Winter, 1998 -
The current Asian financial crisis has undoubtedly impacted tourism
and tourism related investment in Australia. Outbound tourism from Asia
is expected to fall due to low consumer confidence and much higher prices
in local currencies for tourism outside the region. While Australia may
maintain its share of outbound Asian tourism, it seems clear that growth
in the number of arrivals will be affected. Fortunately, Australia's domestic
policy settings are in good shape, inflation is low, the financial system
is robust and Australian governments are not running large budget deficits
While the Asian financial crises may have an impact on visitor arrivals from the countries most affected, their relative impact on yield will be substantially less than if there was a serious decline in arrivals from North America and Europe. Asian visitors tend to stay, on average, a shorter length of time and have relatively lower expenditure levels. International visitors generate 25 percent of Australia's tourism income. Asian markets, including Japan, currently comprise approximately 50 percent of inbound visitor arrivals to Australia. These markets have experienced the strongest growth, when compared with Australia's other inbound markets, over the last ten years, of approximately 10 percent per annum. Recent monthly inbound visitor arrival statistics suggest that growth in most Asian visitor arrivals has slowed significantly and in some markets declined, following the Asian financial crisis. At the same time, there is concern that Australia's domestic tourism market, which accounts for 75 percent of total tourism travel, may decline due to the expected boom in outbound tourism from Australia attracted by very low prices in Asia.
The Asian financial crisis however, has undermined the value of the Australian currency with a devaluation from US74c in October 1997 to US66c in December, 1997. If the Australian dollar continues to decline, relative price competitiveness may improve, thereby underpinning the performance of the nation's tourism industry.
Meanwhile, investors have withdrawn funds from tourism related stocks with the Tourism and Leisure Index falling 28 percent since June 6, while the All Ordinaries Index has only slid 6 percent. Several analysts believe tourism related stocks have been unfairly discounted because of an institutional market perception rather than a real decline in the value of the companies assets. The concern from the investor market in Australia is more of uncertainty of the depth of the Asian financial crises and the degree to which the crises may impact Australia's tourism industry in the future. In the month of December, for example, the Tourism and Leisure Index showed signs of improvement with a 4.5 percent increase in the price of stocks, indicating a market adjustment to the over-reaction experienced post the Asian crash.
In the face of financial market uncertainty and investor jitters, several
pending hotel and tourism related floats have been postponed or shelved
following the Asian market crash. These include:
• Singapore listed company Hai Sun Hup Limited has shelved their $500 million float of the Stamford Hotels portfolio in Australia which was planned for the end of this year.
• DC International withdrew from the stock market the Galileo Hotel float which included funding for its $134 million Wales House Hotel redevelopment in Sydney.
Conversely, several companies proceeded with their acquisitions and
floats despite the current market uncertainty:
• Sundowner Group proceeded with the listing of its hotel trust which was inclusive of 24 three and four star motels worth $56.2 million. However, it has traded below the initial listing price.