Regional tourism’s next challenge isn’t demand, it’s value

The latest domestic tourism figures should give regional Australia confidence.

Domestic visitor expenditure has reached record levels, holiday travel continues to grow strongly, and regional destinations remain the preferred choice for a significant share of domestic travellers. Despite a challenging economic environment, demand for travel has remained remarkably resilient.

The challenge is no longer convincing Australians to travel. The real challenge is converting that demand into sustainable economic value in an environment shaped by rising living costs, constrained aviation capacity and increasingly selective consumers.

For regional tourism operators, investors and policymakers, this represents a fundamental shift. The destinations that thrive over the next decade will not necessarily be those attracting the most visitors. They will be the destinations generating the greatest value from every visitor who arrives.

Regional tourism demand remains resilient

For most Australian households, the cost-of-living crisis is far from over. Mortgage repayments remain elevated, rental pressures continue, energy bills remain high and discretionary spending decisions are receiving closer scrutiny than at any point in recent years.

Conventional wisdom would suggest tourism should be suffering under those conditions. Yet, travel continues to prove resilient.

Instead, Australians appear to be making different choices. Travel remains one of the few discretionary expenses people are reluctant to surrender. Australians are still prioritising experiences, connection, family time and personal wellbeing, even when making difficult spending decisions elsewhere. The latest TRA data confirms Australians are still travelling, while regional destinations continue to benefit from strong domestic demand.

This resilience is good news for regional Australia. Tourism remains a critical economic contributor for many communities, supporting not only accommodation providers and hospitality businesses, but also retailers, transport operators, cultural attractions, local producers and service industries.

However, strong demand alone does not guarantee future growth.

Cost-conscious travellers are changing the rules

While Australians still want to travel, the way they travel is evolving.

The Tourism and Transport Forum's Winter Travel Survey found that 54 per cent of Australians said cost-of-living pressures had affected their winter travel plans. Nearly one-quarter reported they never made winter travel plans at all, while others indicated they would take shorter trips, choose destinations closer to home, spend less on accommodation, or cut back on dining, activities and entertainment. Some reported postponing or cancelling travel altogether.

Importantly, however, the same survey delivered an important insight: holidays and travel remain the number one non-essential expense Australians would continue to prioritise if cost-of-living pressures intensify.

That finding highlights an important shift in consumer behaviour.

Consumers are becoming more value-conscious, more selective and more deliberate. They are looking more closely at the total cost of a holiday and weighing destinations against each other in ways they may not have done previously. Increasingly, travellers are asking a simple question: is this destination worth the price?

For regional tourism operators, that creates both opportunity and risk.

Regional Australia is uniquely positioned to meet growing demand for nature-based tourism, Indigenous cultural experiences, food and agritourism, outdoor adventure and authentic local connections. Across every age group, Australians continue to favour travel outside capital cities, with the strongest preference coming from older travellers, who remain one of the most valuable visitor segments for many regional destinations.

The challenge is ensuring destinations can demonstrate value while maintaining accessibility and competitiveness.

Aviation is becoming a critical constraint

One of the biggest challenges confronting regional tourism today is access.

Across much of regional Australia, aviation is not simply a transport service. It is essential infrastructure. For many destinations, tourism growth is directly linked to the availability, frequency and affordability of flights.

Recent airline schedule changes and capacity reductions have highlighted the growing fragility of regional aviation networks. Airlines are responding to rising fuel costs and broader commercial pressures by concentrating aircraft on higher-performing routes while reducing some regional and seasonal services.

The implications for regional tourism are significant

Reduced capacity often translates into higher fares. Higher fares influence travel decisions. Families reconsider destinations, travellers shorten stays and events become more difficult to secure. Over time, regional businesses become less competitive despite strong visitor appeal.

The challenge is particularly pronounced in Northern Australia, where many destinations remain heavily dependent on aviation connectivity to support tourism and broader regional economic activity.

Industry stakeholders have increasingly identified aviation access as a critical enabler of tourism growth, particularly in regions where alternative transport options are limited. Concerns around reduced capacity, route rationalisation and rising airfare costs continue to feature prominently in discussions about the region's future competitiveness.

That challenge is now attracting national attention.

The Federal Parliament is currently examining the future of regional aviation services and the aviation sector's capacity to provide reliable and affordable services to regional, rural and remote communities. At the same time, the Productivity Commission is investigating the drivers of regional airfares and competition in Australia's regional aviation market. Both inquiries reflect growing concern that accessibility is becoming a barrier to regional economic development.

Australia doesn't have a tourism demand problem. It increasingly has an aviation affordability problem.

Australians are telling us they still want to travel. The data proves it. What is becoming less certain is whether they can afford to access many of the destinations that depend on tourism most. For regional Australia, the biggest threat to visitor growth may no longer be demand, but rather the cost of a seat on the plane.

Why visitor yield matters more than visitor volume

This reality should force a rethink of how we measure tourism success.

For decades, visitor numbers have been a primary indicator of tourism performance. More visitors equated to stronger growth, greater economic impact and a healthier tourism sector.

That thinking is becoming less relevant.

In a world where airline capacity is constrained, labour shortages persist, infrastructure pressures increase and consumers are increasingly price-sensitive, simply attracting more visitors is no longer enough.

The destinations that thrive over the next decade will not necessarily be those attracting the highest number of visitors. They will be the destinations generating the greatest value from every visitor who arrives.

For tourism operators, destination managers and policymakers, this means focusing on visitor yield rather than visitor volume. It means encouraging longer stays, increasing visitor expenditure, creating deeper engagement with local experiences and ensuring tourism spending reaches a broader range of businesses throughout regional economies. It also means investing in quality tourism products and premium experiences that create memorable outcomes for visitors while delivering lasting economic benefits to host communities.

Importantly, a value-focused tourism strategy delivers benefits that extend far beyond the tourism sector itself. Higher-yield visitors support local businesses, create sustainable jobs, stimulate private investment and help communities capture a greater share of the economic benefits generated by tourism.

A new measure of tourism success

The latest tourism figures should be viewed as both encouraging and instructive.

Australians still want to travel. They continue to prioritise experiences, connection and discovery despite broader economic uncertainty. The demand is there.

The challenge now is ensuring regional destinations can convert that demand into long-term prosperity.

Ultimately, the future of regional tourism will not be won by attracting the most visitors. It will be won by creating the most value.

And in an era of rising costs, constrained aviation capacity and changing consumer behaviour, that distinction has never been more important.

How BDO can help

Regional tourism businesses, investors and governments are navigating a rapidly changing operating environment. BDO’s tourism, infrastructure and regional development specialists work with organisations to access tourism demand, evaluate economic impacts, identity growth opportunities and develop strategies that maximise long-term value for destinations and communities.

Contact our team to discuss the trends shaping regional tourism and what they mean for your organisation.