Transcript CRC Sustainable Tourism - BEST Education Network

Effects of SARS on the Economic
Contribution of Tourism to
Australia
Larry Dwyer, Peter Forsyth, Ray Spurr
Tough Times
• Australia’s tourism sector is
experiencing a period of almost
unprecedented difficulty and
uncertainty
• Several major negative shocks have
eroded travel confidence since the
start of 2001 and have severely
impacted upon the inbound travel
sector in Australia
Interrelated Factors
 Context of slow economic growth
 September 11
 Ansett Collapse
 the bombings in Kenya, Bali, Jakarta
 SARS
 the Iraq war
 Fears of terrorism generally
Aims of paper
to outline the nature of the SARS
crisis and its effects on global
tourism
to estimate the effects of the crisis on
the Australian economy
 to discuss some lessons that can be
learned by managers of tourism
organisations to help achieve
destination competitive advantage
Effects of SARS
We distinguish the effects of SARS on
 tourism
 transport
 other sectors
 government activity
Tourism
 GDP of the affected Asian economies
estimated to decline by average of 1-1.5 %
 Tourism arrivals fell by 20-25 %, clipping at
least US$85 billion from collective travel
income and a further $15 billion from
corporate income
 potential travellers were fearful of catching
SARS on a plane or in transit at a foreign
airport.
 Occupancy levels in hotels plummeted in the
Asian Pacific region
 countries (eg. NZ) had vigorous tourism
campaigns encouraging residents to travel
domestically
Transportation
 SARS emerged after two years of
unprecedented airline industry losses, and in
association with the Iraq war, led to a 10%
decrease in traffic and a 20% cut in advance
reservations
 Many airlines restructured their routes while
other cut capacity on Pacific or Asian routes
serving certain destinations
 Asian airlines were the hardest hit as a result
of SARS
 Almost all Asian carriers reduced services
Transportation (cont)
 airlines continue to face higher costs
through insurance, security, and other
technology (such as temperature scanning
required for detecting the SARS virus)
 Heavy discounting by airlines
 All major airlines, as well as tour operators,
introduced a flexible cancellation & refund
policy for flights to and from the affected
areas
 following IATA’s appeals for partnership,
some airports rebated their charges
In Australia - - • There was heavy discounting in domestic
tourism
• the SARS effect extended to all tourism
sectors
• Airlines, hoteliers, car rental agencies and
tour operators offered discounts of up to 45
per cent
• Cruise tourism was also affected by SARS
as certain cruise lines transferred their
principal ports from China or Singapore to
Australian ports
Government Response
governments in the Asia Pacific
region made an effort to:
 establish or expand measures to support
tourism's productive structure
 gear promotional actions towards markets,
market segments and products that were
more accessible to the potential demand
 provide incentives to boost domestic and
intra-regional tourism
Effects on Australian Tourism
Flows (Tourism Forecasting
Council)
 travel to Australia was forecast to fall by 5.3
per cent (260,000 visitors) between 2002 and
2003, to around 4.6 million visitors
 Outbound travel was forecast to decrease
by 4.2 per cent in 2003
 Domestic visitor nights were forecast to
increase by 1.9 per cent in 2003. This partly
reflects some expected switching by
residents from outbound tourism to
domestic tourism
Economic Effects on Australia
(results of modelling)
 The 5.3 per cent reduction in forecast inbound tourism
numbers implies a $977 m fall in injected tourism
expenditure. This translates into a reduction of real GDP
of $109.2 m and loss of 2517 jobs
 This is offset to an extent by an estimated reduction of
$817 million in outbound expenditure
 the expenditure foregone by outbound tourists must be
allocated between expenditure on domestic tourism,
purchases of other goods and services, and savings
 under different assumptions about the pattern of such
substituted expenditure
 reduction in Real GDP is $38.98 m to $83.29 m
 reduction in employment is 692 to 1642 jobs
Industry Effects
 Some industries suffered reduced output and
employment as a result of the crisis
 Hotels
 road, rail and air transport
 transport services
 education
 Other industries experienced increased output and
employment
 agriculture, wholesale trade, food and drink, motor
vehicles and communications
 associated with changes in real exchange rates and
real wages as a result of the changes in tourism
flows and associated expenditure
Implications for 2004
In 2004, the additional ‘pent-up’
outbound tourism was estimated to
reduce real GDP in 2004 by between
$7.9 m and $13.1 m
The additional outbound tourism was
also estimated to reduce employment
by 41- 67 jobs
These are negligible relative to the
size of the spending change
Some Lessons
 Pre Crisis
 Awareness of Risk and Importance of Risk
Management
 During the Crisis
 Strategic Destination Management
 Importance of Communication
 Role of Travel Advisories
 Destination Promotion
 Post Crisis
 Restoring Confidence in Tourism
 Importance of Collaboration
 Towards a Sustainable Tourism Industry
Conclusions
 substitution effects must be taken into
account in estimating the impact of some
event or series of events on the economic
contribution of tourism to a destination
 Once substitution effects are accounted for
the net impact of the events may be seen to
be substantially less than might be thought
 Depends on the size of the domestic tourism
sector
Conclusion
Whatever the extent of the negative
economic effects from a particular
crisis, it is in the interest of all
destinations to develop strategies to
deal with crises before, during and
after they occur
In this way, the negative economic
effects can be minimised given
coping mechanisms in place