Tourism businesses experienced a decline in conditions through the May quarter and have become less optimistic about the year ahead, the latest VTIC Survey of Tourism Performance and Outlook reveals.
A net 13 per cent of respondents to the survey reported a downturn in general business conditions, with 45 per cent indicating a decline in profitability. This may be linked to wages and labour costs, with 29 per cent of businesses surveyed reporting a rise in average wages and 45 per cent indicating non-wage labour costs had increased. This came despite reported falls in both employment levels and overtime during the quarter. Nine per cent indicated a decline in sales.
Overall, 42 per cent of respondents felt that their business was currently operating satisfactorily, down from 61 per cent in the previous quarter.
Business taxes, government charges and wages costs were rated as a significant or critical constraint by 46 and 44 per cent of respondents respectively, followed by local government regulations and business/consumer confidence. Significantly, less than one-third of respondents viewed exchange rate appreciation as a constraint on business, perhaps an indication that businesses have adapted to the high Australian dollar and accepted this as the new norm.
Similar to the previous quarter, 56 per cent of respondents also felt that insufficient international demand was not a constraint on their business. This reflects the results of the International Visitor Survey for the period ending March 2012, which showed that international overnight visitor estimates to Victoria increased by 5.5 per cent to 1.77 million. The greater concern is the stagnation of the domestic market.
The longer term outlook is less optimistic than in the previous quarter, with just a quarter of respondents expecting generally stronger business performance over the next 12 months (compared with 38 per cent in the February quarter). Meanwhile, 44 per cent of respondents expect a generally weaker performance in the year to come, compared with just 20 per cent of respondents holding this view in the previous quarter.
To see the results of the May quarter VTIC Survey of Tourism Performance and Outlook in full, click here.