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About two months ago we provided our clients our first international visitor forecasts for Australia’s major international markets after the outbreak of the COVID-19 pandemic around the world. At the time we said that “making detailed projections about the timing and nature of the recovery of foreign visitors to Australia might seem like a fool’s errand at this stage of the COVID-19 pandemic”. The same could be said today, although things are becoming a little clearer.

Without knowing when governments will lift or ease restrictions on international travel and when airlines will resume modest services between countries, forecasting international travel remains something of a crapshoot. Furthermore we don’t know if there has been significant paradigm shifts relating to consumer confidence, personal travel risk assessments and price – value relationships that may have affected the underlying desire to travel.

We should also note that according to a survey of Australian economists, international travel won’t be an option until 2021 at the earliest, except between Australia and New Zealand!

Despite the unprecedented levels of uncertainty and the serious limits of predictability we have used our econometric forecasts of international visitor arrivals from Australia’s major source markets of China, New Zealand, USA, UK and Japan to derive our visitor forecasts for the period, 2020 to 2024.

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China has been and will continue to be Australia’s largest source market for international visitors, despite rising tensions between the two countries. Over the past ten years, the number of Chinese visitors to Australia has grown from 363,000 in 2009 to 1,439,000 in 2019, a compound annual growth rate (CAGR) of 14.8%. Over the past five years, 2014 – 2019, the growth rate has slowed marginally to 11.1% CAGR.

There is a 60% probability that the number of visitors from China to Australia will fall between 53% and 75% in 2020. We forecast 519,000 visitors, down from 1,439,000 million in 2019. It will not be until 2024 that the 2019 record will be surpassed with the number of inbound Chinese visitors growing at a CAGR of 2.6%.

There is a significant risk associated with our forecasts of the Chinese market to Australia as demonstrated by the wideband in our statistically bound confidence intervals.

Forecast of International Visitor Arrivals from China to Australia 2020-2024

Source: Hotel Investment Strategies, LLC based on Australian Bureau of Statistics, Economist Intelligence Unit, World Tourism Organization and International Air Transport Association data.

Visitors from New Zealand, an important source market for Australia’s major tourist destinations such as Sydney and the Gold Coast, will decline between about 35% and 42% at the 60% confidence limit. The market is forecast to decline from 1,434,000 million in 2019 to 892,000 in 2020. The market is likely to take four years to recover to its previous peak in 2019.

Forecast of International Visitor Arrivals from New Zealand to Australia 2020-2024

Source: Hotel Investment Strategies, LLC based on Australian Bureau of Statistics, Economist Intelligence Unit, World Tourism Organization and International Air Transport Association data.

The USA inbound tourist market has been a consistent growth market for Australia growing at a CAGR of 5.4% over the past ten years. The markets growth accelerated over the past five years at 7.8% CAGR. It grew from 562,000 visitors in 2014 to 818,00 in 2019. The US market is likely decline between 60% and 66% in 2020, down from 818,000 in 2019 to between 278,000 and 331,00 with 60% confidence. Much will depend on the depth and length of the US recession and the level of consumer confidence in the US.

Forecast of International Visitor Arrivals from USA to Australia 2020-2024

Source: Hotel Investment Strategies, LLC based on Australian Bureau of Statistics, Economist Intelligence Unit, World Tourism Organization and International Air Transport Association data.

Visitors from UK, another important source market for Australia’s major tourist destinations, is likely to decline from 1.4 million in 2019 to 697,000 in 2020. The market is likely to take four years to recover its peak visitor numbers and is expected to grow by a CAGR of 1.4% between 2019 and 2024.

Forecast of International Visitor Arrivals from UK to Australia 2020-2024

Source: Hotel Investment Strategies, LLC based on Australian Bureau of Statistics, Economist Intelligence Unit, World Tourism Organization and International Air Transport Association data.

We believe there is a 60% probability that the number of visitors from Japan to Australia will fall between 48% and 68% in 2020 with our mean forecast of 212,000 million, down from 499,000 in 2019. It will not be until 2023 that the record of peak number of Japanese visitors in 2019 will be surpassed.

There is a moderate risk associated with our forecasts of the Japanese market to Australia as demonstrated by the wideband in confidence intervals. We forecast that inbound visitors from China will fall to about 820,000, down from 2.1 million in 2019.

Forecast of International Visitor Arrivals from Japan to Australia 2020-2024

Source: Hotel Investment Strategies, LLC based on Australian Bureau of Statistics, Economist Intelligence Unit, World Tourism Organization and International Air Transport Association data.

It is important to recognize that COVID-19 will impact all visitor arrival forecasts to a degree, but the magnitude, duration & timing of the impact will vary across different inbound tourist markets.

We need to recognize that some demand patterns will return to “normal”, some will return to a new “normal”, and others will not return at all. Hoteliers and tourism operators will need to plan for different scenarios. In the face of great uncertainty, creating & communicating different forecasts for different scenarios is likely to be extremely useful. This can be as simple as “best case” and “worse case” or can be tied directly to varying assumptions about the future.

We continually reassess our forecasting strategies as new information becomes available for Australia and its major source markets. Our goal is not to produce 100% accurate forecasts – that is nearly impossible, given all that has happened and is likely to happen.

Our goal is to try to get our forecasts in the ballpark, good enough to help our clients; hotel owners, investors, operators, and governments make better decisions. Clients can then plan and manage their businesses effectively, and not waste resources doing it.

So in summary our advice for hotels, resorts and other hospitality companies is:

  • Think hard about the big picture questions before you begin forecasting
  • Understand management’s current assumptions about the future
  • Define your phases and develop a strategy for each phase, i.e., isolation-containment-mitigation-reentry-recurrence-return to normal, etc.
  • Reassess your strategy frequently as new information becomes available and don’t be afraid to change your approach
  • Review/modify your forecasts more frequently to incorporate current information
  • Consider developing multiple scenario-based forecasts if appropriate
  • Carefully communicate your approach/assumptions to management and set reasonable expectations for accuracy – everyone needs to be on the same page

Please contact us if you believe we can assist you with your forecasting needs. Our services are outlined here.


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