The latest Victoria Tourism Industry Council (VTIC) survey of tourism operators across the State revealed a generally improved trading performance in the quarter ending August 2007, with healthy business investment tipped to underpin growth in future years.
"General business conditions remained positive in the three months to August 2007, with a net balance of 17 per cent of businesses reporting an improvement. This followed a slightly stronger result in the May quarter with a net balance of 26 per cent, but was a sizeable improvement on the net balance of 4 per cent reported for the corresponding period in 2006", says VTIC Chairman Jeremy Johnson.
"Sales growth remained strong over the three months to August 2007. While average selling prices continued to increase, profitability was flat, due in part to continued growth in wages.
"On the upside, most operators are expecting continuing strong trading conditions in the three months to November 2007.
"Special questions included in the August quarter survey to canvass business intentions regarding new capital investment, indicate strong growth in both short and medium term business investment intentions, which will drive growth going forward.
"Forty-five per cent of respondents indicated that they intend to undertake new capital investment within the next 12 months, with another 34 per cent intending to undertake investment within one to three years.
"The majority of respondents (72 per cent) plan to invest in the expansion or development of an existing facility, while 20 per cent plan to invest in new facilities. While investment in plant and equipment is expected to be comparatively stronger than investment in buildings and structures, a significant proportion of businesses (43 per cent) intend to invest in both.
"Tourism businesses identified the most significant benefits from investment to be improved competitiveness with 54 per cent of respondents identifying this as an advantage, and an improvement in profitability (49 per cent). The major barriers to new investment were identified as being the cost of capital (32 per cent), a low or distant estimated return on investment (32 per cent) and the availability of capital (30 per cent).
"Overall, looking forward, tourism businesses are positive about the longer term with 56 per cent of those surveyed indicating that they anticipate their business performance will be 'much stronger' or 'somewhat stronger' over the next 12 months, a figure stronger than the corresponding period in 2006 (48 per cent).
"This is no doubt underpinned by Victoria's strong major events calendar and decisions by more and more airlines to fly direct to Melbourne.
"As ever the weather will also be paramount in tourism operators' and customers minds - while a possible dry spring and summer may encourage holidaymakers to travel, the downside could be a more intense drought and bushfire threat.
"The relative high Australian dollar may also have an impact", says Mr Johnson.
Survey Results in Detail:
Business conditions remain strong over the August quarter 2007
On a net balance basis, 17 per cent of respondents reported an improvement in general business conditions in the three months to August 2007 (comprising 38 per cent of respondents who reported an improvement and 21 per cent who reported a deterioration). This followed a slightly stronger result in the May quarter with a net balance of 26 per cent, but was a sizeable improvement on the net balance of 4 per cent reported for the corresponding period in 2006.
Growth in sales levels remained strong, with a net balance of 19 per cent reporting increases. While average selling prices continued to rise, profitability growth was flat, due in part to continued growth in wages with a net balance of 27 per cent of respondents reporting an increase. Although the majority of respondents reported stable employment levels, on balance there was a moderate increase of 9 per cent. Growth in business investment strengthened.
Looking forward, the industry is expecting continuing strong conditions in the three months to November 2007. General business conditions are expected to improve, together with sales and profitability. Wage costs are expected to rise further, along with a moderate increase in employment levels. Continued growth in business investment is also expected.
Tourism businesses remain positive about trading prospects over the longer term, with 56 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 similar to the previous survey (57 per cent) and stronger than the corresponding period in 2006 (48 per cent).
Tourism investment on the rise
Special questions included in the August quarter survey to canvass business intentions regarding new capital investment indicate strong short and medium term business investment intentions. Forty-five per cent of respondents indicate that they intend to undertake new capital investment within the next 12 months, with another 34 per cent intending to undertake investment within one to three years.
The majority of respondents (72 per cent) plan to invest in the expansion or development of an existing facility, while 20 per cent plan to invest in new facilities. While investment in plant and equipment is expected to be comparatively stronger than investment in buildings and structures, a significant proportion of businesses (43 per cent) intend to invest in both.
Tourism businesses identified the most significant benefits from investment to be improved competitiveness with 54 per cent of respondents identifying this as an advantage, and an improvement in profitability (49 per cent). The major barriers to new investment were identified as being the cost of capital (32 per cent), a low or distant estimated return on investment (32 per cent) and the availability of capital (30 per cent).
Background - what is VTIC
The Victoria 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. |
