TTF AUSTRALIAN TOURISM: BACKING OUR STRENGTHS by The Word Australia

AUSTRALIAN TOURISM: BACKING OUR STRENGTHS A National Agenda for the Australian Government July 2013

www.ttf.org.au

A national tourism agenda Tourism is an economic development strategy for Australia.

Consumption

The visitor economy already plays a vital role:

GENERATES $95.7 BILLION IN CONSUMPTION

GDP

• I t supports 907,000 jobs (including direct employment of 514,000 people)

Taxes

$34.6 billion (Direct)

$3.1 billion (Direct)

SUPPORTS 907,000 JOBS 514,000 (Direct)

= 100,000 jobs

393,000 (Indirect)

Source: Australian Bureau of Statistics, Australian Tourism Satellite Account, 2010-11 and Tourism Research Australia, Tourism’s Contribution to the Australian Economy, 1997–98 to 2010–11.

The next federal government needs to foster industries with the greatest potential to create prosperity and jobs for the future. This is particularly important at a time when major parts of the manufacturing sector are in decline, the mining investment boom is tapering, and Australia’s demographic profile is ageing leaving less taxpayers to fund vital government services.

CONTRIBUTES $73.3 BILLION TO GDP

PAYS $4.2 BILLION IN TAXES

Jobs

• I t generates $95.7 billion in consumption within the economy • I t is Australia’s largest service export industry

$1.1 billion (Indirect)

$38.7 billion (Indirect)

GSP/GDP ($m)

8,876 JOBS

124,200

GSP/GDP ($m)

727

BUSINESSES

55,688

JOBS

7,500

GSP/GDP ($m)

11,510 JOBS

BUSINESSES

159,400

2,302

BUSINESSES

96,546

The rise of Asia provides Australia with an enormous opportunity. With the number of Chinese citizens taking overseas trips expected to reach 100 million by 2015, tourism can convert the opportunities into income and jobs in every part of the country.

GSP/GDP ($m)

653 JOBS

8,400 BUSINESSES

3,625

GSP/GDP ($m)

Every household would pay $500 more in taxes without the tax revenue generated by tourism. 2

GSP/GDP ($m)

JOBS

BUSINESSES

3,119

48,300 26,946

2,053

33,000 18,263

7,296

117,900 73,178

860 JOBS

15,200 BUSINESSES

6,232

Domestic and international visitors spend an average of $260 million across Australia every day.

TTF’s ten point plan for tourism

With our unique and diverse natural environment and our vibrant cities and regions, Australia is a place the world wants to visit. There’s truly nothing like Australia. However, our competitors also recognise this opportunity and are investing heavily in marketing and product development. Australia cannot afford to be complacent.

Australia is not alone in recognising the potential of the Asian Century and it is critical that we don’t lose the competitive advantage of our proximity to Asian through complacency. This paper provides a roadmap for prosperity by growing Australia’s visitor economy. With the right support Australia can reach the target set by the federal, state and territory governments of doubling overnight tourism expenditure by 2020 and thereby growing jobs and prosperity. This will require support in five critical areas that are outlined in this paper. 1

G row demand for travel to and within Australia

Boost investment in tourism infrastructure

3 Enhance the visitor experience

I mprove the competitiveness of Australian tourism

5 Expand the tourism workforce

For the tourism industry to reach its potential, it needs a renewed commitment from the federal government to: 1 Increase funding for Tourism Australia 2 F ocus government resources to capitalise on Asian Century opportunities 3 Freeze and review the Passenger Movement Charge 4 Commit to a secondary Sydney airport at Badgerys Creek 5 R eview penalty rates to recognise the needs of tourism and hospitality 6 Expand the working holiday maker scheme 7 E stablish a $10 million annual business event support fund to secure more international business events and a $5 million annual fund to attract major international sporting events 8 R eform the tax system to encourage investment in tourism infrastructure 9 C ommit to streamlining trans-Tasman border formalities and reduce the PMC to $25 for trans-Tasman travel by Australians and New Zealanders 10 Increase funding for federal national parks

