The latest Victorian Tourism Industry Council (VTIC) survey of tourism operators across the State reveals a generally improved trading performance in the quarter ending August 2006.

“Compared with the previous quarter, respondents reported slightly improved general business conditions, sales and selling prices. However, profitability declined over the quarter as businesses faced higher wages, fuel and other costs”, says VTIC Chairman Jeremy Johnson at the launch of the Survey at the VTIC Industry Forum, held at VECCI.

“Looking forward, the industry is expecting stronger conditions in the three months to November 2006. General business conditions are expected to improve, with high expectations for growth in sales, selling prices and profitability. However, wage costs are also expected to continue to rise over this period.

“Tourism operators remain optimistic that this performance will improve further over the next 12 months, with 49 per cent of all businesses surveyed indicating that they anticipate an improvement in business performance. However, this figure is down slightly on the previous survey (50 per cent) and the corresponding period in 2005 (57 per cent).

“Oil price increases (and the corresponding rise in petrol prices) were listed as the most common perceived constraint to business growth in the three months to August 2006. This issue was rated as a ‘significant’ or ‘critical’ constraint by 57 per cent of respondents, up from 50 per cent of respondents in the previous quarterly survey, and 45 per cent in the February quarterly survey.

“The increase in petrol prices appears to have had a particularly strong impact on tourism operators located in local rural areas. Sixty-nine per cent of rural respondents have rated the increase in petrol prices as a ‘significant’ or ‘critical’ constraint on business performance, compared with 54 per cent of respondents in regional centres and 41 per cent of metropolitan-based respondents.

“There are a number of policy options available to Governments in terms of moderating the impact of current high petrol prices, including ACCC action to monitor and investigate petrol prices, a temporary cut in fuel excise tax, extension of the LPG conversion rebate to commercial vehicles and a reduction in other Government business taxes and charges”, says Mr Johnson.

Survey Results in Detail:

Business conditions moderate over the August quarter
On a net balance basis, 4 per cent of respondents reported an improvement in general business conditions in the three months to August 2006 (comprising 33 percent of respondents who reported an improvement and 29 per cent who reported a deterioration). This is down on the 18 per cent of respondents who reported an improvement in the previous quarter, but a similar result to that reported in the corresponding period last year.

Sales growth slowed over the three months to Augusts 2006, with a net balance of 4 per cent of respondents reporting an increase. Average selling prices recorded a slight improvement, but this was not enough to offset rising wage and other input costs, and 6 per cent of respondents on a net balance basis reported a decline in profitability. Business investment in buildings and structures continued apace, with a net balance of 11 per cent increasing capital expenditure.

Looking forward, the industry is expecting stronger conditions in the three months to November 2006. General business conditions are expected to improve, with high expectations for growth in sales, selling prices and profitability. However, wage costs are also expected to continue to rise over this period.

Businesses remain positive about trading prospects over the next twelve months, with 48 per cent of those surveyed indicating that they anticipate their business performance will be ‘much stronger’ or ‘somewhat stronger’. However, this figure is down slightly on the previous survey (50 per cent) and the corresponding period in 2005 (57 per cent).

High petrol prices constraining business growth
Oil price increases (and the corresponding rise in petrol prices) were listed as the most common perceived constraint to business growth in the three months to August 2006. This issue was rated as a ‘significant’ or ‘critical’ constraint by 57 per cent of respondents, up from 50 per cent of respondents in the previous quarterly survey, and 45 per cent in the February quarterly survey.

The increase in petrol prices appears to have had a particularly strong impact on tourism operators located in local rural areas. Sixty-nine per cent of rural respondents have rated the increase in petrol prices as a ‘significant’ or ‘critical’ constraint on business performance, compared with 54 per cent of respondents in regional centres and 41 per cent of metropolitan-based respondents.

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

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