The rollout of COVID-19 vaccines, relaxation of restrictions and reopening of international and interstate borders are expected to support a gradual recovery in the Territory’s tourism industry over the outlook period.
While the Territory tourism industry is forecast to return to pre-pandemic levels, the path to recovery is likely to vary within the industry with domestic travel expected to return to previous levels at a much faster rate than international travel.
Before the pandemic, domestic tourism accounted for 85% of the Territory’s visitor economy. Throughout 2021, domestic visitor numbers from interstate were down by 41% compared with pre‑pandemic levels. Much of this decline was due to restrictions on travel from New South Wales and Victoria which are key source markets for the Territory’s tourism industry and were significantly affected by COVID-19 outbreaks through the year.
With borders open and a successful vaccine rollout, pent-up demand, accrued leave and disposable income are expected to support strong interstate visitation to the Territory through 2022. Pre‑booked daily occupancy rates for Darwin indicate strong visitation during the traditional peak season, however significant capacity remains outside of this period when the tourism industry is increasingly reliant on international visitors.
The return of international visitation to the Territory is expected to lag behind domestic travel as the prolonged pandemic has increased concerns for health and safety, reducing the appeal of travelling overseas for many. International travel is likely to be further inhibited by the Russia-Ukraine conflict, which has drastically increased the price of fuel, placing upward pressure on airfares and making long distance holidays less affordable.
Variation is also likely between the pace of recovery for different types of travel. Travel for the purpose of visiting friends and family and holidays is expected to rebound quickly as people seek to reconnect with their loved ones and indulge in new experiences following prolonged periods of lockdown. The business travel sector however is expected to recover at a much slower pace.
Business travel continued to fall in 2021 and was overall 44% below pre-pandemic levels. Travel for business purposes is expected to recover at a much slower pace than leisure travel as improvements in the availability and quality of online communication allowed businesses to continue working through the pandemic and reduced the need for travel. Many businesses are expected to maintain some of the practices that were adopted during the pandemic, such as virtual conferences instead of face-to-face meetings, making business travel less necessary.
Even with increased visitation, a challenge for many tourism businesses will be labour shortages, with an expected shortage of workers from overseas and a loss of employees during COVID-19 who have moved to work in non-tourism related industries.
The emerging signs of the recovery are promising, however this outlook 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.
The Territory Government implemented a number of initiatives to support the tourism sector during the evolving challenges of 2021, and a number of new programs will be delivered over 2022 to regenerate the tourism sector.
- To encourage demand for intrastate travel within the Territory, 4 rounds of Territory tourism vouchers were released over 2020 and 2021. The vouchers worth up to $200 when contributing a matching dollar amount, were redeemable on multiple tourism experiences throughout the Territory. Over the 4 rounds, about 92,000 vouchers were redeemed resulting in $36 million of expenditure on tourism‑related products.
- In response to successive impacts of COVID-19, tourism industry support packages worth $12.5 million were announced in August 2021, co-funded by the Commonwealth and Territory governments. The programs aimed to support Territory tourism enterprises that suffered a significant decline in turnover due to interstate and international COVID-19 lockdowns and border closures, and were not supported by the Territory tourism voucher scheme. Between the Tourism Survival Fund and Visitation Reliance Fund, 213 individual applications were awarded over $4 million in total funding.
- To improve the customer experience of the Territory’s tourism industry, the Visitor Experience Enhancement Program provided businesses with a grant of up to $50,000 when contributing a matching dollar amount. Round 5 of the program awarded 54 individual business applications in 2021.
- Round 3 of the Roadhouse to Recovery Grant program, allocated $2 million to assist regional and remote wayside inns, roadhouses and caravan parks to undertake projects to improve the on-ground visitor experience. Operators can apply for up to $150,000, contributing a matching dollar amount.