Tourism must be high on the agenda of all political parties in the next term of parliament. Image: SA; Flinders Ranges. Copyright Tourism Australia. Photographer: Mike Newling

Grow demand for travel to and within Australia Marketing and promotion play a key role in attracting international visitors to Australia and in encouraging Australians to travel domestically. Crucial to growing awareness of Australia as a destination is a commitment to Tourism Australia and ensuring it is resourced appropriately to expand its activities in growth markets and confidently enter into cooperative marketing partnerships with the private sector. Funding is also required to support business event bids which attract high-yield business visitors, while a coordinated approach by Australia’s international agencies could deliver a better return on investment for the visitor economy. Finally, additional aviation capacity will be required to meet the increased demand for travel to Australia.

CHAMPION THE ROLE OF TOURISM AUSTRALIA AND INCREASE ITS FUNDING A sustained increase in funding for Tourism Australia will help maintain and grow Australia’s profile as a destination. With global competition in tourism continually increasing, TTF is seeking a commitment from both sides of politics to maintain Tourism Australia, to retain its governance structure and to take a long-term view of its funding to give Australia the best chance of reaching the Tourism 2020 target of increasing overnight tourism expenditure. The decline in Tourism Australia’s funding (in real terms) must be reversed. Tourism Australia must be able to commit to long-term cooperative marketing agreements with corporate partners. Recent growth in international arrivals to Australia has been enhanced through Tourism Australia’s partnered approach to marketing. With Asia providing the majority of the growth in international arrivals, we are also seeking a longer-term commitment to additional support for marketing in Asia, beyond the Asia Marketing Fund, which will expire in 2015-16.

CONTINUE TO SUPPORT THE TOURISM 2020 TARGETS AND STRATEGY The Tourism 2020 target to increase overnight tourism expenditure by the end of the decade, to between $115 and $140 billion a year, has been adopted and supported by the industry. The accompanying strategy have set benchmarks for investment and industry performance which are helping to align efforts in reaching the target. TTF supports the target and is calling for bipartisan support to give continuity and certainty to industry. A review of the strategy as it reaches its halfway mark would provide an opportunity to focus efforts to ensure Australia achieves the objectives of the strategy.

Image (top): Great Otway National Park Photographer: Robert Blackburn/Rob Blackburn

ENSURE ALL GOVERNMENTS AND AGENCIES ARE WORKING COOPERATIVELY TO PROMOTE AUSTRALIA A coordinated whole-of-government approach to promoting Australia internationally will deliver a much higher return on investment. A level of consistency in promoting Australian trade, education, employment and investment opportunities with those of Tourism Australia could deliver a significant boost in interest and awareness of Australia as a travel destination. With the potential for decisions across numerous federal portfolios to impact on tourism, TTF supports the establishment of a wholeof-government visitor economy committee to ensure the industry’s interests are represented and ensure each ministry understands the effects of its decisions on tourism.

BOOST AVIATION CAPACITY TO INCREASE VISITOR NUMBERS Aviation access is a key determinant in the success of a destination. This makes building aviation capacity in existing markets and enticing airlines to establish new routes fundamental to increasing the number of people travelling to and within Australia. Ongoing support is required to fund airline attraction incentive schemes. It is essential that bilateral negotiations on air services agreements continue to keep available air capacity ahead of demand and that Australia continues to push for increased liberalisation. Ensuring artificial constraints do not restrict the operation of Australia’s key gateway airports will foster growth in international arrivals and allow for additional domestic flights. This is particularly true in Sydney, where the current movement cap is limiting the capacity of the country’s largest airport to meet the growth in passenger movements and is having significant flow-on impacts across the country. It is also critical to ensure that Sydney, as the nation’s largest city and primary international gateway, has sufficient aviation capacity to deal with future demand. Planning for a secondary Sydney airport must begin now to allow sufficient time to build the airport and the supporting land transport links. TTF believes Badgerys Creek is the best site for a secondary Sydney airport and calls on both major political parties to commit to this location.

