FINANCING INTERNATIONAL TOURISM BUSINESSES

GROW YOUR TOURISM BUSINESS WITH EXPORT FINANCE AUSTRALIAAustralia’s tourism industry is booming. International visitor numbers are increasing year on year and tourism in Australia has been identified by the Government as a super growth industry. If your business is ready to leverage this expanding market, we could help you succeed.

As the Government’s export credit agency, Export Finance Australia provides financial expertise and solutions to drive sustainable growth that benefits Australia and our partners.

We could help businesses providing tourism services directly e.g. cafés servicing international visitors, international event organisers, or through the supply chain (equipment manufacturer contracted by a tourism operator).

Examples of businesses we could support:

This guide will help you understand:■■ Australia’s international tourism industry■■ financing your tourism business■■ opportunities in inbound tourism■■ preparing your business for international growth■■ examples of businesses we could help.

Wine businesses with a cellar door Tour operator Equipment manufacturer contracted by tourism operator

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$2.0bnvisitor spend

$12bnvisitor spend

0.48mvisitor arrivals

1.44mvisitor arrivals

AUSTRALIA’S INTERNATIONAL TOURISM INDUSTRYAustralia is becoming the ultimate global tourism destination. This means significant opportunities for Australian tourism businesses looking to grow and expand their operations. Visitors from India, China and Japan are driving the largest increase in visitor spend - all wanting to enjoy Australia’s diverse landscapes and countless unique experiences.

Top 3 growth markets(largest increase in visitor spend)

Overall growth

$1.7bnvisitor spend

$44.3bnvisitor spend

27maviation capacity

9.3mvisitor arrivals

0.37mvisitor arrivals

Source: Tourism Australia, 31 March 2019

Australian tourism continues to grow with spending by international visitors reaching a new high of A$44.3 billion for the year ending March 2019. For more information, visit the Tourism Australia website.

3%

3%

5%

11% 10% 12%

9% 2% 15%

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FINANCING YOUR TOURISM BUSINESS Financing business growth is a challenge faced by many tourism businesses. The upfront costs associated with increasing customer demand or expansion can put pressure on your cashflow, potentially impacting other aspects of your business.

If you’re a business that provides tourism services directly, or through the supply chain to international tourists, Export Finance Australia could help you.

How we could help your tourism business

“We deliver experiences in Australia for international visitors, am I an exporter?”

Yes you are, inbound tourism covers all international tourist traffic entering a country. Although tourists enjoy their experience within Australia, they pay for services using foreign currency.

“We need working capital to provide high value experiences for international visitors, tailored to their consumer preference.”

“We need a loan to support our business growth.”

“We need finance to increase capacity and keep up with the growing inbound tourism market.”

“We don’t have enough cashflow.”

“We don’t have enough fixed assets.”

“We’re struggling to meet demands.”

Can you relate to these scenarios? Find out how our finance solutions could support your business:

Export loans

If your business provides tourism services to international visitors, our export loans might could help you expand your operations. Examples include working capital to finance the purchase of a new charter boat, equipment or expansion project.

Small Business Export Loans

An unsecured, government-backed loan solution with an easy online application and fast approvals for businesses with a turnover of more than A$250,000.

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FINANCING A NEW BOAT

Case study: Adrenalin Snorkel and DiveExport Finance Australia’s loan helped Townsville tourism business Sun City Watersports Pty Ltd (Trading as Adrenalin Snorkel and Dive) purchase a larger vessel to support growing international tourist demand.

For more than 30 years, family-owned dive and snorkel tour operator, Adrenalin Snorkel and Dive have been delighting tourists with trips to Townsville’s extraordinary reef and the Yongala wreck.

To meet growing international visitor demand, Paul Crocombe, Director at Adrenalin Snorkel and Dive, decided the business needed to purchase a third, larger vessel. A bigger boat would allow him to take 35 people out at a time instead of 21. It would also provide a more comfortable trip to the reef in rougher conditions, reducing the number of cancelled trips.

