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Duty free shop operators and other airport retailers will be happy with the long-awaited (limited) opening of Australia’s international borders in November. Apart from airport tenants, the retail industry in general will be more interested in three looming questions that are also important to Australia’s economic recovery: when will foreign tourists be allowed back? Will they come in the same numbers as in the past? And will retail be a net winner or loser from a total international border reopening?

Let’s try to answer each of these questions.  

Under the federal government plan, states that achieve vaccination levels of 80 per cent will open their international gateways in November. Well, sort of. Really, the door will just be opened a crack: vaccinated Australians wishing to leave will no longer require special permission and returning vaccinated Australians will face relaxed quarantine rules. But no foreign tourists yet.

Limited as the immediate plan sounds, considering the rapid relaxation of international travel rules occurring elsewhere in the world, it still faces resistance, with incessant squabbling between state leaders and the federal government underscoring that premiers are determined to hold on for dear life to the power they have acquired since March 2020.

Let’s assume it happens though. The effect on retail trade will be small in the short-term, providing a lift to retailers at the major international airports where, currently, all but a handful of retail and dining outlets are still closed.

It isn’t clear how quickly airlines will be able to crank up capacity and so we don’t know how many imprisoned Australians will manage to exit. Either way, Australia is unlikely to open the door to foreign tourists until some time next year. That means, for the next few months, a potentially wider imbalance than in ‘normal’ times between outgoing and incoming retail revenues.

Don’t underestimate envy

Here though is where envy enters the picture. As Australia sees its nationals flee to more fun destinations and as potential incoming tourist revenue is being diverted to countries that have opened more quickly, the pressure on the federal government to open the border completely will become intense. This suggests an early opening to tourists in the first quarter of 2022. 

What will that mean for retailers?

In a recent piece of analysis for Inside Retail, I made the argument that Australian retail trade would actually benefit if the international borders never opened, even though it would obviously disadvantage retail operators in places with high exposure to foreign tourists in ‘normal’ times.

In the last such ‘normal’ year’, 2019, Tourism Research Australia estimated that foreign visitors spent AU$31 billion in Australia. Shopping and dining by international visitors in top global destinations is usually about 50 per cent of travel budgets, so it is reasonable to put the loss to Australian retail at approximately $15 billion annually while the borders are closed.

At the same time, I pointed out that estimated tourism expenditures by Australians overseas in 2019 were approximately $60 billion. So even if just $30 billion of the approximately $120 billion kept at home in 2020 and 2021 was spent on retail and food service — and it is likely to have been a good deal more than that — then the spending of Australians trapped in Australia offset the loss from international tourism.

Retailers with high exposure to international tourists will not be thinking too much about that, but they may soon have another problem to contend with. It’s that normal patterns of inbound tourism may not be reestablished for a long time. This is not just a function of when Australia will open to tourists, but also depends on whether tourists will want to come in anything like the same numbers as they did in the past.

Why is this an issue?

Australia’s brand damage: Will it dampen tourism?

Australia has marketed its tourism assets effectively in the past, so why will visitors not just flood back when they are able to do so? The answer lies in a concept that retailers themselves will be only too familiar with: brand damage.

In the eyes of the world, Australia is not what it was before March 2020. The imagery from Australia that has gone around the planet during the past 18 months, on both social and mainstream media, has been extremely unkind to the brand. Once feted as a bastion of sensibleness and goodwill, with a tough croc-hunter veneer, Australia is now  a country with so much dirty laundry on display that it is routinely mocked by media celebrities in other countries. Qualities that made Australians attractive to outsiders are now being harshly reassessed. “Look at what’s happened in Australia” is now an all-too-familiar refrain in social media discussion threads.

It isn’t possible – yet – to quantify the effects of this damage to the Aussie brand in terms of what it will mean for the tourism industry. Optimists will be inclined to sweep these concerns under the carpet and plan for a quick return to business as usual when the border opens.

It could be though that too many of these optimists — and a lot of politicians would be among them — simply haven’t grasped the extent of damage to Australia’s reputation. To many outsiders, Australia isn’t a fun place to be anymore, but rather somewhere that’s been overrun by hostility and intolerance. Fixing that brand damage may take years, and even with Australia’s image-makers at their very best, the country may not fully recover its Paul Hogan sheen until the Covid era slips from living memory.

When a retailer or other business missteps and suffers damage to its brand, there are a number of things it can do that help to repair its image. Often, the CEO is fired or steps down, and is replaced by someone who has a free hand to bring in new people and reorganise the whole management structure. Board oversight is strengthened. Apologies are issued to the public. Fines are paid. Reporting and transparency are enhanced, social media storms are decisively defused, and departments that held inordinate power during the crisis are put in their places.

That’s how a company does brand damage recovery, but how does a country do it? A country like Australia has elected officials supported by an entire bureaucracy, not CEOs and senior management who can be kicked out by a Board of Directors. And adverse cultural traits that have been put vulgarly on display cannot be transformed as quickly as a corporate culture, where new leadership can clean house and HR can screen new applicants with more stringent criteria.

So the task ahead for Australia to repair its image is non-trivial.

The implication for retail is that the approximately $15 billion that flowed in during the last ‘normal’ year may not be coming back next year, or even the year after that. Instead, the outgoing billions could balloon, as people accustomed to foreign travel as a birthright but kept corralled at home for two years are suddenly let loose. This includes not just tourists, but Australians seeking a better place to live, taking not only their pocketbooks, but their entire families to greener pastures.

The post A rush to reopen: Is it doing Australian retail more harm than good? appeared first on Inside Retail.