PROVIDE FUNDING TO SUPPORT INTERNATIONAL BUSINESS AND MAJOR EVENTS International business events attract high-yield visitors to Australia, many of whom engage in leisure travel while in Australia. Additionally, business events attract thought leaders from various fields who exchange ideas with international and domestic counterparts, which can lead to collaborations and future investment in Australia. Matched federal government funding is required to support state government bids for international business events to ensure that Australia can compete with regional rivals in an increasingly competitive global marketplace. TTF is calling for a $10 million annual national business events support fund to assist in event acquisition across meetings, incentives, convention and exhibitions. Funds are only expended if events bids are successful, guaranteeing a return on government investment.

MAXIMISE THE ECONOMIC RETURN FROM INVESTMENT IN MAJOR EVENTS Australia has the potential to capture a greater share of the rapidly growing international sports tourism market. Sporting events, ranging from small scale and amateur through to mega events such as an Olympic Games, provide a compelling reason to visit Australia as well as a platform to market our destinations globally. However, Australia is increasingly being outbid by new and emerging destinations in the Asia-Pacific region, which have recognised the powerful role of major sporting events as economic drivers. For Australia to remain competitive as an international destination host for major sporting events, a strategic approach and plan is required. TTF is calling for the existing Major Events Taskforce to be formalised as a coordinating body tasked with ensuring Australia leverages greater economic return from major sporting events, while identifying future opportunities to bid for and secure a pipeline of events. The Taskforce should have access to a bid fund to partner with state governments and sporting codes to bid for and secure major sporting events for Australia. TTF believes that, initially, $5 million per annum should be provided to the bid fund.

Boost investment in tourism infrastructure Investment in demand-driving tourism infrastructure is required to help Australia compete on the global stage and is critical to Australia’s chances of reaching the Tourism 2020 targets. Public investment in tourism infrastructure fosters private sector investment in upgraded and expanded accommodation stock, as well as in new and refreshed tourism products and experiences. In conjunction with Austrade, Tourism Australia released a list of ‘shovel-ready’ investment opportunities in mid-2012 as part of efforts to renew Australia’s tourism offering and improve our attractiveness and competitiveness as a destination. Building Australia’s accommodation capacity is central to enabling growth in the visitor economy, especially in the international gateway cities of Sydney, Melbourne, Brisbane and Perth, where occupancy rates are at 80 per cent or higher. The limited supply of accommodation can price some visitors out of the market and reduce dispersal to regional areas if potential visitors cannot secure suitable accommodation on arrival in those gateways. However, it is also critical to manage the expansion of accommodation capacity within any individual market, with rooms added in a sustainable fashion to foster incremental growth and ensure the sector’s continued strength. Reforms to Australia’s taxation regime are needed to encourage private sector investment in visitor accommodation. The reforms, including accelerated depreciation for capital works, must take into account the 24/7 nature of tourism operations. Refreshing tourism product is critical to improving the visitor experience. Iconic attractions in top tourism regions can encourage visitors to stay longer and deliver more visitor expenditure, while the creation of new experiences in regional areas can help drive visitation beyond the capital cities. Governments should invest in projects which address instances of market failure and attract additional visitors and spending. TTF has identified tourism infrastructure priorities in the country’s 20 most popular tourism destinations.

INCREASE GOVERNMENT INVESTMENT IN STRATEGIC TOURISM ASSETS While investment in tourism assets like convention and exhibition facilities, entertainment centres and precincts, recreation and public spaces, and sporting stadia falls to state government, federal funding can expedite projects which will strengthen the visitor economy. This includes, for example, funding for visitor infrastructure in federal national parks and national cultural institutions. In addition, the federal government can help facilitate visitation to key destinations through the provision of strategic infrastructure, like roads, ports, airports and other transport infrastructure.

