Supply side implications

The future growth outlook in the tourism industry will require the expansion of basic infrastructure, such as airports, transport routes and hotels, as well as a larger industry labour force. In this section, the state-wide supply side implications of the TFC forecast and industry potential targets are analysed.

4.3.1 Airport capacity

Table 4.1 and Table 4.2 summarise the requirements for aviation capacity for international flights in Queensland airports under the TFC forecasts and industry potential, respectively.

Aviation capacity is defined in terms of aircraft movements, which is the number of times the runway is used for either flying in or out. While international aircraft movements is the focus of this analysis, domestic capacity is also an important consideration (both for domestic visitation and as international tourists often arrive in Queensland from other Australian cities).

Assuming growth in domestic aircraft movements matches that of international growth, the industry potential would mean Brisbane Airport would struggle to meet capacity without delays to services by 2020. However the New Parallel Runway would help to abate this issue through increasing capacity. Works for the NPR are currently expected to commence in 2012, with the runway expected to be operational by 2020. In other regions, the existing capacity in Queensland’s airports appears to be sufficient to meet demand.

Table 4.1: International aircraft movements, Queensland, by airport, TFC forecasts

2010 2015 2018 2020

Brisbane 26,630 32,510 35,820 38,080

Cairns 4,880 7,030 7,920 8,440

Gold Coast 4,430 5,130 5,560 5,850

Queensland total 35,940 44,670 49,300 52,370

Source: Deloitte Access Economics using TRA and BITRE data Note: Numbers may not add up due to rounding

Table 4.2: International aircraft movements, Queensland, by airport, industry potential

2010 2015 2018 2020

Brisbane 26,630 34,190 38,630 41,180

Cairns 4,880 7,350 8,410 8,970

Gold Coast 4,430 5,730 6,560 6,980

Queensland total 35,940 47,260 53,600 57,130

Source: Deloitte Access Economics using TRA and BITRE data Note: Numbers may not add up due to rounding

4.3.2 Hotel capacity

The accommodation sector modelling is undertaken within a framework known as TARDIS (Tourist Accommodation Regional Demand, Investment and Supply). The TARDIS model was developed by the then Access Economics in 1998 for a group of state, territory and Commonwealth tourism agencies and has since been utilised in a range of analyses.

The TARDIS model forecasts accommodation demand as a function of seasons, income growth of source regions (i.e. per capita GDP growth), population growth of source regions and special events (e.g. the Sydney Olympics or SARS). Accommodation supply is defined as the number of room nights establishments are prepared to sell (given the strength of demand, sensitivity of travellers to prices charged, the available number of rooms, competition levels and many other factors).

The model accounts for the simultaneity between supply and demand, which interact to determine quantity and price (i.e. occupancy rate and room rate). As such, TARDIS provides a simultaneous equation model of the hotel accommodation market. Further detail on the technical specifications of the TARDIS framework can be found at Appendix A.

Table 4.3 presents the numbers of rooms required to meet tourist numbers anticipated under the TFC forecast and industry potential. The implied capacity rates are based on an assumption that the annualised number of rooms available remains at 2010 levels i.e.

61,800 rooms state-wide.

The results indicate that, while the state wide TFC forecast visitor numbers could be accommodated with present infrastructure, the industry potential visitor numbers would see hotels state-wide operating at 88% of capacity by 2020. This result would see accommodation supply effectively operating above present-day capacity at times, for two reasons:

 Demand and supply will not be spread evenly over the state, and so this state-wide occupancy rate is likely to imply that occupancy rates are at 100% in some parts of the state, with unmet demand in some areas. This is discussed further in the regional analyses in Chapter 5.

 These figures do not take seasonality into account. In some parts of Queensland demand is highly seasonal, particularly in northern regions where the wet season effectively closes some operations for part of the year. Given these seasonality issues, such a high annual occupancy rate is likely to imply periods of full capacity, with unmet demand.