With three boats, the company could also operate three trips at once – one for reef day-trippers, another for Yongala wreck dives, and a third for multi-day diving tours. But despite a profitable

business and long track record in tourism, finding funds for the new boat proved to be another challenge.

“Banks are very reluctant to lend money on boats,” said Paul, “and even more so for tourism.”

That’s where Export Finance Australia can help – with a range of finance solutions for Australian businesses that provide tourism services to international visitors.

After discovering us through a business coaching program, Paul applied for a loan and proved that he had enough international visitor demand and the marketing skills to grow his business successfully.

We provided Adrenalin Snorkel and Dive with a $575K loan to support the purchase of a third vessel.

Paul Crocombe Director

Adrenalin Snorkel and Dive

“ The Export Finance Australia loan means we can maintain our lead in the area of reef education. Like a tree, if a business isn’t growing, it’s dying. So standing still isn’t an option. Their support means we can take the next step to grow the business.”

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OPPORTUNITIES IN INBOUND TOURISMInbound tourism is big business in Australia. With international visitors increasing year on year, demand for tourism services in Australia continue to grow. According to the forecasts published by Tourism Research Australia, international visitor arrivals are expected to increase to 10.3 million in 2020-21.

Inbound tourism references all international tourist entering a country. If your business provides tourism services to international visitors, you could be classified as an ‘exporter’.

Source: Tourism Research Australia, 2019

Need more help? Contact the Australian Tourism Export Council (ATEC). ATEC is the professional organisation that builds the capability of commercial connections between tourism businesses targeting international travellers.

How can you take advantage of these opportunities?

Decide on your target market■■ It’s important to tailor your business or product

to your customer. This means understanding the cultural background of your customers and how your offering will appeal to them.

■■ Once you’ve decided on the market you will target and understand your competitive advantage, make sure you tailor your offering, marketing and promotional activities to attract the right customers.

■■ Understand the key time periods your customers will be booking in their visit and travelling. This way you can manage your activities and cashflow to ensure your business is in the best possible position to take on growth opportunities.

Develop relationships■■ Distribution channels and purchasing

behaviour changes depending on the market. Understanding the structure of the distribution system specific to your target market is critical before you market internationally.

■■ Travel distributors open up your customer base beyond the reach of a limited marketing budget. Overseas customers still rely on travel experts when planning and booking their Australian holiday.

■■ Different distribution channels include inbound tour operators, retail travel agents, wholesalers, online travel agents, and meeting and incentives planners. Consider your options.

Seek advice■■ As with any business venture, receiving good

quality legal, tax and professional advice is critical before making important decisions.

■■ Contact your state and territory tourism organisation for advice. They have a wealth of information and resources to help you make the best decision for your growing tourism business.

■■ Look at your finance options early on. If you are not able to access finance from your bank, consider the financial solutions provided by Export Finance Australia.

Did you know? The tourism industry now employs 1 in 13 of Australia’s workforce, becoming one of the fastest growing industries in Australia.

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PREPARING YOUR BUSINESS FOR INTERNATIONAL GROWTH Before you start growing your international tourism business, get a clear understanding of where your domestic business operations stand. By undertaking an audit on your current business strategy, you’ll know what resources you need for your international visitor growth – and be able to identify any funding gaps.

A key consideration when growing your international visitor numbers is whether you have a viable market. Your international visitor growth strategy should align with your overall business plan, outline your international objectives and action plan, and include your budget, operational model and any distribution channel partners you may have. You should also create a cashflow forecast to help you identify potential cashflow gaps.

Create a cashflow forecast A cashflow forecast helps you find out if your tourism business can cover its running costs when

targeting new international markets, and identify any periods when you will have more cash going out than coming in. You can then decide if you need finance to cover funding gaps.

Build your creditworthiness A cornerstone of building your business’ credit profile is to establish strong financial systems, so

it is simpler to get finance when the time comes. Taking steps to grow your international visitor business may mean taking on more financial risks, making it harder to secure financing through your bank. Developing a good relationship with your accountant or financial advisor will help you understand your financial position.