REFORM THE TAX REGIME TO ENCOURAGE PRIVATE SECTOR INVESTMENT Reforms to the current capital works and depreciation regimes should ensure that the tax treatment of investment in visitor accommodation reflects the operational life of these investments. To stimulate investment in hotel refurbishments and new developments, an immediate depreciation bonus of 50 per cent of the cost of capital works, with the remaining balance depreciated over 12.5 years at four per cent, is recommended. In a global investment market, access to overseas finance is vital for the development of the Australian tourism industry. The decision in the 2012-13 budget to double the final withholding tax rate for managed investment trusts from 7.5 to 15 per cent undermined investor confidence in the government and should be reversed.

Image: Sapphire Princess. Carnival Australia copyright. Photographer: James Morgan

ALIGN AIRCRAFT DEPRECIATION SCHEDULE WITH ASIAN ECONOMIES Australia’s airlines are also disadvantaged by the tax regime surrounding the depreciation of aircraft relative to their international competitors. Singapore, for example, allows the depreciation of aircraft over three years and China, a rapidly-growing aviation market, over five years. TTF strongly supports the reduction of the effective life statutory cap for aircraft from ten years to three years and the reintroduction of the investment allowance for aircraft assets. This would support future fleet growth and put Australian airlines on a level playing field with regional competitors.

PROVIDE APPROPRIATE FUNDING FOR FEDERAL NATIONAL PARKS Australia is noted the world over for its clean, green environment. From the Great Barrier Reef to the Great Ocean Road, and from the Australian Alps to Kakadu, our national parks and natural estate are world-renowned. Tourism activities can help achieve conservation goals by growing awareness of the unique challenges facing many of these areas and by developing sustainable revenue streams to help cover the cost of park management and maintenance, as well as paying for visitor infrastructure including signage, walking trails and interpretative centres. Parks Australia’s and Tourism Australia’s National Landscapes program is considered industry best-practice in encouraging collaboration between tourism and conservation, providing targeted investment in iconic nature-based experiences. Consistent funding for Parks Australia is required to ensure these areas are appropriately managed and visitor infrastructure is maintained, allowing continued visitor engagement in national parks.

SUPPORT THE CONTINUING GROWTH OF CRUISE SHIPPING THROUGH INFRASTRUCTURE AND POLICIES Cruising is the fastest growing segment of Australia’s tourism industry and that growth is expected to continue over the coming years. The federal government has a role to play in facilitating the continuing growth of Australia’s cruise sector, especially through funding the provision of port facilities and allowing access to berths controlled by national agencies, including the naval base at Garden Island in Sydney. This access is critical as a third of all cruise ships visiting Sydney will be unable to fit under the Sydney Harbour Bridge within three years and that figure is expected to rise to 56 per cent by 2020.

MAINTAIN RESEARCH TO SUPPORT INVESTMENT DECISIONS Data is critical to allowing the Australian tourism industry to make investment decisions. A key tool for the tourism sector is the Survey of Tourist Accommodation (STA) conducted by the Australian Bureau of Statistics. This survey provides extremely valuable information on accommodation including occupancy rates, room rates and revenue, as well as a measure of accommodation supply for destinations across Australia. Earlier this year, the ABS announced it was reducing the survey from a quarterly to an annual collection and report to meet budgetary targets. TTF is calling for this very valuable dataset to continue to provide the industry with timely information which forms the basis of decision-making regarding investment in accommodation. TTF is also calling for additional funding to support the industry’s tourism research agenda, enabling Tourism Research Australia and the tourism industry to address the identified gaps in research.

Enhance the visitor experience In the current economic climate and with the dollar remaining higher than average, increasing productivity will be essential if Australia is to improve its international competitiveness and present a compelling value proposition to prospective visitors, both domestic and international. Improving the visitor experience begins at the time intention becomes a decision to travel. From that point on, the process should be as seamless and simple as possible, starting with the visa application right through to departing from Australia.