- An additional $500,000 for international marketing by Study NT will support increased in-market promotional campaigns to promote the Territory as a destination of choice for international education and training to audiences in China, Nepal, India and Vietnam. This includes partnerships with education agents that, prior to the pandemic, recruited up to 70% of international students to Australia.
The Commonwealth has committed:
- $132 million towards Central Australian tourism roads, including sealing the Mereenie Loop. The Commonwealth has also committed $50 million to upgrade the Alice Springs to Halls Creek corridor and $678 million in additional funding to seal the Outback Way, $124 million of which, will be spent in the Territory and is anticipated to create 442 local jobs.
- $543.5 million over 2 years to continue to support the aviation sector as part of government’s response to the sector’s recovery from the pandemic including $28.5 million to extend the Regional Airports Screening Infrastructure program.
- $146.5 million over 3 years to support the recovery of the Australian Tourism industry as part of the THRIVE 30 Strategy. This includes $76.7 million to support travel agents and tour service providers through the COVID-19 Consumer Travel Support Program, $63 million to accelerate the return of international tourists and backpackers through targeted marketing initiatives, and $6.8 million for increased data availability and analysis to improve planning and establish and employment platform.
The Territory’s Tourism Industry Strategy 2030 remains the overarching framework that guides the Territory’s long-term plans for the tourism sector. The first of the scheduled 3‑yearly updates is being undertaken in the coming months, which will reset short-term targets and contextualise immediate actions within a COVID-19 recovery operating environment.
Visitors, visitor nights and expenditure
Visitor numbers to the Territory can vary significantly from year to year but have averaged 1.58 million per annum over the past 10 years. From 2009‑10 to 2019-20, tourism accounted on average for 4.2% of Territory GSP and 6.2% of total employment.
The number of visitors to the Territory increased by 30% to 1.3 million in 2021, however remained 46% below pre-pandemic levels. Given international border closures and interstate travel was severely disrupted, 49.6% (636,000) of visitors were intrastate, 50% (642,000) came from interstate and 0.4% (5,000) were international visitors.
Intrastate visitors increased by 6% in 2021, as the Territory’s successful health response to COVID-19, minimal lockdowns and interstate border closures allowed Territorians to travel relatively freely within the Territory while their ability to holiday elsewhere was restricted. The Territory Tourism Voucher scheme provided further incentives for Territorians to travel within the Territory, and people substituted interstate and international travel for intrastate travel. Following the opening of all borders, intrastate travel is expected to marginally fall to its pre-pandemic levels through 2022 as people are able to travel elsewhere.
Interstate visitors increased by 92% in 2021 from 2020 when interstate visitor numbers were highly restricted by border closures. However lockdowns in other jurisdictions continued to impact people’s ability to travel to the Territory, particularly towards the end of the year with visitor numbers over 2021 still 41% below pre‑pandemic levels. Interstate travel is expected to increase through 2022 as borders have opened across Australia.
International visitors fell by 90% in 2021 due to the closure of Australia’s international border. The closure of international borders was particularly damaging to the Central Australian tourism market, which is more reliant on international visitors than the Top End. With the opening of Australia’s borders in early 2022 international travel is expected to slowly recover, reaching pre-pandemic levels in 2025.
On average, visitors stayed in the Territory for 6.4 nights, spending an average of $1,435 per stay (up 49%) with total expenditure of $1.8 billion (up 94%) in 2021. Household savings increased substantially over the pandemic and therefore total expenditure per stay is expected to increase in 2022 as pent-up demand for travel, accrued leave and disposable income during lockdowns encourage people to take longer, more expensive trips.
Tourism is a significant sector for regional areas, contributing to business and employment opportunities. Prior to COVID‑19, 1.2 million visitors spent at least 1 night outside the Greater Darwin region, with regional areas accounting for 62% of total visitation to the Territory.
In addition to leisure tourism, the lucrative business events sector as well as international students and working holiday makers are key targets for the Territory tourism industry. In 2021, 32% of visitors to the Territory came for business. Business visitation is particularly important to Central Australia as it represents a larger proportion of the visitor economy. The number of business visitors to the Territory increased by 8% in 2021, however remained 44% below pre-pandemic levels.
