PEST Tourism Environment Grade 7 PDF

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BSB108 ABSBAssessment 1: PEST AnalysisPlease ensure you have read the instruction in the Assessment 1 folderSTUDENT NAME: Benjamin FarrellSTUDENT NUMBER: 110679ABSTRACT ( approximately 200 words) :This report will analyse a variety of political, economic, social, and technological megatrends to asse...

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BSB108 Assessment 1: PEST Analysis Please ensure you have read the instruction in the Assessment 1 folder

STUDENT NAME: Benjamin Farrell

STUDENT NUMBER: 110679

ABSTRACT (approximately 200 words):

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This report will analyse a variety of political, economic, social, and technological megatrends to assess the current and future business environment of the tourism sector. In addition, macroeconomic indicators will be used to assess the effect of the COVID-19 pandemic and the future potential for the sector’s recovery. Property rights, the federal operations of tourism in Australia, the governing bodies responsible for the stability of the business environment and developing political movements will be analysed. Macroeconomic indicators and growth rates will be used to economically analyse the tourism business environment. The effect of COVID-19 on the GDP and workforce will be used in conjunction with social megatrends to understand the future of the tourism sector. Current and future technological disrupters will provide insight on the changing business environment and the potential for significant change.

Political

The Australian political environment favours citizen’s ability to own and utilise property for economic benefit. The strength of a country’s property and legal rights is indicated in their property rights score. (The World Bank, 2021).

Figure 1: Line Graph shows property rights score for respective countries in 2018. (The World Bank, 2021)

In 2020 Australia held a property rights score of 82, this places them in the upper echelon alongside other first world countries such as France and the United Kingdom (Global Property Guide, 2020). This score demonstrates Australia’s strong property rights and the integrity to which they are upheld. This indicates the political stability of the nation therefore, the likelihood of disruptive policy change that will affect the tourism sector is low.

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The Australian Tourism sector operates at a federal and state/territory level. Tourism Australia is a federal organisation responsible for international advertising, consumer research, business development and investment, and several other key markets (Tourism Australia, 2020). State organisations target interstate travellers primarily through marketing and destination development (Tourism Australia, 2019). Australian Regional Tourism LTD is a government partner that represents regional tourism organisations; key contributors to the sector (Australian Regional Tourism , 2021). There are a large number of government and private organisations that manage the tourism sector, this is beneficial to the business environment as it gives tourism businesses a variety of options to seek funding or advice. The financial stability of Australia is a key influence of the tourism sector. The Reserve Bank of Australia (RBA) plays a key role in maintaining the country’s financial system. The cash rate set by the RBA determines the interest rate set by the banks (Your Future First, 2019). Changes to the cash rate can influence the Australian dollar, an increase may negatively affect the international tourism industry as foreign currency will hold less value. The cash rate will also affect the variable loan rate which could negatively or positively effect debt funded business depending on the change. As a result, businesses in the tourism sector are influenced by the policies and actions of the RBA. The Australian Tourism sector is being shaped by the recognition of Indigenous Cultural and Intellectual Property (ICIP). Political push has resulted in more organisations adopting ICIP rights, this is key to increasing Indigenous participation in the tourism sector as integrity and authenticity are maintained (Australian Heritage Commision, 2005). Indigenous culture is a key point of difference for

Political

Australia in the global tourism market, therefore Indigenous participation is essential for growth (Tourism Research Australia, 2017). International tourists participating in Indigenous tourism activities increased over 40% between 2013 and 2017, this accounted for over 17% of international tourism expenditure (Tourism Research Australia, 2017). Further growth in this niche is to be expected as more organisations adopt ICIP.

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Geopolitical factors have a significant effect on the business environment of the tourism sector. China is the most important inbound tourism market for Australia (AusTrade, 2021). Due to the importance of the Chinese market it is essential that the political relationship between Australia and China remains healthy, as a decrease in Chinese tourists could cripple the industry. Estimates show Chinese tourism market in Australia will exceed $26 billion by 2027, a 250% increase from 2017 (AusTrade, 2021). With recent geopolitical tensions arising from the COVID-19 pandemic the China-Australia relationship has weakened, as a result the business environment in the tourism sector faces future uncertainty as further political conflict may result in policy that will disrupt inbound Chinese tourists.

