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Economics Legislation Committee
31/10/2016

WOODWARD, Mr Ben, Director, Sales and Marketing, CaPTA Group

[09:21]

ACTING CHAIR: Thank you very much for joining us. This is the Senate Economics Legislation Committee. Senator Ketter and I are two of the members of that committee and conducting this inquiry here today. Welcome, and thanks very much for your time. These are proceedings of parliament, so parliamentary privilege applies should that be relevant. I suspect it will not be. We will ask you some questions, but, if you wanted to make an opening statement on the general issue of the working holiday-makers reform package, we would be very pleased to hear that. Whilst I am familiar with your organisation, you might, for the record, just want to indicate what your organisation is involved in and how you relate to this issue. Over to you.

Mr Woodward : I have prepared an opening statement, and that does cover who I am and what we are all about. The CaPTA Group is the largest family owned and operated tourism company in Tropical North Queensland consisting of four attractions, Rainforestation Nature Park, Wildlife Habitat, Australian Butterfly Sanctuary and Cairns ZOOM & Wildlife Dome, and two touring companies, Tropic Wings Cairns Tours & Charters and Jungle Tours & Trekking.

We have been active players in the youth backpacker and adventure travel market for several decades and continue to have a strong presence in these markets with Jungle Tours & Trekking and Cairns ZOOM & Wildlife Dome in particular. Jungle Tours & Trekking operates day and extended tours to Cape Tribulation and the Daintree for this market, whilst Cairns ZOOM & Wildlife Dome offers a unique combination of adventure and wildlife via a ropes challenge course located conveniently within our CBD located wildlife park. We also operate a wildlife volunteer program at several of our parks which attracts many younger travellers who stay on longer in Australia as working holiday-makers.

Whilst 2016 has seen very positive growth and recovery of the tourism industry in our region across all markets, the one particular market segment that is not seeing significant recovery is the youth backpacker and adventure market. Whilst we have seen a steady increase in our Jungle Tours & Trekking numbers in 2016, other operators in the market have been reporting a very soft year with the following anecdotal observations: youth backpacker and adventure travellers staying in the region for a shorter period of time and spreading their stay across more destinations, rather than just the traditional iconic destinations along the east coast, such as Cairns, the Whitsundays and Byron Bay; traditional backpacker hostels experiencing increased competition from new online accommodation channels such as Airbnb; and self-drive or budget campervan options becoming increasingly popular alternatives to both accommodation and touring. Backpackers are still spending money on the essential must do experiences such as the Great Barrier Reef and the rainforest and adventure; however, secondary activities are reporting a decline.

A number of international factors may have contributed to this changing climate: economic uncertainty in the EU following Brexit; the declining Australian dollar, which, whilst it has been good for inbound tourism, is not all that attractive for working holiday-makers to earn; and an increase in the working holiday visa fee, which has already contributed to a decline in working holiday-makers. Whilst Australia has always been and continues to be a popular 'must do' destination for this market, we cannot afford to take anything for granted and need to be mindful of this current challenging and competitive climate for this market. The real concern is that this current trend of diminishing duration of stay and dispersal in Australia may continue in line with the impact of the tax on the net earnings of working holiday-makers. Whilst it is positive that the proposed backpacker tax will be dropped from 32.5 per cent to 19 per cent, we still need to be mindful of where this places us with competing international destinations. New Zealand has become increasingly popular for this market and, considering their similar taxes are at a lower rate, we may see a trend of backpacker and youth travellers choosing to spend more time in New Zealand than here in Australia for a working holiday. Undoubtedly, there are a lot of sectors that rely on the employment of working holiday-makers, particularly the agricultural sector. The tourism industry also relies on seasonal employment of working holiday-makers for temporary hospitality positions in peak periods, such as Chinese New Year.

Most income earned by working holiday-makers is spent in the Australian economy before departure. Certainly this is the case in our region, which is ultimately a leisure destination for this market, where they spend their earnings on the 'must do' Australian experiences such as reef and rainforest, following stints of agricultural work as they have travelled up the east coast. The current reported decline in secondary experiences is likely to continue under the implementation of this tax.

