Reflecting seasonal influences as well as stronger tourism demand, the latest Victorian Tourism Industry Council (VTIC) survey of tourism operators across the State revealed a generally improved trading performance in the quarter ending May 2007.
“However, volatile fuel prices and a shortage of skilled labour have been identified as major hurdles to further business growth. The ongoing effects of the drought and capacity to recover quickly from the impact of bushfires remain key challenges for many rural and regional operators”, says VTIC Chairman Jeremy Johnson.
“In fact, three in every five rural-based respondents indicated that environmental factors were either a ‘significant’ or ‘critical’ constraint on their business. Just 15 per cent of respondents in the metropolitan area held this view.
Mr Johnson said most operators are expecting mixed trading conditions in the three months to August 2007.
“On the upside, trends in general business conditions are expected to improve as a result of a strengthening intrastate visitor numbers and the prospect of a good ski-season. However, the recent industry-wide improvement in sales is expected to falter due to intensifying competition and the limited capacity of many operators to pass on higher wage and non-wage costs into final selling prices,” he said.
“Despite this, most surveyed businesses believe their trading performance will strengthen over the next year.
In this context, Mr Johnson said VTIC has welcomed the State Government’s decision to provide extra funds to the major events cap in the recent State Budget – critical at a time when other cities such as Sydney are seeking to copy the Melbourne model.
“The Budget also provided a strong boost for regional tourism, with $23 million over four years to boost regional tourism operators and support local events, including $6.3 million allocated to promote nature-based tourism and car touring.
“We are continuing to lobby for policies that encourage future long-term private and public investment in the sector to drive growth and competitiveness and increase the yield of the tourism dollar,” he said.
Mr Johnson said special questions included in the survey show a high level of awareness of the importance of environmental sustainability to Victorian tourism, with customer demand, Government policy and the ability to realise cost savings all being identified as major drivers of business awareness and action.
In terms of what would motivate businesses to make further changes to benefit the environment, specific Government incentives (including grants and subsidies, as well as rebates for energy saving technologies, practices or products) were rated highly, followed by social and community responsibility, productivity or efficiency improvements, and emerging customer demand.
“In terms of water use, eight in ten respondents indicated that their business had reduced water use over the past 12 months (compared with the previous year) - while almost half believe that their current water use practices are either ‘very efficient’ or ‘efficient’. However, most surveyed businesses also concede that they could do more, indicating further scope for reductions in water use,” Mr Johnson said.
Survey Results in Detail:
Business conditions strengthen over the May quarter 2007
On a net balance basis, 26 per cent of respondents reported an improvement in general business conditions in the three months to May 2007 (comprising 45 percent of respondents who reported an improvement and 19 per cent who reported deterioration). This followed a similar result in the February quarter, and was an improvement on the net balance 18 per cent reported for the corresponding period in 2006.
Growth in sales levels remained strong but slowed from the previous quarter, with a net balance of 12 per cent reporting increases. Average selling prices also increased, along with profitability, with a net balance of 9 per cent of respondents reporting an improvement. Profitability growth was slightly offset by continuing widespread growth in average wages, with a net 33 per cent of respondents reporting an increase over the quarter, while growth in business investment continued apace.
Looking forward, the industry is expecting mixed conditions in the three months to August 2007. General business conditions are expected to improve, however, sales are expected to decline on balance, with 29 per cent of respondents expecting an improvement, but 32 per cent expecting a deterioration. Wage costs are also expected to continue to rise over this period, and profitability is expected to decline.
Despite this, respondents are positive about trading prospects over the longer term, with 57 per cent of those surveyed indicating that they anticipate their business performance will be ‘much stronger’ or ‘somewhat stronger’ over the next 12 months. This figure is an improvement on the previous survey (53 per cent) and the corresponding period in 2006 (50 per cent).
Fuel prices and environmental factors perceived as constraints to business growth
The most common identified business constraint was the cost of petrol, with 32 per cent of respondents identifying it as a ‘significant’ or ‘critical’ constraint, followed by skill shortages at 24 per cent.
Environmental factors (including drought and bushfires) were identified as a ‘significant’ or ‘critical’ constraint by 23 per cent of respondents, down from 39 per cent in the previous quarterly survey, when large parts of the Gippsland region were directly affected by bushfires. However, the impact of environmental factors differed considerably depending on the location of the respondent. Of rural-based respondents, 60 per cent indicated that environmental factors were ‘significant’ or ‘critical’ constraint on their business. In comparison, 41 per cent of respondents located in regional centres rated environmental factors as a ‘significant’ or ‘critical’ constraint, compared with just 15 per cent of respondents in the metropolitan area.
Environmental Sustainability now a mainstream issue for tourism businesses
Survey respondents showed a high level of general awareness on environmental sustainability, with 79 per cent indicating that environmental sustainability is an important issue for their business, with the demand for change being driven by both Government and customers.
In terms of water use, 81 per cent of respondents indicated that their business had reduced water use over the past 12 months (compared with the previous year). While 46 per cent believe that their current water use practices are either ‘very efficient’ or ‘efficient’, 55 per cent concede that they could do more, indicating further scope for reductions in water use.
In terms of what would motivate businesses to make changes to benefit the environment, 74 per cent of respondents nominated ‘Specific Government Incentives’ (which includes supporting initiatives such as grants and subsidies, as well as rebates for energy saving technologies, practices or products). The next most common factor was direct cost savings, followed by social and community responsibility, productivity or efficiency improvements, and customer demand.
Background - what is VTIC
The Victorian Tourism Industry Council (VTIC) is the peak policy council for the Victorian tourism industry, which represents key industry associations and operators, providing one united industry voice. |
