The April quarter 2005 Victorian Tourism Industry Council (VTIC) survey of tourism operators across the State reveals a healthy trading performance over summer tracking for a solid performance over autumn 2005.

 

"Compared with the previous January quarter survey, respondents reported stronger general business conditions although increases in wages and other labour costs have prevented stronger sales from translating into matching increases in profitability", says VTIC Chairman Bob Annells.

 

"Tourism operators remain cautious but positive that this solid performance will continue over the next 12 months, with 50 per cent of all businesses surveyed indicating that they anticipate further improvements in business performance."

 

"The industry has been buoyed by the establishment of Virgin Blue and Jetstar as alternative domestic carriers, with the benefits now flowing through the sector".

 

"However, over 32 percent of survey respondents identified wage costs as the single most significant factor constraining business growth during the January quarter.  The other major constraint identified was access to finance (26 percent)". 

 

"The issue of wage costs in large part reflects the growing concern of skills shortages and the fact that Victorian employers have now been brought within Federal Award coverage from the beginning of this year, instead of the industry sector framework that previously applied.

 

"Most tourism businesses are small businesses, and will benefit from the Howard Government's recently-announced industrial relations reform package.

 

"Furthermore, the recent Victorian Budget provided for $823 million of land tax relief over four years, especially for properties valued between $850,000 and $2.7 million.

 

"Other welcome measures included a 10 percent cut in WorkCover premiums, and an extra $7.6 million to strengthen our 'Major Events Strategy', which encompasses the Grand Prix, Melbourne Cup and Australian Tennis Open.

 

"In addition, the recent Commonwealth Budget also contained some welcome measures, including personal income tax relief, an extra 20,000 skilled migration places, and a new visa to allow overseas nationals to undertake full-fee apprenticeships", says Mr Annells.

 

 

Solid performance across key indicators, though activity may be slowing.
On a net balance basis, 32 percent of respondents reported improved general business conditions in the January quarter 2005, the same number as this period last year.
However, many respondents have also experienced increases in wages and other labour costs (net balances of 54 percent and 50 percent respectively), which have meant that the increase in sales (net balance of 33 percent) has not translated into a matching increase in profitability (net balance of 3 percent).

Looking forward, the industry is expecting a slower April quarter.  Moderating business conditions are forecast (negative net balance of 3), with sales and profitability expected to fall (each with a negative net balance of 5).  This is partly due to an expected continuation of increases in wages (net balance of 18) and other labour costs (net balance of 13).

Fifty percent of all businesses surveyed indicating that they anticipate either a 'much stronger' or 'somewhat stronger' business performance compared to the previous twelve months. 
Of the only two statistically relevant sub sectors in the survey, bed and breakfast operators have a more optimistic outlook than caravan parks.  Seventy percent of bed and breakfast operators expect their business to be either much stronger or somewhat stronger over the next 12 months, while 54 percent of caravan parks remain optimistic. 

 

Wage costs and Government regulations pose the most significant constraint to business performance.
Wage costs (32 percent of respondents rated this as a 'significant' or 'critical' constraint) were the most significant factor constraining business growth during the first quarter.  Wage costs have concerned business in the sector in recent surveys as the move from State to Federal awards has increased wage bills for many operators.

Government regulations (26 percent) were the second most pressing constraint on the sector this quarter, with respondents citing the move to Federal awards and overlapping Federal, State and local regulations as particular concerns. 

Access to finance remains a major concern for business with 25 percent identifying it as a constraint in the wake of the March 2005 interest rate increase.  Another ongoing concern is skill shortages in the sector, with 25 percent of respondents rating it as a 'significant' or 'critical' constraint. 

 

Effects of negative one-off "shocks" dissipating
Respondents have indicated that the effects of negative one-off "shocks" are gradually dissipating over time.  Most of these posed less of a constraint this quarter compared to the previous quarter, including the drought (13 percent of respondents considered this a moderate to critical constraint, down from 28 percent last quarter), international terrorism (14 percent, down from 21 percent) and global economic conditions (10 percent, down from 17 percent). 
Low cost domestic carriers Virgin Blue and Jet Star have increased domestic travel and both have been identified as significant (cited by 31 percent and 41 percent of respondents respectively as having a 'positive impact') positive contributors to tourism activity. 

 

 

The Victorian Tourism Industry Council (VTIC) is the peak policy council for the Victorian tourism industry.  Bob Annells chairs the Council, which represents key industry associations and operators, providing one united industry voice.