Multi-billion dollar industries: Part IV

SmartCompany’s Developing an Entrepreneurial Australia Roundtable came up with 10 multi-billion dollar industries of the future. JAMES THOMSON talks to IBISWorld’s general manager Rob Bryant about the next two sectors that will take off: Tourism and Leisu

As part of SmartCompany’s Developing an Entrepreneurial Australia Roundtable, we asked IBISWorld general manager Rob Bryant to nominate the 10 multi-billion dollar industries of the future.

We then asked our panel of 17 entrepreneurs and experts to try and identify the niches within these sectors that Australian businesses can exploit.

In the fourth of a five-part series, James Thomson looks at two more of the 10 big industries of the future – tourism and leisure.

If you are already operating in one of the two sectors next nominated as multi-billion dollar industries of the future, we’d love to hear from you about the opportunities and barriers that exist. Send your feedback here.

To see the first six of our billion-dollar sectors, see part one, part two and part three of our five part series.

7. Tourism

The travel industry was represented at the SmartCompany roundtable by Darrell Wade, co-founder and chief executive of adventure tourism group Intrepid Travel. In the last 18 years, Wade has turned his home business into a booming empire with turnover of $130 million, 800 employees and operations in 96 countries. And not surprisingly, he’s got some firm ideas about the direction the travel industry could take.

Wade and his group (which included SmartCompany publisher Amanda Gome to Carmen’s Fine Foods chief Carolyn Creswell) came up with a number of innovative ways that tourism products could be packaged and marketed. How about themed tours, based around a traveller’s love of food, wine, indigenous culture or the environment?

Or what about adding resort-style accommodation to retirement centres, so that older consumers can travel and still receive the same level of care they need. Or what about tapping into the growing area of health tourism, where travellers combine a holiday with wellness treatments or even cosmetic surgery.

Key statistics 2007

Products and service segmentation

Major market segments

Industry outlook

IBISWorld forecasts that the tourism sector will expand at an average annual rate of 2.9% during the five year period to 2012-13. For the next few years, Australia’s strong dollar is likely to provide something of a headwind for the industry as international travel will become less affordable for foreigners.

But things should pick up in 2010-11, with growth in real GDP along with a rise in real household disposable income expected to fuel demand for a range of tourism products and services provided by this division. In 2011-12 and 2012-13, this division is expected to continue to record positive revenue growth, which will be aided by GDP growth, an improvement in currency conditions and a rise in international visitor nights.

The serviced apartments and hotel accommodation segments are expected to perform well over this period.

Key sensitivities

IBISWorld also nominates a number of factors that will affect the performance of the tourism sector. These include:

• Labour force; females. Changes in the participation rate of the workforce and particularly of married women in the workforce influence the level of discretionary expenditure on items included in this division.
• Leisure and recreation; total time available. The performance of this division is positively affected by changes in lifestyles and attitudes favouring expenditure on discretionary services over expenditure on goods. For example, many people now value a good holiday over a new car. This shift in consumer sentiment towards leisure items is due in part to the growing demand for “wellness” products, which provide an element of relaxation and revitalise lifestyles.
• Real household disposable income. Fluctuations in the levels of real household disposable income influences the ability to take a holiday, eat out rather than eat at home, or go out to a club or pub to socialise. In general, growth in disposable income enables consumers to eat out more often or take short holiday breaks.
• Tourism; short-term arrivals, business. The level of business profitability impacts on business expense accounts and the amount of business travel undertaken. In general, a rise in business profitability bodes well for corporate travel, which increases demand for accommodation services, eateries and possibly entertainment venues such as hospitality clubs.
• Tourism; visitor nights, international. The performance of this division is influenced by the level of domestic and international tourism as reflected in visitor nights. In general, a rise in tourism visitor nights bodes well for a range of services provided by this division including accommodation, cafes and restaurants and clubs. Growth in visitor nights positively affects tourism levels within a region and increases the demand for accommodation, eateries and entertainment venues such as clubs.

8. Leisure

Closely related to the tourism sector is the domestic leisure sector, which includes everything from sporting organisations and movie companies to galleries and casino operators.

The biggest part of the sector is the sport and recreation division, which includes sporting events and gaming-related areas such as racing and casinos. While chasing a ball around or betting on a horse isn’t exactly innovative, technology is transforming the way these activities are monetised.

IBISWorld general manager Rob Bryant says we are smack in the middle of the infotronics age, where continued advances in digital technology, telecommunications and the internet are helping to change the profile of a number of industries.

In the sport and recreation sector, pay TV and the internet have changed the way sports can be broadcast and created huge new revenue streams for sporting organisations. Interactive TV – which allows, for example, a punter to bet on horses by pressing buttons on their remote control – will create even more growth opportunities.

Key statistics 2007

Products and service segmentation

Major market segments

Industry outlook

IBISWorld forecasts will grow at an average annual rate of 3.4% over the five year period to 2012-13. It also predicts employment levels for the leisure sector will increase over the next five years, boosted by continued increases in the number of domestic and international tourism visitors.

Key sensitivities

IBISWorld also nominates a number of factors that will affect the performance of the leisure sector. These include:

• Legislative compliance requirements; cultural and recreational services. Government regulation and/or deregulation, particularly regarding the availability of licenses to operate gambling facilities – for example casinos, gaming machines, but also media and arts policy, play an important role in influencing the industry’s operating environment.
• Leisure and recreation; expenditure. Changes in household expenditure patterns favouring expenditure in services, and particularly entertainment services, work in favour of the industry.
• Leisure and recreation; total time available. Fluctuations in the level of leisure and recreational activity influences the demand for services provided by this division. For example, a rise in leisure time by consumers increases the available time to visit museums, undertake sporting activities, or visit libraries.
• Real household disposable income. Fluctuations in real household disposable income affects the demand for a range of services provided by operators in this division.