Tourism

Outlook

Growth in the tourism industry is expected to slow in 2023 as increased cost of living pressures constrain household budgets. Over the medium term, the industry is expected to be supported by growth in both international and domestic visitation to the Territory.

Visitor expenditure in the Territory in 2022 was the highest on record, reaching $3.1 billion, up 69% on 2021. The number of visitors to the Territory increased by 30% to 1.66 million in 2022, but remained 17% below pre-pandemic levels, primarily due to a slower recovery in the number of international visitors (Chart 13). The strong results for 2022 reflect a unique operating environment for the Territory, mainly fuelled by domestic travellers substituting overseas holidays for travel within Australia.

Chart 13: International and domestic visitation and expenditure in the Territory¹

LHS: left-hand side; RHS: right-hand side
1 Moving annual total.
Source: Tourism Research Australia, International Visitors in Australia, Travel by Australians

Higher prices contributed to higher average spend per trip. On average, visitors stayed in the Territory for 7.4 nights, spending on average $1,875 per stay (up 30%). From 2011-12 to 2020-21, tourism accounted for an average of 4.3% of Territory gross state product and 6.1% of total employment.

While the international visitor recovery is underway, it is anticipated to proceed slowly. Growth in domestic spending is expected to moderate as increasing cost of living pressures weigh on discretionary spending and Australians are exposed to a range of holiday choices as international travel returns. A full recovery to pre-pandemic levels of visitation is anticipated from 2025 when international travellers return and aviation networks are expected to recommence.

International visitation

There were 90,000 international visitors to the Territory in 2022, 70% fewer than in 2019. The outlook for international visitors remains challenging due to international airlines seeking to recover their networks following two years of hibernation, traveller confidence returning in key markets where health and safety is seen as paramount, and cost of living pressures in source markets. In addition, competition is high in the global market for tourism, with a range of competing destinations ramping up their investment to attract the interest of potential travellers.

At a Territory level, the international visitor revival lags the national recovery, due to the Territory’s placement on international itineraries for Australia. The closure of international borders was particularly damaging to the Central Australian tourism industry, which traditionally has been more reliant on international visitors than the Top End. Affordability issues have been exacerbated in the Territory due to airplane and crew shortages, the high cost of jet fuel and inflationary pressures. While forward occupancy rates for Darwin indicate strong visitation during the traditional peak season, significant capacity remains available outside of this period when the tourism industry relies more heavily on international visitors.

Domestic visitation

The recovery of domestic travel for the Territory and Australia has been strong. Visitor spending growth has outpaced visitor volume in the Territory, with expenditure results now higher than in 2019 at an average of $1,867 per trip, up 48% compared with 2019. The roll back of COVID-19-related travel restrictions, pent-up demand, accrued leave and greater demand for premium experiences, is expected to see growth in domestic travel continue through the Territory’s 2023 peak season from April to October.

In 2022 the number of interstate holiday visitors increased by 48% relative to 2021, 12% lower than pre-pandemic levels. The number of intra-Territory visitors fell slightly in 2022 to 623,000. In 2022, 1.1 million visitors visited regional areas, equating to 64% of visitation to the Territory.

The pace of recovery has varied for different purposes of travel. Travel for holidays and visiting friends and relatives has recovered more quickly than for other segments. Domestic visitation from the Territory’s holiday and visiting friends and relatives segments grew strongly in 2022, up 24% and 21%, respectively, with the number of holiday visitors now 10% higher than in 2019.

The business travel sector is recovering at a much slower pace. Business travel increased by 22% in 2022, but remains 27% below pre-pandemic levels. Many businesses have maintained practices that were adopted during COVID-19 such as virtual conferences instead of face-to-face meetings, dampening the demand for business travel.

While outcomes have improved over the past two years, the post-pandemic recovery may be impeded by a number of factors including the effect of future COVID-19 variants or a worsening geopolitical situation as a result of the Russia-Ukraine conflict, as well as inflationary and interest rate pressures domestically.

Government initiatives

The Northern Territory’s Tourism Industry Strategy 2030 sets out the strategic direction for industry development over the next decade. The strategy includes specific actions to achieve identified goals in the short, medium and long term to attract more visitors to the Territory, and help the tourism sector deliver increasingly diverse, quality tourism experiences.

In 2023-24, the Territory Government has invested in a number of projects that will help improve tourism opportunities and experience across the Territory, which include;

• $12.8 million for targeted tourism, business events and international education marketing activities
• $1.1 million in additional personnel expenses to increase digital activities and deliver enhanced marketing and development initiatives
• $1.9 million for Aboriginal tourism industry development activities
• $3 million for an international marketing boost
• $500,000 for visitor services across the Territory.

An update of the Territory’s Tourism Industry Strategy 2030 is underway and is expected to be finalised by 30 June 2023. This will reset short-term targets and contextualise actions for the next three-year period within a COVID-19 recovery operating environment.

The Government’s Cruise Tourism Strategy 2022-2025 aims to increase the number of both cruise liners and expedition ships over the next three years. The cruise sector is a key part of the tourism industry in the Top End, generating an estimated $60 million of annual expenditure within the Territory pre-COVID-19. Based on current Darwin Port data, there are 150 ships booked in to visit Darwin from June 2023 to December 2024, with a passenger capacity of approximately 95,000 visitors.

