When Tourism Is Worth More than Iron Ore

tourism australia

Outside of Melbourne, you won’t find many people who love it as much as locals do.

Even though I’m a born and bred Melburnian, I get why it’s hard to love. Housing affordability is a major issue. It’s actually quicker for many people to get to work in peak traffic than outside it. And it’s artic cold for nine months of the year.

However, this once small 19th-century industrial port has one thing going for it: We score a public holiday for sporting events.

You might not be into the Melbourne Cup, or even care about tomorrow’s Aussie Rules Grand Final, but this major Australian city shuts down for people to cheer at a team — or a horse — on their boss’ dime.

It doesn’t make sense for an entire state to shut down just to prepare to watch some blokes kick a pigskin around.

Yet it will come as no surprise to discover that the Australian Industry Group says the Friday public holiday before the AFL Grand Final should be dumped. Victorian boss Tim Piper says the public holiday costs the Aussie economy $1.2 billion every year.

But Small Business Minister Philip Dalidakis says that the public holiday brings in a ‘huge’ number of tourists into regional Victoria. Though it seems harder to pinpoint the value in dollar terms that the public holiday brings.

While I can’t quantify the dollar value of the pre-AFL Grand Final public holiday, the broader Australian tourism industry is booming.

In fact, in the 2016 financial year, both tourism and education sector exports matched the total value of iron ore exports. In that year, iron ore brought in $47.8 billion, whereas the combined value of tourist and education dollar raked in $42 billion. That year alone, iron ore accounted for 15% of ‘total value of Australian exports, and tourism and education was a smidge behind at 14%.

If you fancy a tipple, wine-related tourism accounted for almost $9 billion in that year.

The much overlooked tourism sector of the Australian economy is likely to be an important driver of long-term economic growth.

Iron ore export value has increased since then, thanks to rising demand from China. But Tourism Research Australia says that overnight tourism will balloon out to $196.3 billion a decade from now.

In a report earlier in the year, Deloitte Access Economics pointed out that this hot sector of the Aussie economy is growing at a record pace. Even though the Aussie dollar is relatively high against the US dollar, this has done little to slow down the number of people travelling to and within Australia.

As they see it, Australia is ‘…experiencing is the fastest in a generation and is seeing it outpace both global performance and travel across the Asia Pacific. In fact, international visitation to Australia is growing at nearly three times the rate of global travel.

Furthermore, they predict international visitation will grow by 6.2% per annum over the next three years. The majority of the growth will come from India (13%), followed by Indonesia and China (both 10%). Deloitte notes: ‘On current forecasts, we expect by 2020 that the value of inbound tourism from China will exceed the entire inbound international tourism market as it stood in 2000.

Asia’s growing middle class is no doubt driving this trend. And Tourism Australia says the number of Chinese visitors will top two million by 2025 — almost double the 1.2 million that travelled to our shores here in 2016.

For investors, this means that there are opportunities to profit. You just have to know where to look. Surprisingly, 95% of tourism businesses in Australia are small companies employing less than 20 people.

This tells us that certain companies listed on the ASX should perform well over the next few years. But you have to know where to look.

Total Income editor Matt Hibbard recently dug deep into the booming Aussie travel sector. He reckons he’s unearthed one company that is set to profit from this sector over the next few years. For all the details, go here.

Regards,

Shae Russell,

Editor, Markets & Money

Shae Russell

Shae Russell

Drawing on her extensive experience, Shae is the lead editor of Markets & Money. Each day, Shae looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

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