The damage has already been done. This market consists primarily of millennials who have already heard negative messaging around Australia's backpacker tax through viral messaging and social media, which has, in turn, impacted their decision-making process on coming to Australia. Several of our wildlife volunteers from Europe who are currently doing placements with us have said that this issue was on their radar when deciding to come to Australia for their placement. It would be fair to say we have seen a slight decrease in our wildlife volunteer numbers as a result of this and a combination of the other factors I spoke about earlier.

However, all in all there are positive changes that are included in this package. It is positive to see that the age of eligibility will be increased from 30 to 35, and also the reduction of the cost of the visa by $50 to $390 but, ultimately, it is still more expensive than similar visas in New Zealand and Canada. It is also positive to see $10 million put towards Tourism Australia for dedicated backpacker tourism promotion over the next two years. Thank you.

Senator KETTER: How important are backpackers to your business as a source of revenue?

Mr Woodward : I guess we are in quite a unique position as an operator here in Cairns in that we are working across a number of different markets. As I said earlier, we have seen significant growth in all markets except for the backpacker market. Certainly, from our perspective, whilst we have other markets that we are working in, the backpacker market is still a very important and essential one. I guess it is bringing the youth through to our area and from that we do see lots of inspiring ideas with this particular market.

Senator KETTER: You did say there was no significant recovery in the youth market, and you also said that the damage had been done in terms of what has already happened. Am I right in putting those two together and equating that lack of recovery in the youth market to the uncertainty generated by the changes to the backpacker tax rate?

Mr Woodward : I think that has certainly contributed to it. As I said earlier too though, I think there has been quite a combination of complex issues which are seeing the decline in this market, somewhat, in our region—those being the Aussie dollar and the strength of that Aussie dollar at the moment. Australia has become more appealing in a lot of ways for other markets; however, it is becoming common knowledge that backpackers who are working in Australia will be earning less in their own currency as a result of that weakening dollar.

I think that a lot of factors in this market have contributed to how a backpacker travels these days as well. As I said, moving along the east coast, our region has found more competition with emerging regions. But, as a worldwide phenomenon, I think backpackers are looking at a whole diverse range of different options when they travel. Australia has always been seen as a must-do destination; however, I do not think we can be complacent and take that for granted anymore.

Senator KETTER: Do you have any figures in relation to the numbers of backpackers working in your business over the past 10 years or two years?

Mr Woodward : It would be hard for me to comment on that, mainly because when we do have backpackers employed it is usually through third-party agencies—for example, as I said, Chinese New Year, in particular, is a period when we obviously need to increase our employment around food and beverage hospitality, so usually we would use a third-party service for that. We have heard anecdotally from the third-party organisations we work with that they have seen, over the years, a decline in backpackers working through them. But I would not have any specific statistics on that.

Senator KETTER: Right. Were you consulted about the proposed reform package? Given the announcement was on 27 September, did you provide any input prior to that?

Mr Woodward : Not so much directly into this; however, there had been industry surveys from organisations such as QTIC, where we made our views very clear via that avenue. Through the advocacy of both ATEC and TTNQ our voice as industry players has been heard.

Senator KETTER: What do you think the impact of the change to the passenger movement charge will be on your business?

Mr Woodward : That is one of the positives which is being looked at in this overall package; however, I guess you need to look at the package overall—

Senator KETTER: Sorry to interrupt you: this is the increase from $55 to $60 with respect to the departure tax, which does not just impact on the working holiday-makers; it is across the board. Do you have a view about that?

Mr Woodward : I guess it is a relatively small increase, so perhaps it will not have a huge negative impact. I would not see a small increase like that as having too much of a detrimental impact on the industry.

Senator KETTER: Have backpackers been talking directly to you or your business about the debate and the changes?

Mr Woodward : Certainly anecdotally, as I said, particularly the wildlife volunteers that we have across our parks. These programs vary from six- to eight-week programs and, as I said, a lot of these volunteers are looking at staying on for a working holiday as well. So, anecdotally, we have seen that they have discussed with their peers back home before they left as to whether Australia is as viable an option for a working holiday as other countries such as New Zealand and Canada.

