Sector Report from Bank Austria Economics:
Tourism in Austria enjoys record demand but revenue is weak

  • 2012 saw a return to pre-crisis levels, with a nominal 2.4 per cent increase taking total revenue to EUR 22.3 billion
  • Despite steady demand, the overall picture for tourism in 2013 is gloomier, as revenue is not increasing; adjustments for price changes are even expected to bring a slight fall
  • The sector is expected to grow more strongly during 2014
  • More visitors staying for shorter periods and spending less money are squeezing the margins of accommodation providers

Although tourism in Austria welcomed record visitor numbers in 2012, the results posted for the financial year were poor. As the latest Sector Report from Bank Austria’s economists reveals, revenue for the sector was up 2.4 per cent in nominal terms, although this was cut to a mere 0.2 per cent in real terms. Analysing the situation, Bank Austria economist Günter Wolf said: "Although total revenue of EUR 22.3 billion for 2012 may have helped tourism make up for the massive downturn of 2009 in nominal terms, the sector remains financially fraught. The sharp rise in visitor numbers during the last three years has failed to translate into increased revenue for the sector after adjusting for price changes, which has ultimately hit its profits."

Sharper increases in revenue not expected until 2014
The picture for tourism will ultimately be bleaker in 2013. Although the sector is likely to see visitor numbers remain steady for the year as a whole, growth in revenue will be marginal at best – and will even turn into a slight fall in real terms. Austrian tourism will have to wait until 2014 before it can report any more substantial increases in revenue again as incomes rise and people in the key target markets show a greater appetite for travel. For the moment, the persistently weak economic trend is checking growth of the tourism industry. Although winter 2012/13 proved to be another season of record demand, tourism-based businesses did not really feel the benefit at their tills. The 2 per cent rise in overnight stays during the winter only translated into revenue growth of just under 2 per cent in nominal terms. The relatively steep rise in prices even meant that revenue fell by half of one per cent after adjusting for price changes. During the current summer season, both overnight stays and nominal revenue have decreased slightly so far.

More guests staying for shorter periods and spending less money
Bank Austria economist Günter Wolf continued: "Although the number of visitors to Austria is growing, this growth is actually getting slower and slower from a long-term perspective, and also visitors are staying for shorter periods. Thus it took until 2012 before the record from the early 90s of 130 million overnight stays was matched. What ultimately matters to businesses is that, over the past few years, visitors have been spending less and less and have become increasingly careful with their money." Nominal tourism revenue per visitor fell from an average of EUR 671 in 2008 to EUR 618 in 2012.

Austrian tourism placed third in the World Economic Forum rankings
Thanks to ongoing improvements in terms of the quality of services on offer and ever-better value for money, Austria as a tourist destination has consistently been able to appeal to new segments of the visitor market and make up for falls in demand. Clear evidence of its success in these areas is its third place, behind Switzerland and Germany, in the latest travel and tourism competitiveness rankings published by the World Economic Forum. The World Travel & Tourism Council is expecting Austria’s share of international tourist arrivals in Europe to fall from its current 4.6 per cent to below 4 per cent over the next ten years. There is little danger, however, that domestic tourism will fail to keep pace with the international trend. The sector is suffering not so much from a loss of competitiveness internationally as from the growing number of new competitors, particularly as a result of new markets opening up and cheap flights.

Pressure on margins
The improved quality of services on offer ensured that occupancy rates were higher and, for much of the time, that revenue was also up, although this did not always translate into higher profits. Recent years have seen accommodation providers barely able to cover their increased costs. Figures from the "Österreichische Hotel- und Tourismusbank" show that, seen from a long-term perspective, operating profit has decreased in relation to sales across all segments, but particularly in the case of three-star establishments.

The revenue that tourism-based businesses generate is often too low to finance the level of investment they require. "If you take into account the current low interest rates and the fact that accommodation providers are going to have to up their level of investment again in the near future, then the sector will find it even harder to secure finance going forward as interest rates rise. This will most likely mean the issues of rock-bottom pricing and further cuts to capacity making the headlines once again", Wolf concluded.

Enquiries: Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0) 50505 - 41954;
E-mail: guenter.wolf@unicreditgroup.at