Economic

The health of the Australian macroeconomic environment can be measured with three primary indicators: gross domestic product (GDP), unemployment, and inflation. Australia’s GDP grew 3.1% in Q3 2020/2021 on Q2 GDP (Trading Economics, 2021). Inflation increased 0.9% on Q2 results with unemployment decreasing 1% (Trading Economics, 2021). These key macroeconomic indicators demonstrate that the Australian business environment is in the expansion stage of the business cycle as GDP and inflation are increasing while unemployment is decreasing. COVID-19 has been a key factor influencing these macroeconomic trends. GDP annual growth rate is at -1.1% as the market is yet to completely recover from the recession caused by the pandemic (Trading Economics, 2021). One factor that has played a role in the increased GDP is increased worker productivity as more employees move back to full time work. As employees move to a full time schedule they generate more income for themselves, spending this income on a broader range of products from different industries, thus increasing GDP. As spending increases inflation will increase as more disposable income is available allowing companies to increase prices of goods (Investopedia, 2020). Higher disposable income will also result in a drop in unemployment as businesses look to take on more staff to respond to higher sales and busier stores. In 2018/2019 tourism in Australia contributed to 3.1% of GDP, this number fell to 2.5% 19/20 (Tourism Research Australia, 2020). Direct tourism employed 621,000 people in 19/20 which accounts for 4.8% of the workforce even after a 6.6% decrease in tourism employment (Tourism Research Australia, 2020). The decrease in employment and GDP contribution in the tourism industry is directly related to the coronavirus pandemic as it has restricted all international travel for over a year and prevented inter and intra state travel for approximately 6 months. Dramatic decline in the tourism sector contributed significantly to Australia’s recession as the Covid-19 pandemic essentially cut an entire key industry from GDP contribution for several months.

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Figure 2: Visitor spend in Australia 18/19 vs 19/20 (Tourism Research Australia, 2020)

Figure 2 gives a good indication on the dramatic decline in tourism revenue caused by the Covid-19 pandemic. With the first national lockdown occurring in mid-March we can see a subtle decline in tourism spending followed by a dramatic decrease of approximately 75% for the June quarter compared to the same timeframe a year earlier. In 19/20 total tourism consumption dropped 19% on the previous year, with international travel unlikely to rebound for at least another year the Australian domestic market will play a critical role in the sectors recovery (Tourism Research Australia, 2020).

Economic

Figure 3: Monthly hours worked in all jobs, seasonally adjusted (ABS, 2021)

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There are a variety of factors that can distort macroeconomic indicators. Unemployment has decreased 1% in Q3 20/21, but it is important to consider the type of employment influencing the change (ABS, 2021). 20,800 people lost their full-time employment in March where part-time employment saw an increase of 91,500 people (ABS, 2021). The overall part-time employment share has increased to 32.1%, a 0.4pt increase from March 2020, as a result unemployment is down considerably (ABS, 2021). Whilst full-time employment is preferred for economic stability the increase in part-time employment is not necessarily bad, in fact total worked hours have hit 1800 million across the country; a 1.2% increase on the year that places the nation at an all-time high – shown in figure 3 (ABS, 2021). This is a positive indicator to the current macroeconomic conditions as more people are working for longer than pre-COVID levels, thus reenforcing the expansion stage of the business cycle shown by the macroeconomic indicators.

Social

One of the key social megatrends that will affect the Australian workforce in the coming decades is its ageing population. 1 in 7 people in Australia are aged 65 and over (AIHW, 2018). This number is expected to increase 139% by 2030 with 1 in 5 Australians over 65 (Department of Health, 2008). In the modern era an Australian man aged 65 can expect to live at least another 20 years, 7 years longer than a man the same age living in the mid-1960s (Department of Health, 2008). As a result of increased life expectancy, it is predicted that the population aged 85 and over will increase 2.3% in the next 30 years as shown in figure 4 (AIHW, 2014). The ageing population will have a significant effect on the Australian economy as it will place more financial pressure on key government services such as pension and health care. GDP growth is also expected to slow due to a reduced workforce as a higher proportion of citizens will be retired (Pettinger, 2019).