SIMPLIFY VISA APPLICATIONS While progress is being made to simplify and expedite the visa application process with the move to online visa processing for all countries, there remains room for improvement, including the provision of application forms in other languages. User-pays processing models would provide a faster option for passengers willing to pay a premium, which should extend to preferred customs and immigration clearance on arrival in Australia. TTF also supports the implementation of a more equitable fee structure for visas which better reflects the cost of processing, and a review of charges associated with visitor, student and working holiday maker visas in light of significant increases over the past few years.

IMPROVE BORDER PROCESSING Border formalities are the first impression international travellers have of Australia. It is therefore crucial to ensure that Australia’s border agencies are adequately funded to deliver world-class passenger processing. While the introduction of SmartGate self-serve passport kiosks is removing some of the workload, it remains essential to have sufficient frontline Customs and Immigration staff. TTF is seeking government commitment to invest in passenger facilitation technology and to reinstate Customs funding for front line staff in response to increasing numbers of international visitors.

MAKE TRANS-TASMAN TRAVEL EASIER A domestic-like travel experience would encourage more visits by New Zealanders. As a first step, TTF is calling for the Passenger Movement Charge for visitors from New Zealand to be cut to $25. TTF believes a streamlining of border formalities at existing international airports should be coupled with developing a new model for regional airports. Together, these reforms will stimulate demand for travel and improve the dispersal of New Zealand visitors. With Australia and New Zealand to co-host the Cricket World Cup in 2015, TTF is calling on governments to recognise the tourism potential of this significant sporting event and to work with the New Zealand government to create a common special event visa that will give visitors the flexibility to travel to both countries.

SUPPORT AGENCIES WORKING TO GROW VISITATION FROM ASIA It is vital that Tourism Australia’s expansion into Asia, especially into secondary cities in China, is supported by investment in other agencies that facilitate travel to Australia. With the visa application process an integral part of the travel experience, it is essential that sufficient resources are allocated to match increased marketing activity and travel demand and ensure approvals are granted promptly.

SUPPORT NATIONAL CULTURAL INSTITUTIONS Our national cultural institutions draw hundreds of thousands of visitors each year, making a vital contribution to the cultural fabric of the country. It is essential that these assets continue to be supported to ensure Australia’s cultural tourism experiences remain attractive and globally competitive.

Image: NT; Alice Springs. Copyright Tourism Australia/Tourism NT. Photographer: Steve Strike

4 Improve the competitiveness of Australian tourism Tourism is a global industry and many other countries are recognising the potential of the sector to create jobs and economic activity. In the face of growing competition, Australia must act to improve our competitiveness. Regulatory reform is required to remove barriers to investment and travel, as well as providing the right framework to foster investment in accommodation, attractions and other visitor infrastructure.

FREEZE AND REVIEW THE PASSENGER MOVEMENT CHARGE Australiaâ&#x20AC;&#x2122;s Passenger Movement Charge (PMC) is the highest departure tax for short-haul travellers of any country in the developed world, which put the country at a disadvantage relative to our regional rivals. Introduced as a cost recovery levy, the PMC now significantly overcollects relative to the cost of providing passenger facilitation services. TTF believes a full Productivity Commission review of the PMC is required to assess its impact on the competitiveness of tourism. TTF is also calling for a bipartisan pre-election commitment to freeze the PMC. In addition, TTF call on the parties to reduce the PMC to $25 for trans-Tasman travel by Australians and New Zealanders.

STOP UNFAIRLY TAXING TOURISM In addition to PMC increases, tourism has been hit with a number of new taxes and charges, among them the proposed airport police tax and visa fee increases, including an almost 30 per cent hike in the cost of a Working Holiday Maker visa. Factor in the impact of the carbon tax on this trade-exposed sector, and the sector has been hit with a disproportionate increase in taxes and charges. These extra costs only serve to make Australia a less competitive travel destination. TTF is calling for a comprehensive review of tourism taxes and charges. We are also seeking commitments that no new tourism taxes will be introduced.

