The billion-dollar backpackers and their importance to the post-COVID economic recovery

Australia’s tourism sector has been a frontline economic casualty of the COVID-19 pandemic. In the year ending March 2020, the inbound industry was worth more than $45 billion in export earnings, but by the end of March, the industry effectively closed with the borders.

Now, though, with the reopening of domestic borders, the industry is planning a roadmap to relaunch the lucrative inbound market. Along with a COVID-free NZ, strategically it also makes sense to let in high-yield, long-staying international visitors.

Both international students and international working holidaymakers (WHMs)  – a subset of international backpackers – are likely to be two of the key high-yield segments contributing to the recovery of the international tourism economy in 2021.

The economic benefits to Australia’s university sector and the nation’s central business districts of the international education market have been widely publicised; however, the strategic benefits of hosting backpackers and WHMs are commonly misunderstood.

Currently, the top two markets for the WHM visa to Australia are the UK and France. But the number of countries that have access to the WHM visa, or work and holiday visa, range from Estonia and Finland in northern Europe, to Chile and Argentina in South America, to South Korea and Taiwan in Asia. 

In total, people from 44 countries have the opportunity to work and travel in Australia. The scheme that commenced in 1975 also permits young Australians to work overseas, boosting cross-cultural understanding.

WHMs can also be argued to be one of our most strategic segments, as not only are they high-yield visitors, but they disperse widely to the regions, with Tourism Research Australia’s International Visitor Survey indicating they spend more than a third of their nights in regional Australia. They also stay longer than holiday travellers (an average of 148 nights), typically buy local, become brand advocates for Australia on social media, and express a desire to become repeat visitors.

They're also far more likely to stay in a locally-owned hostel or caravan park than an internationally-owned hotel. In economic terms, that means because of their travel behaviour, less money leaks out of the economy.

Working holidaymaker numbers plummet

The border closure has seen the numbers of WHMs currently in Australia decline from 145,000 in November 2019 to just over 60,000 in October 2020, and this outgoing tide of travellers has revealed their importance to the broader economy.

International WHMs not only provide tourism expenditure supporting tourism SMEs in key traveller leisure hubs such as the Whitsundays and Byron Bay, but they also play a crucial role in providing an educated, mobile workforce keen to travel and experience regional Australia.

WHMs are here as long-term multi-destination travellers typically on a gap year from university or school, or a career break. They're in Australia to sample the lifestyle, see the country, and to work to supplement their adventure. They're typically highly educated, with many having completed tertiary study and, via a Ford or Holden station wagon, are a natural fit for providing mobile labour for the agricultural and tourism industries, from picking melons in Bundaberg to being a barista in Broome.

It’s a win-win situation. Travellers exchange their labour for cash, the opportunity to extend their visa for up to three years to continue their adventure, and a hands-on travel experience of regional Australia that many Australians miss out on.

Research previously conducted by Jarvis and Peel (2013) estimated that WHMs based in the northern Victorian town of Mildura spent just under $4000 each in the local economy, while working on the summer harvest.

But with the international borders shut, the impact on the agricultural industry is becoming apparent, and is predicted by the government’s ABARES December report to translate into a 15% to 25% increase in supermarket produce prices, rotting fruit, and lost income for regional Australia.

As noted above, one of the benefits of the WHM scheme is that it provides mobile labour happy to move from picking apples in Shepparton to working on the vintage in Griffith. A network of "working hostels" have also developed along the harvest route to facilitate mobility where travellers stay in dormitory accommodation in old motels, pubs or converted houses.

In the short term, for the summer harvest, the government is offering both existing WHMs and international students relocation support of $2000 to take up agricultural work.

Standing committee's recommendations

The Joint Standing Committee on Migration chaired by Julian Leeser MP has just published its final report into the WHM program, and comprehensively noted its value to Australia, the role it has in job creation, and a range of recommendations.

Those recommendations that will impact tourism include further extending the age limit to 35 for all countries (currently this is only available for applicants from France, Canada and Ireland). This is a great strategic move that takes into account changing sociological and employment patterns in host societies, and will facilitate increasing numbers of older “career breakers” arriving with travel savings and employment-ready skills.

In association with this, the committee recommended that the access to the second-year visa extension (which currently is linked to 88 days' work in specific fields in regional Australian in the industries of agriculture, forestry, mining and fishing) be broadened to include hospitality and tourism.

One of the benefits of the WHM scheme is that it provides mobile labour happy to move from picking apples in Shepparton to working on the vintage in Griffith.

Also, it was recommended that the definition of “regional Australia” should expand to cover smaller capital cities and "peri urban" areas outside major capitals. Currently, if a WHM doesn't meet the working days' requirement, they have to leave the country with their savings to spend elsewhere when their visa expires.

This recommendation should significantly benefit the tourism economies of regional Australia, as well as providing increased labour.

Overall, if the recommendations of the Joint Standing Committee on Migration are accepted, we should see the WHMs segment rebounding to contribute to the post-COVID recovery of Australia’s tourism industry, and deliver broader benefits to the wider domestic economy.