Figure 4: Number and proportion of older people, 2013-2053 (AIHW, 2014)

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Maintaining a strong workforce is key to Australia’s future success therefore population growth is essential. One worrying trend is declining fertility rates across the nation. In 2019 Australia recorded 1.66 babies per female (ABS, 2019). Figure 5 illustrates the 2019 fertility rate is the lowest on record.

Figure 5: Total fertility rate, 1935-2019 (ABS, 2019), citations (Capuano, 2020)

Social

A drop in fertility rates will exacerbate the effect of the ageing population. The population replacement rate is approximately 2.1, it may take a generation for the effects to be felt but at 1.66 Australia can expect a declining population with a larger proportion of the population being older people (Capuano, 2020). Another key social trend that will affect Australia’s future business environment is immigration. As of 2019, 29.7% of the population was born overseas (ABS, 2019). This is a 3% increase from a decade prior – shown in table 1 – including a 239,600-person population increase due to overseas migration in 2019 (ABS, 2019).

Table 1: Percentage of Australia’s population born overseas (ABS, 2019)

Despite growing immigrant population rates in the last decade, the Australian net migration rate is expected to decrease approximately 25% by the year 2050 (UN, 2019). This is due to a fewer number of immigrants and a larger number of Australian emigrants. In essence, Australia will no longer be able to rely on immigrants in the workforce to balance their ageing population.

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Declining immigration and fertility rates will emphasise the effects of Australia’s ageing population, the government has thus pushed new policies to boost female participation in the workforce. In 2014 Australia committed to decreasing the gender workforce participation gap 25% by the year 2025 (DPMC, 2017). The success of this goal would directly contribute $25 billion to the GDP and increase per annum growth by 0.4% solely through increased female participation (DPMC, 2018). This goal is on track to be achieved, with 90,000 more women than men joining the labour force in 15/16 (DPMC, 2018). Each of these trends will directly impact the Tourism sector’s business environment due its reliance on labour. Tourism indirectly and directly employs approximately 925,000 people which accounts for 8.1% of the labour force (Tourism Research Australia, 2020). The sector only accounts for 3.1% of the GDP, therefore it requires 2.6% of Australia’s labour force for every 1% of GDP contribution. Consequently, social megatrends effecting the labour force such as ageing population, lower immigration, and declining fertility rates will disproportionally affect the tourism sector. Furthermore, 54% of the sectors labour force is comprised of women (Tourism Research Australia, 2020). The future push for increased female participation in the workforce will result in the majority of new workers to be female, this will benefit the Tourism business environment as women take up a majority of positions in the sector.

Technology

Technological disruption will play a large part in shaping the future business environment. One of the largest disruptors affecting the tourism sector is social media. An excess of 3.6 billion people use social media as of 2020, this number is projected to increase to 4.4 billion by 2025 (Tankovska, 2021). Social media’s influence on travel decisions has developed significantly over time. 75% of tourists use social media while travelling, with 36% reporting social media had a direct influence on their decision making while on holiday (Deloitte, 2019).

Figure 6: Influence of social media on domestic tourism decisions (Deloitte, 2019)

The use of social media will only grow as younger generations transition to an internet presence. Social media will pose a challenge to some destinations as they may not live up to the expectations presented online, however, numerous opportunities are open to revolutionise the sector. TripAdvisor is an online booking company that utilises social media pathways to generate business in the tourism sector. Generating over $1.5 billion in revenue in 2019, the company provides an indication of the possibilities that can be achieved in the tourism business environment through exploitation of social media (Statista, 2020). Technological development has paved the way for the growing success of the sharing economy. The sharing economy was worth over $26 billion in 2016 and an estimated two-thirds of the population were partaking (IPA, 2016). It has experienced high growth since that time and has no doubt been a key influence on the current business environment (IPA, 2016). The sharing economy plays a key role in the tourism sector providing accommodation and transport to travellers; traditionally these services were provided by travel agents. In 2019, 49% of travellers reported using at least one sharing economy service during their holiday – shown in figure 7 (Deloitte, 2019).

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Further integration of the sharing economy in the tourism sector as planning a holiday can be done with more ease. This can be beneficial to the tourism business environment as it can allow travellers more spontaneity regarding shorter trips and open new destination possibilities.

