The latest Victoria Tourism Industry Council (VTIC) survey of tourism operators across the State revealed that business confidence in the tourism industry has fallen dramatically and general business conditions have slowed over the three months to June 2008.

Oil and petrol prices stood out as the most commonly identified factor constraining business growth over the May quarter, with 60 per cent of respondents listing it as a ‘significant’ or ‘critical’ factor. This has increased from 41 per cent in the previous quarter and from 32 per cent a year ago. Other constraints indentified included environmental factors (35 per cent) business/consumer confidence (34 per cent), and wage costs (27 per cent).

Rural and regional respondents reported the greatest level of concern over fuel prices, with 65 per cent and, 64 per cent respectively, identifying high oil or petrol prices as a ‘significant’ or ‘critical’ constraint.

“Fuel prices are causing serious problems for the tourism industry, impacting on profitability and affecting business confidence”, says VTIC Chairman Jeremy Johnson.

“Victoria is a driving holiday destination and it’s clear that fuel prices are putting people off car holidays, especially to places more than a petrol tank’s drive from Melbourne such as South-West Victoria, North-East Victoria, the Murray River towards Mildura and East Gippsland

“High fuel prices are also reducing people’s capacity for discretionary expenditure in the area of retail, hospitality and tourism.

“The survey also shows the industry is expecting weaker conditions in the three months to August 2008 with general business conditions expected to decline, along with most other business indicators, including profitability, sales and employment.

“The number of tourism businesses anticipating a stronger performance over the next twelve months has fallen to the lowest since the VTIC survey commenced in 2002, the year of the Bali bombings.

“Tourism businesses are less positive about trading prospects over the longer term, with only 32 per cent of those surveyed indicating that they anticipate their business performance will be ‘much stronger’ or ‘somewhat stronger’ over the next twelve months. This is a decrease since the last quarter (42 per cent) and on the figure for the corresponding period last year (57 per cent).

“This is a worrying sign for the tourism industry and more needs to be done by State and Federal Governments to increase direct flights to Melbourne, invest in vital infrastructure, address skills shortages, reduce business taxes and provide targeted marketing support to the regions, particularly those furthest from Melbourne.

“The Federal Government also needs to get serious in examining cutting fuel costs in order to take the pressure off the tourism industry”, says Mr Johnson.

Summary of results

General business conditions in the tourism industry declined over the three months to May 2008. Results were weaker than the previous quarter and the corresponding period in 2007.

Sales growth slowed, but remained positive. Average selling prices continued to increase, while profitability declined as growth in wages continued. Employment levels also declined, following stable employment conditions in the previous quarter. Growth in business investment increased moderately.

Oil and petrol prices stood out as the most commonly identified factor constraining business growth over the May quarter, followed by environmental factors, and business and consumer confidence.

Looking forward, the industry is expecting weaker conditions in the three months to August 2008. General business conditions are expected to decline, along with most other business indicators, including profitability, sales and employment. Growth in wages and average selling prices is expected to remain positive. Growth in business investment is expected to decline.

Tourism businesses are less positive about trading prospects over the longer term, with 32 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 is a decrease on the previous survey and on the figure reported during the corresponding period last year.

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, operators and government agencies, providing one united industry voice.