In early 2023, the Government announced a range of Alice Springs tourism support initiatives, including;

• $1 million brand and trade campaign dedicated to the Red Centre, to drive interstate visitation in 2023
• a tailored $500,000 business events marketing program to showcase Central Australia through familiarisation programs, media activity and travel trade advertising
• the Save and Learn voucher program will be doubled to $3,000 per eligible school group for the 2023 calendar year to encourage more interstate schools to visit the Northern Territory
• $1 million for round six of the visitor experience enhancement grant program where Territory operators can receive up to $100,000 in funding to upgrade their visitor experience.

These investments build upon the Seek Different, Road Trip Differently and Culture is Closer Than You Think campaigns, which are already in market to draw visitors to the Northern Territory.

In November 2020, Tourism Central Australia released a Priority Action Plan with 11 priority projects aiming to refocus and refresh tourism experience in Central Australia. These projects were generated through consultation with the tourism industry, market intelligence, visitor surveys and feedback and reviews of product development from destinations with similar characteristics. Currently, the Mereenie Loop and Visitor Information Centre projects have been upgraded and progressed.

The National Aboriginal Art Gallery project in Alice Springs is progressing. The Northern Territory Government has acquired the land for the site and construction of the Gallery is expected to commence in 2024.

Accommodation

Strong intrastate tourism supported the accommodation sector through 2022. As a result, occupancy rates increased by 8.7 percentage points to 62% over the year and have recovered to pre-pandemic levels.

Many hotels across Australia are facing an industry-wide shortage of qualified hospitality workers, inhibiting the sector’s ability to service the recovering visitor numbers. The Territory is responding with a new employment campaign as part of a $12.8 million worker attraction program led by Hospitality NT.

Darwin accommodation performed strongly in 2022 compared with 2019. Darwin hotel occupancy in 2022 averaged 63% compared with 58% in 2019 and was 3.1 percentage points above the national average. In Darwin there were around 450 more rooms supplied in December 2022, compared with December 2021 as accommodation suppliers recommenced operations post-pandemic. Improvements and major construction refurbishments are being completed at hotels in Darwin, specifically at the Mercure and Novotel hotels at the Darwin Airport. Renovations are expected to be completed in 2023.

The outlook for the Darwin accommodation sector is positive with the monthly forward booking figures, as at February 2023, indicating occupancy peaking in May and July. Forward bookings around events are particularly strong, as is the normal pattern.

The accommodation sector in Alice Springs has seen improvements from 2021 with average occupancy in 2022 at 64% surpassing occupancy for 2020 and 2021, at 49% and 58%, respectively. The Mercure Alice Springs Resort reopened for business in August 2022, with 139 rooms being added to supply, providing room for the region to attract more visitors and creating flow-on impacts to other businesses in the sector.

Aviation

Aviation services directly support the Territory’s economic development and underpin essential services such as healthcare, education, social welfare and movement of time-critical freight. It also plays an important role in keeping the Territory’s remote communities connected throughout the year, particularly those experiencing road closures during the wet season. The Territory’s expansive and isolated geography means there is a high reliance on air travel when commuting intrastate, interstate and internationally.

The lifting of Australia’s international travel restrictions in February 2022 led to a sharp recovery in air travel demand, with airlines attempting to quickly scale-up operations to pre-pandemic levels. However, this presented the aviation sector with operational challenges at a global scale, including shortages of airplanes and crews, availability of spare parts and other supply chain disruptions. This resulted in ongoing airline capacity adjustments throughout 2022 all over Australia.

The aviation outlook for 2023-24 is positive, with the Territory Government applying a proactive strategy to rebuild its aviation network. This includes the collaborative approach by Territory Government to support the opening of Qantas’ Embraer 190 aircraft and crew base at Darwin International Airport in February 2022. This project will benefit the Territory’s aviation goals of improving air accessibility, while also making economic development contributions by creating up to 200 new Territory jobs.

While domestic flights at Darwin have mostly recovered to pre-pandemic levels, there is still work to do to address Central Australia’s (including Alice Springs and Yulara) aviation connectivity and affordability, which is strongly linked to the recovery of international visitation. Currently there are over 450,000 seats available into the region throughout 2023. The Territory Government is focused on strategies to support the aviation recovery in the region, including working with Virgin Australia to support its position as the second airline carrier serving Alice Springs.

Passenger movements in 2022 for Darwin and Alice Springs remain below pre-pandemic levels with passenger movements in Alice Springs recovering at a much slower rate of 38% below 2019, whereas Darwin has almost recovered and is only 5% below 2019 (Chart 14). The prices of flights to Central Australia, especially to Alice Springs, are high and seat capacity has been reduced. The decline in visitation to Alice Springs can be linked to the township losing its position as the gateway to Uluru. With the expansion of Ayres Rock Airport, many visitors are choosing to go directly to Uluru, bypassing Alice Springs.

Chart 14: Annual passenger movements

Source: Bureau of Infrastructure and Transport Research Economics, Domestic aviation activity

Internationally, the Territory welcomed the return of Singapore Airlines to operate non-stop flights between Darwin and Singapore. This route is crucial for the Territory’s global connectivity. These services will increase to five per week from July 2023. Separately, the opening of the Embraer 190 base in Darwin saw an expansion of the Darwin-Dili (Timor-Leste) route to now be served by two carriers, Qantas and Airnorth. Jetstar provides an important connection for Darwin residents with Bali as well as the promotion of a two-way traffic hub through Denpasar, connecting Darwin with cities in South-East Asia and beyond.

A non-stop flight linking the Territory with China remains a focus of the Territory Government’s aviation strategy. A formal engagement and business development plan is in place to restore this important link.

For the latest data on the tourism sector, refer to the Territory Economy website.