Figure 7: Use of sharing economy platforms among domestic travellers (Deloitte, 2019)

Technology

Automation will play a primary role in shaping the future business environment. The most significant change will be to low-skilled jobs (Ivanov, 2020). The tourism labour force is majority unskilled labour, these jobs are most at risk to be automated (Tourism Research Australia, 2020). Automation can increase the economic efficiency of the tourism sector through hotel bookings, service enhancements, and even room service (Ivanov, 2020). Automation of simple tasks will drive change in the tourism labour force, favouring skilled workers and allowing further specialisation.

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Technological disruption of the tourism business environment has only just begun. Whilst the accommodation and aviation sectors have recently been transformed, whereas entertainment, shopping, and touring sectors still have large opportunity for improvement in the coming years.

References

References ABS, 2019. Births, Australia. [Online] Available at: https://www.abs.gov.au/statistics/people/population/births-australia/latest-release [Accessed 20 04 2021]. ABS, 2019. Migration, Australia. [Online] Available at: https://www.abs.gov.au/statistics/people/population/migration-australia/latestrelease#:~:text=There%20were%20over%207.5%20million,2.9%25%20from%20the%20previous%20 year. [Accessed 20 04 2021]. ABS, 2021. Labour Force, Australia. [Online] Available at: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labourforce-australia/latest-release [Accessed 20 04 2021]. AIHW, 2014. Ageing and the health system:, Canberra: Australian Institue of Health and Welfare. AIHW, 2018. Older Australia at a Glance. [Online] Available at: https://www.aihw.gov.au/reports/older-people/older-australia-at-aglance/contents/demographics-of-older-australians [Accessed 20 04 2021]. AusTrade, 2021. Approved Destination Status (ADS) scheme. [Online] Available at: https://www.austrade.gov.au/australian/tourism/working-with-china/ads [Accessed 19 04 2021]. AusTrade, 2021. Working with China. [Online] Available at: https://www.austrade.gov.au/australian/tourism/working-with-china [Accessed 19 04 2021].

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Australian Heritage Commision, 2005. Successful Tourism at Heritage Places. [Online] Available at: https://www.ecotourism.org.au/assets/Resources-Hub-Indigenous-Tourism/SuccessfulTourism-at-Heritage-Places.pdf [Accessed 19 04 2021]. Australian Regional Tourism , 2021. About Us. [Online] Available at: https://regionaltourism.com.au/ [Accessed 19 04 2021]. Capuano, G., 2020. Australia’s birth rate falls to the lowest in a century. [Online] Available at: https://blog.id.com.au/2020/population/population-trends/australias-birth-rate-fallsto-the-lowest-in-acentury/#:~:text=In%202019%2C%20Australia's%20birth%20rate,the%20most%20important%20de mographic%20indicators. [Accessed 20 04 2021]. Deloitte, 2019. Technology disruptors in Tourism, Canberra: Austrade.

References

Department of Health, 2008. Trends in population ageing. [Online] Available at: https://www1.health.gov.au/internet/publications/publishing.nsf/Content/work-resruraud-toc~work-res-ruraud-2~work-res-ruraud-2-5~work-res-ruraud-2-52#:~:text=Between%202000%20and%202030%2C%20the,population%20or%205.7%20million%20pe ople. [Accessed 20 04 2021]. Department of Industry, 2020. Deregulation agenda. [Online] Available at: https://www.industry.gov.au/about-us/deregulation-agenda [Accessed 19 04 2021]. Douglas, J., n.d. Deregulation in Australia, s.l.: s.n. DPMC, 2017. WOMEN'S WORKFORCE PARTICIPATION. [Online] Available at: https://www.pmc.gov.au/office-women/economic-security/womens-workforceparticipation [Accessed 20 04 2021]. DPMC, 2018. Women's workforce participation - an economic priority. [Online] Available at: https://womensworkforceparticipation.pmc.gov.au/womens-workforce-participationeconomicpriority.html#:~:text=Women's%20workforce%20participation%20is%20at,are%20in%20the%20labo ur%20force.&text=G20%20target%20%2D%20closing%20the%20gap,track%20for%20our%20 [Accessed 20 04 2021]. Global Property Guide, 2020. Property Rights Index in Australia compared to Pacific. [Online] Available at: https://www.globalpropertyguide.com/Pacific/Australia/property-rights-index [Accessed 19 04 2021].

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Investopedia, 2020. What Causes Inflation and Who Profits From It?. [Online] Available at: https:/...