REFORM THE TOURIST REFUND SCHEME TO ENCOURAGE RETAIL SPENDING Australiaâ&#x20AC;&#x2122;s competitiveness can be improved through enhancement of the Tourist Refund Scheme (TRS), which allows international visitors to claim back the GST on some retail purchases. However, a lack of awareness and restrictions around the scheme mean it is under-utilised by international visitors. Reform of the TRS could improve value for international tourists, for many of whom shopping is a key travel activity. Contracting the TRS out to a private operator, improving awareness of the scheme and access to it, would increase its usage and add to expenditure in the visitor economy.

Image (top): Skyline, Gold Coast, Qld. Copyright Gold Coast Tourism Corporation. Image (above): Shopping at Centre Place. Photographer: Robyn Lea

5 Expand the tourism workforce Government figures show around 36,000 job vacancies in tourism and hospitality across Australia, with that number set to grow to 56,000 by 2015. Despite the significant investment many tourism businesses make in training, many struggle to find staff and also have trouble retaining them, while others are hamstrung by a workplace relations regime which does not recognise the 24/7 nature of tourism and the visitor economy. The challenge of finding and retaining the right staff has a negative impact on the ability of businesses to offer an appropriate level of service.

REVIEW PENALTY RATES Some tourism and hospitality businesses choose not to open on Sundays, because their labour costs are simply too high. In conjunction with organisations including the Accommodation Association of Australia, Restaurant & Catering Australia and Tourism Accommodation Australia, TTF is seeking support for a Fair Work Australia review of workplace arrangements as they apply to tourism and hospitality operators, particularly penalty rates, to allow the establishment of an effective system of workplace regulation for tourism and hospitality.

REFORM AND EXPAND THE WORKING HOLIDAY MAKER SCHEME Working holiday makers (WHM) provide a flexible workforce for tourism businesses, especially the many seasonal operators in regional areas. Since 2005, a second-year extension of the WHM visa has been available for some individuals who, in their first year, undertake three months of work with a regional employer in the agriculture, mining and construction industries, among others. TTF believes WHM visa holders who spend three months or more working in regional tourism and hospitality businesses should also be able to apply for a second-year WHM visa. This would boost the labour supply of these regions and improve their competitiveness. In line with the focus of Tourism Australiaâ&#x20AC;&#x2122;s expanded activities in Asia and aligned with the federal governments efforts to engage more broadly with Asia, TTF recommends the expansion of the WHM scheme to include China, India, Vietnam and the Philippines. The scheme should also include our other key international growth markets, and current caps on countries like Indonesia and Malaysia should be lifted. In addition, TTF believes that the requirement for such arrangements to be reciprocal is unnecessarily restrictive. The scheme can also be improved by raising or removing age limits to allow older workers with valuable skills and experience to come to Australia and lifting the 6-month cap on employment, recognising the significant investment in training required before new employees are job-ready.

EXPAND THE SEASONAL WORKER SCHEME The highly seasonal nature of the visitor economy in many regional areas creates significant challenges for businesses, which face an often desperate need for staff during peak periods. This problem has been heightened by demands from the resources sector. For example, the challenges faced by Queensland island resorts and Australiaâ&#x20AC;&#x2122;s North in attracting seasonal staff have been a key factor in the financial problems confronting these regions. While limited pilot programs are underway, further effort and resourcing are needed to develop these programs for the tourism industry.

REVIEW SKILLED MIGRATION The tourism industry requires staff with specific skills which are, at times, in short supply in Australia. Therefore, TTF is urging that consideration be given to reinstating chefs and cooks to the skilled occupation lists to ensure the adequate supply of appropriately trained staff. In addition, 457 visas are used by tourism and hospitality businesses unable to find suitable staff within Australia. Making the application process for 457 visas less onerous would see a greater take up rate among small to medium enterprises which could derive significant benefit from such a scheme. The tourism industry supports the 457 visa regime and is opposed to amendments which would add further burden to tourism businesses. 11

Cover Image: Vic; Great Ocean Road; Twelve Apostles Tourism Australia Copyright Photographer: Richard Powers

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