One of the significant concerns about international border closures has been the effect lost tourism revenues would have on local economies, including the retail industry. In every state of Australia, shopping centre operators and the government have created retail infrastructure to cater to tourists that include not only physical retail stores and shopping centres, but also marketing machinery, travel agents, transportation and more. The impact of border closures is felt even more deeply in oth
other countries such as heavily tourist-dependent Asia, where borders are taking a long time to reopen. The loss is proving to be worse than first anticipated. It appears international tourism may well be near zero for the remainder of the year and even well into 2021. As a result, in the top 10 most visited Asian cities by international tourists, the gap in retailer revenues will be pushing up toward an estimated US$50 billion in 2020 alone. We can also quantify the effects on Australia. The losses to national retailers, which have flowed through to their landlords in terms of lost rental income, are a function both of absolute visitor numbers and the countries from which they are visiting since different traveller demographics have different shopping propensities. According to data from Tourism Research Australia in 2019, total visitor spending on shopping in Australia, which includes business travellers, amounted to an estimated A$40.3 billion in 2019, or 12.2 per cent of total retail sales. Domestic travel was a far more significant contributor to retail than international tourism overall, with domestic travellers spending an estimated A$28.1 billion, or 8.5 per cent of total retail sales, compared with A$12.1 billion, or 3.7 per cent, for international visitors. In other words, domestic travellers outspend international visitors by more than two to one. Even though Australia has world-class shopping centres and high-profile global brands, shopping is not a strong reason for international tourists to visit, which these headline numbers reflect. While shopping is one of the key reasons for visiting cities such as New York, Tokyo and Dubai, those who make landfall in Australia in Sydney or Melbourne are not usually similarly motivated. That isn’t to knock Australian retailers or shopping centres but is just a simple recognition of the fact that Australia has myriad natural attractions to offer tourists that take priority. By a long way, the biggest overseas spenders in Australia are from China. Travellers parted with an estimated A$3.6 billion, or 28 per cent of the international visitor total in 2019. Note, however, that these numbers are skewed upward by the large number of Chinese international students who in non-coronavirus years are studying at Australian tertiary institutions. A key feature of visitors from China is that a higher proportion of their retail spending — nearly 50 per cent — is on items other than food and beverage. New Zealand is the most crucial source countries in terms of absolute numbers of visitors to Australia, but in retail spending terms, it is a long second to China. New Zealanders spent approximately A$852 million on retail items, including food and beverages, in Australia in 2019, amounting to 23 per cent of the total attributable to visitors from China. Since the doors slammed shut to international visitors in March and remained closed for the rest of the year, Australian retailers will have foregone circa A$10 billion in sales. However, the collapse of outbound tourism means people have spent money locally instead of overseas. The importance of domestic borders On the surface, it looks as if the cessation of international travel would be a boost to domestic tourism. However, the intermittent closure of state borders has played havoc with domestic tourism too. There were nearly 39 million interstate trips made in 2019, representing about 32 per cent of the total number of domestic trips. Assuming a roughly direct relationship between visitor nights and spending, this implies that interstate travel was worth A$8.7 billion in 2019, which is more than two-thirds of the amount spent by international visitors. Whether interstate or intrastate, the biggest retail beneficiaries of domestic tourism are food and beverage retailers, particularly those in the restaurant and takeaway food business. While international visitors spent, on average, about 40 per cent of their retail dollars on non-food and beverage retail in 2019, Australian domestic travellers spent an average of only 20 per cent at non-food and beverage outlets. Looking forward Unfortunately, the prospect of an early return to some semblance of business-as-usual in terms of tourist spending still seems far off. This means the survival of many retail businesses will be cast into doubt. Many of these businesses are smaller independents that have been hit by the double whammy of border closures and weak consumer confidence. Governments in Australia will continue to spin this as the fault of coronavirus rather than policy. When history is written, the narrative may well be different. Meanwhile, the best we can hope for is for the plight of retailers, and other businesses dependent on the tourism industry, to finally be heard, and for both interstate and limited international travel to be possible again by early next year. Although for many, this will already be too late.