAA will be addressing at every opportunity with Governments at all levels.