For all intents and purposes, domestic tourism should be ripping.
Australians have traditionally spent more travelling overseas than foreigners have spent holidaying in Australia. Therefore, with the international border closed and Australians barred from travelling overseas, the tourism industry should be booming as we holiday domestically instead.
CBA outlined the logic behind this view last year:
We estimate that over 2020 the Australian economy will miss out on approximately $A20bn in foreign spending due to the international border closure (1.0% of GDP). But working the other way is $A38bn that we estimate would have been spent offshore that will no longer leave Australia (based on the 2019 outcome and Q1 20 expenditure of $A13bn by Australian residents offshore).
This logic is strengthened by the massive savings war chest held by Australian households:
Recognising this fact, the Morrison Government has embarked on an expensive advertising campaign encouraging Aussies to book local. Recalling, of course, that Scotty from Marketing is the former head of Tourism Australia.
However, logic and reality don’t always mesh. Australia’s tourism industry remains on its knees and is demanding further stimulus from the federal government, including an extension of JobKeeper beyond its late-March 2021 end date.
The key reason why the tourism industry has failed to recover is the on-again, off-again domestic border closures by state governments. In recent months, we have witnessed a bunch of jurisdictions close their borders to entire states after a single COVID-19 case leaked out of hotel quarantine. All closures have resulted from these hotels.
In turn, the travel plans of thousands were thrown into disarray as flights and accommodation were suddenly cancelled, or visitors were thrown into forced isolation or quarantine.
The end result is that a form of ‘sovereign risk’ has crept into the travel and tourism industry. That is, nobody can be confident to book travel when borders can be suddenly shut, visitors can be thrown into isolation, or be barred from returning home.
As long as this uncertainty and ‘sovereign risk’ lingers, the domestic tourism industry won’t recover. Travel will simply be too risky. Planes will remain grounded. Hotels will remain empty. And consumers will keep their wallets closed.
Thus, much of the blame must fall upon the Morrison Government. Its abrogation of responsibility for quarantine to the states into unsuitable hotels all but guarantees that Australia will experience continuous leakages of COVID-19 into the community, resulting in further knee-jerk border closures and more pain for travellers and tourism operators.
Morrison should long ago have centralised the system in rural areas, under federal control, and have liberated states from this risk.
In short, this is a neat microcosm of the Scotty from Marketing leadership style: get the advertising right while doing nothing to address the underlying policy need, or even make it worse.
