Brexit could impact UK visitor arrivals to Australia

14 October 2016

Brexit will likely lead to a fall in visitor arrivals to Australia from the UK and Europe but is expected to have little impact on visitor arrivals from the USA, China and NZ.

By Janice Wykes, Assistant General Manager, Tourism Research Australia, Austrade

Brexit is expected to have implications for Australia’s tourism industry and inbound tourism in particular, given its potential impact on UK GDP, wages growth and the AUD/GBP exchange rate.

Other issues include the possible flow-on effects to EU GDP and exchange rates, as well as the effect on global growth. These impacts may be exacerbated in the long-term if the terms of the exit are not negotiated and implemented soon.

Tourism is one of Australia’s largest and fastest growing industries.

In 2014-15, tourism directly contributed $47.5 billion to Australia’s GDP (3 per cent of total GDP), employed 580,800 people (5 per cent of total employment) and earned $30.7 billion in export earnings (9.6 per cent of total export receipts). In the year ending June 2016, total visitor expenditure was $116.7 billion, supporting over 270,000 tourism businesses.

The UK is one of Australia’s largest source markets for short-term visitor arrivals. In 2015-16, the UK was our:

  • third largest source market (706,200 visitors or around 9 per cent of total visitors)
  • second largest market for visitor nights (25 million nights  or 10 per cent of total visitor nights)
  • second largest market for total trip spend ($3.8 billion or 10 per cent of total visitor spend).

The EU is also an important source market, with many EU countries featuring in our top 20 source markets.

China is our second largest source market for visitors and our largest in terms of expenditure, while New Zealand and the United States of America round out our top four markets in terms of visitor numbers and visitor spend.

Quick facts:

  • The UK joined the European Economic Community, the predecessor of the EU, in 1973.
  • A 1975 referendum committed the UK to staying in the EEC with 67 per cent of voters agreeing to continue membership.
  • In the recent June 2016 referendum on EU membership, 52 per cent voted to leave, resulting in the complex process of withdrawal to be negotiated.
Last Updated: 14 October 2016

Based on Tourism Research Australia’s inbound demand model, an assessment of the impacts of Brexit on inbound tourism from Australia’s major source markets found that the impacts will likely differ across each market (assuming all other things are equal):

UK

A fall in UK GDP is likely to lead to a relatively significant fall in visitor arrivals to Australia from the UK. Given lag effects, this negative impact is likely to be higher in the long run (up to ten years) as UK residents adjust their travel plans to lower income levels. An appreciation of the AUD against the GBP will also impact negatively, with lower visitation expected in the short run, evening out over the longer-term as people adjust to a lower pound. The lower pound, however, will have a significant impact on UK visitors’ expenditure while in Australia.

Europe

If the flow-on effects of Brexit are negative for EU GDP and the Euro, we can expect to see European visitors to Australia impacted in the same way as UK visitors. The impact on expenditure is likely to be significant (a 10 per cent depreciation of the Euro against the AUD is likely to lead to falls of between 10 per cent and 20 per cent in expenditure).

USA

The impact on the USA market is likely to be mixed. While Brexit may detract from US economic growth, thus dampening disposable income, a strengthening US dollar will motivate more residents to travel overseas, including Australia.

China

While Brexit may detract from China’s domestic economic growth due to further weakening external demand, the lower exchange rates between the Chinese RMB and the Euro and GBP will influence China’s international tourists in favour of European destinations.

NZ

Long-haul destinations may become more attractive under the assumption that Brexit will not derail the economic growth of NZ.

Domestic tourism

The impact of the devaluation of the GBP (and possibly the Euro) against the AUD will make it relatively cheaper for Australians to visit the UK and Europe. While this may affect domestic tourism, it may be counterbalanced by a relative appreciation of other currencies (eg the USD) against the AUD.