Strong dollar double edged sword for tourism

[creampie]

The Australian dollar hit a new, 27-year high against the Greenback overnight and the march towards parity has been a boon for companies specialising in overseas travel.

But at home, the tourism industry is facing the toughest conditions in 30 years, forcing some companies to close their doors for good.

Sydney's Darling Harbour should be bustling with tourists, but at lunch time on a weekday the crowds are thin.

The strong dollar's seen many visitors tighten the purse strings, including Phil and Sally McCue from New Zealand, who say they are not spending as much as they usually would because of the exchange rate.

Both say the strong Australian dollar would put off other Kiwis crossing the Tasman.

Australian Tourism Export Council chief executive Matt Hingerty says many of his members are struggling.

"We're now three billion dollars in the red," Mr Hingerty said.

"That is three billion dollars more is leaving the country from travel as is coming in and we haven't seen that for 30 years."

Matt Hingerty says rising interest rates could be the last straw for struggling businesses that are still bearing the brunt of the global economic crisis.

He urges the Reserve Bank to show restraint at next month's board meeting.

"The worst outcome would be to see a counter-economic situation where you had a high dollar and high interest rates," Mr Hingerty cautions.

"That would be unsustainable for a lot of the smaller operators in the industry."

Mr Hingerty adds that Australia's two-speed economy sees different sectors being affected differently by the surging local currency.

"I know there is one side of the economy that is growing very strong, the minerals side of the economy, but the service industry is going through a different set of circumstances," he said.

"We're not yet out of the global financial crisis. We are fighting our way back to profitability and we need interest rates to stay at current levels or lower for the time being."

Regardless of what the Reserve Bank does in November, it will be too late for Perth-based Chris Cronin who is closing his adventure tourism business that has been running for 15 years.

"I guess at the moment there's been a serious shortage of travellers up and down the west coast [and] there are a lot more people out there that are really going to suffer because of the strength of the Australian dollar at the moment," Mr Cronin said.

"It does tear your heart out. We've worked so hard day and night."

He adds that there is a critical shortage of British and Irish backpackers who have until recently propped up his business.

But in recent months the number of people booking tours has dropped from 16 people per bus load to just six or eight.

Mr Cronin says the closure of his business will hurt regional and remote communities his tour groups visited.

"The impact up and down the coast on small, coastal communities and also some of the rural towns - they're really going to notice a hole," he said.

"It's just a very tearful farewell tour."

But for some, business is booming as more Australians take advantage of cheap flights and a favourable exchange rate.

The online company Webjet says that in recent weeks, it has had a 30 per increase in the number of searches for flights to the US and Asia.

Internet travel provider Expedia has also experienced massive growth since the Australian dollar hit 98 US cents.

Expedia Australia and New Zealand marketing manager Louise Brompton says the biggest growth has been in flights to the US, but there's renewed interest in Europe too.

"We've seen upwards of 200 per cent growth, year on year, for people planning to travel to Paris, to Rome, to Barcelona, to the Czech Republic over the Christmas period," Ms Brompton said.

"Obviously the strength of the dollar helps to stretch your travel dollar further when you're on the ground, and I think where there is value, people will travel."

Expedia says fierce competition has brought down the price of domestic flights too and there has been steady demand for trips to Sydney, Melbourne and the Gold Coast.

But that is cold comfort for Mr Cronin's West Australian company Easyrider, which closes its doors this weekend.

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