Can domestic tourism save holiday towns?

Domestic tourism is seen as the poor cousin to international overseas arrivals, but with borders likely to remain at least partially closed due to COVID-19, many countries have turned to locals to bridge the gap. Will staycations be enough to keep tourist-focused economies turning?

It took just minutes for the seats to sell out on two Singapore Airlines A380s on a recent weekend — but it wasn’t for a flight. Instead, it was a cash-raising exercise in which the airline turned its flagship fleet into a pop-up restaurant.

For just over $470, you could have a meal in a private cabin, and people also snapped up the chance eat off their knees in an economy seat for just $40.  For those who want their plane food without the plane, the airline will even deliver some of its signature first-class meals to your front door.

But with Singapore Airlines posting a billion-dollar loss in the first quarter, these kinds of initiatives will do little to forestall the worst ever year for international travel.

Last year an estimated 4.5 billion air tickets were sold. This year that number is expected to halve.

In October, the European Vice President of the International Air Transport Association warned the sector is “burning through cash at the rate of $300,000 a minute in the second half of 2020.”

Across the world, planes have been grounded, cruise ships moored in floating graveyards, and hotel rooms stand empty.

The World Tourism Organization, a UN agency committed to responsible, sustainable and universally accessible tourism, shows a 70 per cent fall in the year to August in international tourism, better than the 93 per cent collapse recorded in the year to May but still far from a state of recovery. 

Savvas M Klitou, Regional Coordinator at Baker Tilly Klitou and Partners in Cyprus, says international tourism was a pillar of the Cyprus economy and the economic impact of the global pandemic has been severe.

“For the period from January to September 2020, there were just over 500,000 tourist arrivals according to the Cyprus Statistical Service,” he says.

“Compare that with 3.2 million in the corresponding period of 2019 and it’s a decrease of 85 per cent.”

In New Zealand, the absence of visitors is squeezing holiday accommodation providers in terms of revenue but also in other ways, says Matt Shallcrass, Director – Business Advisory Services at Baker Tilly Staples Rodway Christchurch.

“International guests represent around 55 per cent of one client’s business, which is indicative of other South Island businesses I’ve spoken to, from Nelson to Christchurch and further south.

“They’re also struggling to recruit staff to clean and maintain the properties, as they are heavily reliant on international workers for these jobs as well.”

But as border and quarantine controls remain tight in almost every tourism-focused country, governments are beginning to turn to domestic markets to see if increased local travel can prop the sector up while the world waits for a vaccine.

Domestic tourism prevents economic disaster

Tony Maginness, Director, Specialist Services at Baker Tilly Staples Rodway Auckland, says many New Zealanders have also taken the chance to holiday at home.

Domestic travel has provided a little relief to tourist towns, although that is tempered by the feeling that it is not a long term fix.

“We’ve actually had a better winter period than usual with the borders shut because New Zealanders tend to travel overseas during that time,” he says.

“Other places like beaches may be busier over the summer, but only for a few weeks.”

Similarly in Cyprus, people have been taking their holidays at home.

“In the case of Cyprus, which has a population of 750,000 compared to an annual tourist arrival of over 3 million, there was never the expectation that the gap could be bridged from local tourism,” says Mr Klitou.

“However, during the year through various government plans, Cypriots were encouraged to take discounted local holidays, which has helped marginally reduce the losses made by the tourist sector.”

While often considered the poor cousin in tourism, the domestic travel market far outweighs the international one.

The UNWTO estimates there are 9 billion domestic tourist trips annually, making the market six times that of international tourism, and contributing to 75 per cent of total tourism expenditure in OECD countries.

For countries like India, the US, Brazil, and Spain, domestic tourism is by far the dominant form of travel.

For every one international tourist trip in India, there are 109 domestic trips. In Brazil, the ratio of domestic to inbound travel is 38 to one. Citizens of the US make the most domestic trips her capita (more than 5 a year) while Australia is not far behind with 4 trips a year.

China has been pushing its domestic tourism sector strongly in recent months, culminating in the eight-day holiday that covers Golden Week and mid-August Festival in October.

