As the number of Australian tourists taking overseas trips increases, Alan Joyce has warned the high-flying Australian dollar should now be considered the new normal.
Addressing the Tourism and Transport Forum in Sydney yesterday, the Qantas chief executive said while he would prefer the dollar to drop in value to between US70c and US80c, businesses cannot expect this to happen.
“Any business looking at the economics of their operation has to be planning that [the dollar] is not going to change,” Joyce said.
Joyce believes business strategies cannot rely on the dollar dropping in value. He said a high dollar, at least for now, is the new standard for Australian business strategies.
“They should be making their strategies robust enough to cope with it,” he said.
Joyce’s comments come as a report by the Australian Bureau of Statistics shows the effects of the exchange rate are being felt with great force throughout the tourism industry.
While 2012 was a reasonable year for inbound tourism, with short-term arrivals 4.6% up on 2011, bolstered by a massive 15.5% increase in Chinese visitors, the high dollar and falling international flight prices have resulted in more Australians heading overseas than ever before.
The ABS statistics show an excess of 2.1 million more short-term resident departures than short-term visitor arrivals, a record high and 5.3% greater than 2011.
Short-term resident departures have continued to exceed short-term visitor arrivals since the year ended December 2008, when departures overtook arrivals for the first time in 22 years. In 2008 this figure was just over 200,000, but the trend has continued since to reach the 2012 figure.
This trend is occurring not only because travellers want to make the most of the dollar’s spending power abroad, but because getting there has become more affordable too.
Tourism and Transport Forum acting chief executive Trent Zimmerman told SmartCompany low cost airlines have made flying cheaper and the airline industry more competitive.
“Fares have come down as international carriers try to build market share in a very competitive environment,” says Zimmerman. “With the choice between low cost carriers and full service airlines, travellers have a wide range of options available.”
This puts pressure on the likes of Joyce and his full-service airline compatriots. “Low cost carriers have a much lower cost base than the legacy airlines,” says Zimmerman. “It has put pressure on full service airlines to be more price competitive.”
Zimmerman thinks that it has always been in the Australian nature to want to travel, but now this is more evident than ever before due to the favourable conditions.
“I think Australians have always been interested in travel – it’s a function of growing up on an isolated island,” says Zimmerman.
“Airfares are affordable, our economy is strong, the dollar is strong and it looks like staying that way for a while. So Australians are being marketed to by international destinations and people are taking advantage of the favourable conditions.”
To draw more visitors to the country, Zimmerman says marketing is critical and politicians must be on board.
“With the election coming up in September, we are calling on politicians on all sides to commit at the very least to maintaining funding for Tourism Australia,” says Zimmerman.
“It’s also important that the tourism industry isn’t continually slugged with new taxes and charges.
“Last year our departure tax was hiked 17% and the costs of a number of visa classes rose. It’s folly to think you can keep putting up prices without negatively impacting demand.”