This seasonality issue is an important question in establishing the effective occupancy rate for hotel accommodation. Broadly speaking, Queensland occupancy rates peak in the September quarter when conditions are pleasant in the northern regions and when business activity is higher for the urban regions (although this may not be the peak period for all tourism regions), and are lowest in the March quarter when business activity is low while the north of the state is facing the wet season.

This variation can be substantial; while Table 4.3 shows the room occupancy rate in Queensland over 2010 as a whole was 62%, on a quarterly basis this rate was as high as 69% in the September quarter. When examined at a greater level of detail (i.e. monthly or even weekday compared with weekend) even more fluctuations may be evident.

Consequently, an 88% implied capacity at 2020 under the industry potential may in fact mean that the state is operating at or above capacity at certain times of the year.

Table 4.3: Hotel accommodation requirements, Queensland

Year Rooms

Source: Deloitte Access Economics using TRA and ABS data

4.3.3 Labour market

Estimates for the prevailing level of tourism employment in Queensland in 2010 have been sourced from TRA (2012). These figures, and the composition industries (e.g. retail trade, transport and storage) from the 2008-09 State Tourism Satellite Accounts, have been used to carve out an estimate of Queensland as a share of total tourism employment.

The TFC forecast for 2020 tourism would require a growth in total tourism employment of 9.3% over 2010 levels, implying a compound annual growth rate of 0.9%. This rate is roughly equivalent to the anticipated rate of growth in total employment over the next decade. By contrast, the industry potential requires a compound annual growth rate of 2.8% in employment, which is a rapid rate of growth (twice the anticipated total labour force growth rate to 2020). This would pose considerable challenges in a low unemployment environment for an industry already reporting issues in finding sufficient staff.

A recent report on tourism labour force prepared by Deloitte Access Economics for the Department of Resources, Energy and Tourism shows that the tourism industry in Queensland currently exhibits a 6% rate of unfilled vacancies, with highest demand pressures observed in Brisbane, Gold Coast and TNQ. A range of factors including industry difficulties attracting and retaining workers, wages and conditions in the tourism industry being less desirable than those in other industries, and generally tight labour markets with low unemployment mean that shortages are forecast to continue, and in some parts of the state to deteriorate out to 2020.

These shortfalls in labour supply are categorised in the report in two separate sections:

 Skilled labour shortages are those that must be met by workers with a specific qualification, and represent the shortfall between demand for a specific qualification and supply of workers with that qualification. It does not necessarily mean that all workers with qualifications attain employment. For example these shortages may mean there is more demand for workers with Certificate III or IV in Cookery than there are workers with that qualification, while there may be individuals with a different qualification unable to find work because there is insufficient demand for workers with that skill.

 ‘Changes in non-skilled labour demand’ refers to changes in demand for workers without a specific tertiary qualification. Due to limitations in the available data, it is too difficult to estimate overall unskilled supply for the labour force. As a result, the demand side only is used to illustrate the change in the level of unskilled labour required (or demanded) to meet the TFC forecasts and industry potential target.

Further detail on the methodology for estimating skills shortages can be found in Appendix B.

A shortfall of 9,450 skilled tourism workers is forecast to 2020 in the state, even under the more conservative TFC forecast. Competition from other industries, particularly the resources sector, is reported to be a major difficulty for retaining workers in this sector.

The occupations or skills with the largest demand are expected to be concentrated in food and beverage service, including kitchen hands, wait staff, chefs and cafe and restaurant managers. Overall, a reversal of the trend of tourism employment declining as a share of total employment in Queensland would be required to meet the tourism labour force demand of the industry potential scenario.

Table 4.4: Tourism labour demand, persons, Queensland

2010 2015 2018 2020

TFC Forecasts

Labour demand 125,000 129,540 133,750 136,600

Accumulated change in skilled labour shortage

- 4,820 7,570 9,450

Accumulated change in non-skilled labour demand

- 10,470 16,610 20,790

Industry Potential

Labour demand 125,000 148,140 161,370 164,990

Accumulated change in skilled labour shortage

- 10,280 16,180 18,470

Accumulated change in non-skilled labour demand

- 20,610 32,910 38,090

Source: Deloitte Access Economics

Note: Numbers may not add up due to rounding