Market – Australia & New Zealand

• ST Research Report 2023 –– Download here

Under construction…

After a belated recovery start in 2022, Australia has developed a strong dynamic in outbound travelling, and Switzerland is doing over-proportionally well. With a +7.5% on Hotel ON between January and November, it is likely that 2023 will become the best year ever out of Australia.

It is an exhilarating time for the tourism sector in Australia. Despite inflation and the stubbornly high cost of living, Australia’s total spending on tourism in 2023 (domestic and international combined) was at record levels, up 20% in 2019. Australian travellers continue to prioritise travel despite a slowing global economy and rising cost of living. In 2024, they are expected to take 11.6 million international trips, an increase of approximately 16% over 2023.

The luxury sector has led the recovery in the Australian market and continues to flourish. As a result, we have seen the distribution sector across the travel trade adapt accordingly, with more players and new companies and allegiances focusing on this segment. It is reported that 80% of luxury travellers use a travel agent – so working with the travel trade is more important in this market than ever before.

Geographically, we are a large market. Therefore, it is essential to understand where the opportunities come from. The east coast cities of Australia (Sydney, Melbourne & Brisbane) represent approximately 80% of the market share to Switzerland.  The rest originates in Perth, the smaller cities of Canberra and Adelaide, and New Zealand.

New Zealand was slower to re-open its borders post-COVID, and naturally, this had an impact on the recovery of the tourism sector. The local travel industry was particularly hard hit during that time, losing at least one-third of travel agents. The market is much smaller than Australia – i.e., New Zealand’s total population is less than Sydney’s. However, there is every reason to forecast that 2024 will be based on the Australian experience in 2023; outbound tourism from New Zealand will likely be positive in 2024.

ST in Sydney is expecting the strong momentum for travel to Switzerland to continue for the foreseeable future. 

(Statistics: courtesy of Deloitte’s Tourism Market Outlook – Australia – December 2023).

Australia’s major bank states that the economy remains “in relatively good shape” in 2024. Regardless of global economic challenges, Australia looks to have avoided a recession.  This is despite the extreme cost of living challenges experienced over the past 12 months, with inflation pushing 8% at times.

Sydney is now the second most expensive city in the world to buy a house (after Hong Kong).  The upside for those already in the property market is incredible returns on investment, and this certainly has a direct flow onto the high spending habits of Australians on leisure travel.

In the second half of 2024, inflation is forecast to return to around 2-3% and interest rates on housing loans are set to decrease very slowly.  This is expected to have a very positive outcome for the tourism sector, freeing up discretionary spend for a wider segment of the population which will keep the growth momentum in international outbound tourism high for the short to medium term. 

The economy in New Zealand is expected to return to growth in 2024, following a recession in 2023.  Like Australia, it is anticipated that inflation will slowly decrease towards the end of the year.  Accordingly, the outlook for New Zealand is positive, with growth expected in the outbound travel market in the short to medium term.

The travel trade is key to selling Switzerland in Australia and New Zealand. The Australian Travel Industry Association (ATIA) cites that 70% of long-haul travellers from Australia use a travel agent for at least part of their travel arrangements. The travel trade distribution network is made up of the following:

• Tour Operators/Wholesalers
  – Products Include group tours, FIT, niche special interest & rail.
  – Australian-owned as well as international companies (US & UK) with local offices.
  
• Retail Travel Agents
  – The Flight Centre Travel Group and Helloworld are two main consortia, with numerous travel brands sitting under these companies.
  – Other “buying groups”, such as Virtuoso (for the luxury sector), have a strong presence, particularly in Australia.
  – Post covid, far fewer travel agents have physical storefronts, which has resulted in the rapid rise of home-based travel agent consortia, the two largest in the market being Travel Managers and MTA.
  – New Zealand agents readily purchase through tour operators based in Australia.
  
• Online Travel Agents | OTAs
  – Mainly operate on a B2C basis (although expanding into B2B).
  – High volume, invest heavily in consumer advertising and tactical campaigns

Given Australia is considered a valuable high-spending market, it is very crowded with travel suppliers who invest heavily to work with the travel trade, offering everything from rebates and marketing spend to cooperative promotional campaign-type activity. With agents less accessible in office locations, events have become an essential way of working with and engaging the trade. Webinars remain popular as an effective use of time and resources. In any given week, a well-established travel agent would have up to ten invitations to consider from travel industry suppliers. This means that to get cut through with the trade, ST ensures that our promotional activities target their needs and interests and that we use a creative hook wherever possible.

One of the highest investing sectors in the travel industry in Australia is the cruise industry. Australians have a deep love of cruising and take more cruises per head of population than any other country. It is very common for Australian travellers in the 60+ age group travelling to Europe to incorporate a river cruise as part of their itinerary.

The final remaining challenge in the region post covid has been the high cost of airfares to Europe due to ongoing capacity limitations from Australia. Over the past 12 months, Australian travellers paid, on average, 30% more to fly to Europe than in 2019, and still, it was a record year for visitation from Australia to Switzerland! Airfares started to decrease at the end of 2023 slowly. However, they are expected to remain high for the foreseeable future, as seat capacity in Europe sits at around 85% compared to 2019. The most positive aviation announcement in recent months is that Qantas will commence nonstop flights from Perth to Paris from May to October 2024; this new route will complement their existing nonstop flights from Perth to London and Perth to Rome.

The travel trade in Australia well regards Switzerland Tourism. We work closely and proactively with all sectors of the distribution network and are always happy to help our Swiss partners navigate the best possible opportunities in the local market to capitalise on the buoyant market demand we are currently experiencing.

The Australian market should be regarded as a relatively sophisticated, mature market, particularly in terms of the frequency of travel and knowledge of Europe as a travel destination. Traditionally, Australians booked travel to Europe at least 9 months in advance. This timeframe has been reduced, and there is no longer a clear peak booking period. Regarding travel periods, Australians are very open to travelling before and after the summer peak months. September to October is well regarded by local travellers as the best time to be in Europe, allowing the development of Autumn campaigns further, likewise for New Zealand, but on a much smaller scale.

As mentioned in the market overview, the luxury segment led the recovery of the outbound travel market and continued to perform exceptionally well in 2023, with no sign of deceleration. It is essential to understand that luxury has become very much about the experience, be it a once-in-a-lifetime experience, a gastronomic dinner at a Michelin-star restaurant, or a private customised itinerary. It can also be an experience that is unique to a remote region or somewhere untouched by the tourism footprint. The demand for luxury travel emphasises the need for in-depth destination knowledge and expertise from travel agents and a need for Swiss suppliers to meet these specific customised requirements.

Other current key trends/nuances of Australian travellers include:

• A demand for cultural exploration – including authentic interaction with locals.
• Slower travel – spending longer in a destination and going beyond the main sites.
• The increased use of AI to help with travel planning (not necessarily replacing the use of travel agents).
• A renewed affection for print advertising – in particular newspaper weekend travel sections (in print!) are now twice as large with an increase in circulation than in 2019.
• Solo travel.
• Rail travel.
• Nature travel, wellness, spa experiences.

Taking into account all the factors contributing to the travel behaviour of Australians and New Zealanders, the next few years are anticipated to be very robust for Switzerland in the local market.

In Australia and New Zealand ST is prioritizing the personas of Kris, Quinn, Max and Jo. Find more information about the personas here.