In the first four days of the break, State media agency Xinhua said 425 million domestic tourists travelled to different sites around the country, with total tourism revenue reaching 312 billion yuan or USD $46 billion.

In Cyrpus, some interesting insights for accommodation operators were uncovered with the influx of local holidaymakers, compared to the spending habits of overseas arrivals.  

“The main difference related to locals is that they preferred to book a number of accommodations in different parts of the island, but with smaller number of nights in each compared to a foreign tourist,” Mr Klitou says.

“Moreover, it was evident that the net spend from local tourists was higher compared to foreign tourists.”

Can domestic travel continue to cover the loss of international visitors?

Queenstown, New Zealand’s adventure tourism capital that usually welcomes as many as 2 million visitors a year, has seen more domestic visitors that it usually does, partly offsetting the border closures.

But Donald Jackson, Managing Partner – McCulloch & Partners in Queenstown, says while some operators have been able to survive, the situation will quickly become dire without international travel.

Despite talk of vaccines and travel bubbles, businesses and tourism operators are not feeling optimistic.

“The sentiment around here is that people can’t see improvement happening in the next 12 months,” he says.

“While the original predictions of doom didn’t quite eventuate to the extent that was forecast, there will be no easy recovery.

“Although our air connections with Auckland and weekend events have been a lifeline, once schools go back in January it’s hard to see the momentum being maintained.

“Most New Zealanders only get four weeks’ leave per year, and how many times will people visit Queenstown per year?”

Mr Shallcrass says local visitors cannot compensate for the loss of international tourism.

“Hospitality clients are having to cut costs because New Zealanders are shopping around, having more choice than when they’re competing against international tourists,” he says.

“There’s not the forward booking you’d get with international tourists either, so accommodation providers are finding it hard to plan. Many domestic tourists are just booking at the last minute, calling on Friday to book accommodation for the weekend.”

A travel bubble with Australia and some Pacific islands remains New Zealand’s best hope to restart the flow of international visitors.

New Zealand has committed to a trans-Tasman travel bubble with Australia early next year, days after announcing a plan for quarantine-free travel with the Cook Islands.

John Brazzale, national chairman at Pitcher Partners, says Australian hospitality and tourism businesses would gladly welcome more New Zealand tourists, who made up more than one million of the 6.7 million visitors to Australia in 2019-20.

“The pandemic was another blow to tourism operators in regional areas of Victoria in particular, coming so soon after a horrendous bushfire season,” he says, referring to the Black Summer bushfires that killed 34 people and burnt 18.6 million hectares of land.

“Operators were already reporting cancellations well before the virus became a recognised threat and another crisis so soon after robbed those areas of much-needed tourism dollars.”

Domestic tourism has been gaining strength in Australia since the middle of the year and it is expected to increase after the recent reopening of internal borders as Victoria’s second wave of COVID-19 was supressed.

But, like New Zealand and Cyprus, Mr Brazzale says local visitors tend to spend less than international tourists.

Putting the Recovery and Resilience fund to work

Tourist season has concluded in Cyprus for 2020, with all resorts now closed for the winter season, and preparations are underway for the new tourist season beginning in April 2021.

Mr Klitou says there is optimism that international visitors will start to return, paving the way for a strong rebound in coming years.

“The focus of the Cyprus Ministry of Tourism has turned to the battle for tourism in 2021,” he says.

“There is hope that the war against the pandemic will be won with a new vaccine and many more people will be seeking a Cyprus holiday next summer.

“Actions have been brought forward so that the island can benefit when the tourism sector recovers fully in 2022 and 2023.”

Mr Klitou says a €1.25 billion has been made available to Cyprus under the European Commission’s Recovery and Resilience fund to improve digital capacity.

“It has been crucial in helping to direct resources to render member countries ‘greener’ and more digitised,” he says.

“The pace of travel and tourism service digitalization is being rapidly accelerated during the pandemic. Different online platforms for payment services and marketing have risen as consumers are avoiding person-to-person contact.

“Moreover, tourists rely on online platforms to receive health and safety standards for each destination. Digital technology will also be necessary for providing more efficient and touchless solutions at airports and other public spaces.

“With the trend for remote working being here to stay a new breed of traveller is being created who can enjoy working from vacation destinations.”