Develop strong financial systems for your tourism business■■ Ensure you have a robust international growth strategy that includes your financial resources,

foreign exchange rate considerations, and the sustainability of your budget■■ Use a reliable accounting system■■ Build a strong relationship with your business banker by keeping them informed of any

developments in your business■■ Consider an accounting firm that has experience working with tourism businesses■■ If you have a financial adviser, ask them to review your growth strategy regularly.

Learn how our finance options could help you grow your business.

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FINANCING A NEW CAFE TO BOOST VISITATION AND ON-SITE SALES

Case study: Creswick Woollen MillsA regional Victorian wool mill has transformed itself into a leading tourism and retail venture, with help from Export Finance Australia.

Creswick Woollen Mills (Creswick) was established in 1947 by Paul Ryzowy, spending its first 65 years manufacturing fine fabrics and yarn.

In 1956, the mill’s fabric was used in athletes’ uniforms for the Melbourne Olympics, boosting demand for its products. Then, in the 2000s, the mill partnered with retailer David Jones, becoming a household name, and opened its first retail store.

Today, Creswick has nine retail outlets around Victoria, a thriving online store, and a growing export business. The mill also generates significant revenue from tourism, with Creswick Mills a must-see destination – particularly for international tourists.

Boaz Herszfeld, Executive Director at Creswick, said that support from Export Finance Australia enabled the Mill to bring forward the construction of the site’s new café, to help boost visitation and on-site sales.

“While we have a really good relationship with our bankers and a long-term plan on when we use bank funding for capital, we wanted to set up the café earlier and quicker.”

“So Export Finance Australia gave us the flexibility to do that, and bring forward that expenditure, which was helpful.”

“We’ve even created a private shop where groups of Chinese tourists come in, and everything they buy is exported back to China. It’s just not in a container.”

Boaz Herszfeld Executive Director

Creswick Woollen Mills

“ We wanted to set up the café earlier and quicker… Export Finance Australia gave us the flexibility to do that.”

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RESOURCESThere is a wealth of detailed, easy to access information available to help Australian export businesses, it’s just a case of knowing where to look.

Export Finance AustraliaThe Australian Government’s export credit agency, providing finance solutions to Australian businesses including tourism operators.

We also provide a number of resources for exporters, including our online Exporter Journey, which walks companies through the steps to successful exporting.

Visit exportfinance.gov.au or call 1800 093 724.

Tourism AustraliaThe Australian Government agency responsible for international visitors to Australia, both for leisure and business events.

Tourism Australia’s activities include advertising, public relations and media programs, trade shows and programs for the tourism industry, consumer promotions, online communications and consumer research.

Visit tourism.australia.com

Australian Tourism Export CouncilATEC is the peak industry body representing Australia’s $43 billion tourism export sector.

Representing more than 1000 members across Australia including large national and multinational companies as well as small and medium-sized enterprises, ATEC’s support includes B2B opportunities, industry advocacy and development, education and business capacity building, local and national networking events and conferences.

Visit atec.net.au

AustradeThe Australian Government’s trade and investment agency, providing you with practical advice, support and insight into many of the countries to which you’re looking to attract visitors from.

Austrade provides information and advice to assist Australian companies to reduce the time, cost and risk associated with growing your international business, as well as Export Market Development Grants (EMDG) to support your export growth.

Visit austrade.gov.au

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Discover how Export Finance Australia could help your business take on the worldAs Australia’s export credit agency, we offer options by working with your bank to provide supplementary finance, or support when your bank may be unable to help.

To find out more about how we could help your business, go to exportfinance.gov.au or call 1800 093 724.

This information is of a general nature and has been prepared without taking account of your business needs, financial situation or objectives. The information does not comprise advice or a recommendation. You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances. While Export Finance Australia endeavours to ensure this information is accurate and current at the time of publication, Export Finance Australia makes no representation or warranty as to its reliability, accuracy or completeness. To the maximum extent permitted by law, Export Finance Australia will not be liable to you or any other person for any loss or damage suffered or incurred by any person arising from any act, or failure to act, on the basis of any information or opinions contained in this document.

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