The outlook for international students is positive following the Australian border reopening to eligible visa holders from 15 December 2021. The Commonwealth estimates that 500 international student visa holders have arrived in the Territory since December 2021.
The cruise and expedition ship sector is traditionally a key part of the tourism industry in the Top End, particularly over the tropical summer period, generating an estimated $60 million of annual expenditure within the Territory pre‑COVID‑19. A declaration under the Biosecurity Act 2015 has prevented foreign cruise ships or large passenger vessels capable of carrying more than 100 passengers from entering Australian waters for the past 2 years. This restriction was removed on 18 April 2022, in time for the expedition cruising season in northern Australian waters, paving the way for the recovery of the sector.
Strong intrastate tourism and the use of accommodation properties for quarantine facilities supported the accommodation sector through 2021. As a result, occupancy rates increased by 13 percentage points to 54% over the year, however rates remained slightly below pre-pandemic levels.
Some businesses have started to report a slow recovery but Central Australian businesses continue to endure the brunt of the COVID‑19 due to their high dependence on international and business visitors. The impact is further intensified in towns like Alice Springs and Yulara that do not have a critical mass of local residents to generate significant visitation from friends and relatives to support local businesses during the downturn.
Many hotels across the Territory are facing an industry‑wide shortage of qualified hospitality workers, thereby reducing their full capacity available to the short-term market and inhibiting the sector’s ability to cater to the recovering visitor numbers.
The accommodation sector in Central Australia is expected to see improvements from the second quarter of 2022, with the Mercure Alice Springs Resort reopening for business following the cessation of the Alice Springs Quarantine Facility in May 2022, increasing the supply of rooms, attracting visitors and having flow-on impacts to other businesses in the sector.
In Darwin, there was an average increase in the supply of 170 rooms in 2021 compared with 2020, due to the majority of accommodation suppliers recommencing operations. The outlook for the Darwin accommodation sector is positive with the monthly forward booking figures at April 2022 indicating occupancy peaking in June and July. Forward bookings around events also remain strong, with the weekend of the Darwin Cup Carnival currently at 76% occupancy for Darwin overall.
Aviation services directly support the Territory’s economic development and underpin essential services such as health care, education, social welfare and movement of time-critical freight, with the Territory’s regional communities such as Nhulunbuy, Groote Eylandt and Maningrida depending heavily on flights to access essential services. The Territory’s large area means air services form an integral part of sustaining intrastate, interstate and international connectivity.
Following 2 years of disruptions, lifting Australia’s domestic travel restrictions coupled with the progressive easing of international travel requirements will lead to improved confidence in air travel and heightened demand. There is an optimistic outlook for aviation in 2022, and the Territory’s domestic routes are expected to make a full recovery by the end of the year, as well as additional routes.
A new Qantas flight service between Darwin and Townsville began in March 2022, providing travellers with 3 additional weekly services between the 2 cities. It is expected to encourage business and holiday visitors to travel between the 2 destinations.
Internationally, the Territory has been reconnected to the global aviation hub of Singapore, where there are convenient onward flights to Europe and Asia, with international services by Jetstar Asia and Singapore Airlines recommencing. As a short-term opportunity, Qantas has operated non-stop flights between London and Darwin since November 2021, however this route will return to its original routing of London to Singapore and London to Perth in June 2022.
The Russia-Ukraine conflict has caused fuel prices to increase through the early months of 2022 and is likely to have an inflationary effect on airfares, particularly for long-haul flights. While increased prices for long-haul airfares are likely to further slow the return of international visitors to the Territory, this may encourage more domestic travel to the Territory as outbound travellers from other states within Australia choose to holiday domestically instead of abroad.
For the latest data on the tourism sector, refer to the Territory Economy website.