The retail sector is benefiting from Australia's growing tourism market

Melbourne, Australia – August 22, 2017: Pedestrians on Little Bourke Street walk past a sign for Caledonian Lane in the Central Business District of Melbourne, Australia

Tourism has been one of Australia’s fastest growing industries. According to ABS data, in financial year 2016-17, tourism overtook coal as Australia’s second most valuable export (behind iron ore). Personal travel (excluding travel for education) was worth over $5.0 billion.

According to industry research organisation IBISWorld, this tourism boom has been a saviour for at least part of the retail sector.

While the majority of retailers have suffered amid rising competition from online players and weak consumer sentiment, IBISWorld notes that Australian luxury retailers have been relatively insulated from this weak retail environment.

“The Luxury Retailing industry has grown at a rapid pace over the past five years, with revenue expected to grow at an annualised 10.2% over the five years through 2017-18, to $2.1 billion,” said IBISWorld Senior Analyst, Kim Do.

She notes that this growth has largely been driven by inbound tourism, particularly from Asian tourists.

IBISWorld anticipates that in 2017-18, approximately 30% of industry revenue will come from inbound tourists, especially from the rising middle-class markets in Asia, such as China.

“This demographic has been one of the key markets for the industry, helping it to weather the effects of widespread economic uncertainty,” said Do.

Data from government body Tourism Australia shows there were 8.8 million visitor arrivals for the year ending January 2018, an increase of 4.9% per cent relative to the previous year.

A staggering 1.3 million of these visitors were from China.

China is expected to overtake New Zealand as our largest source of visitors in 2018. More importantly, for our retail sector, Chinese visitors are already by far our biggest spenders. ABS data shows that Chinese tourists spent a total of $10.4 billion in the past year, which is around 25% of total spending by all visitors.

The expanding middle class in China suggests that the growth in Chinese visitors to Australia is likely to continue. Meaning Australian retailers and other businesses will need to ensure they are set up to take advantage of this growing market.

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