Anecdotally, as well, on our tours it is something that has been noted. Whilst our numbers for jungle tours have increased this year, we are seeing the traditional backpacker, as such, travelling in fewer numbers; they are staying for shorter periods of time. They are still doing the essential activities, but it could be a result where, if there are fewer holiday-makers coming over here, they are staying for a much shorter period of time.

Senator KETTER: When you said earlier that the damage had already been done in terms of the announced changes in this area, what specifically were you referring to? What damage has already been done?

Mr Woodward : I guess, really, the social media discussion amongst this group. As I said, when you look at it, the backpacker and youth market consists primarily of millennials. Social media is very much a key part of how they communicate. I guess, word of mouth has already dispersed and gotten out there saying that Australia has these reforms coming into play. There could be a whole lot of miscommunication about that, but I do believe that that talk has been detrimental.

Senator KETTER: What would be the impact on your business if the backpacker numbers do not increase or if they continue to decline?

Mr Woodward : As I have said, we have seen a decline in the traditional backpacker travelling on our tours and with Jungle Tours in particular. We have somewhat adapted our business and attracted other markets to that particular touring company now. From our position, we would need to continue to look at adapting and accessing other markets. One thing to keep an eye on with this particular market is how it is evolving and changing and how to remain relevant to it.

Senator KETTER: Do you have a view about the departing superannuation tax? Is that something that has been raised anecdotally with you?

Mr Woodward : Not so much with our business. We are not really in a position of employing backpackers directly. Anecdotally, we have heard that that could be a concern in this overall package as well.

Senator KETTER: This is where the government is recovering 95 per cent of the superannuation that has been paid to backpackers in the course of their time. Do you have a view as to the proportion of people that actually do claim that superannuation tax and use it to fund the next leg of their journey? Anecdotally, is that something they talk to you about?

Mr Woodward : I would have to say that I have not heard too much about that anecdotally, no.

Senator KETTER: Do you think that the revised tax package is compelling for backpackers to continue to come to Cairns?

Mr Woodward : Overall, there are some very positive aspects to this—for instance, as I said, increasing the age from 30 to 35. However, we do need to be mindful of 19 per cent compared to other countries such as New Zealand and Canada, which are significantly lower. I think New Zealand, in particular, is a concern to us, being in close proximity and offering quite a different experience to what Australia has to offer. Being a smaller country, working holiday-makers would be more equipped to travel around and spend more time there rather than in Australia, being the large land mass that it is. New Zealand has a lot of opportunities to be attracting this market over us.

Senator KETTER: You mentioned in your opening statement that it has been a soft year, that the youth market has a shorter stay in the region and they are spreading that over more destinations. To what extent is that related to the changes to the tax rate?

Mr Woodward : I think it is a combination of the factors I spoke about which has seen a decline in the traditional backpacker travelling through the region. However, I do think the word of mouth on these reforms has already gotten out there and has perhaps deterred them or encouraged shorter stays rather than the lengthy stays we were seeing previously. I would think that with these reforms coming into place we would continue to see a decline.

Senator KETTER: Those shorter stays of backpackers as tourists obviously has an impact on your business in terms of the source of labour for your businesses—would that be right?

Mr Woodward : More so in the decrease of demand. Obviously, if there are fewer people visiting our attractions or going on our tours there are certainly long-term effects of that as well.

ACTING CHAIR: Mr Woodward, you are speaking to us mainly as a supplier of services and experiences to the backpacker market rather than as an employer of backpackers.

Mr Woodward : Correct.

ACTING CHAIR: Just as an employer, the labour hire operators—do you deal with the same group or do you shop around? And how have you found labour hire operators? Are they all honest, responsible and ethical, or are there some dodgy ones in the market?

Mr Woodward : We work with one particular company here in Cairns and we have found their services to be of a good standard. Certainly, from them, we have heard that there has been a decline in backpackers who are essentially on working holiday visas and seeking food and beverage, and hospitality employment as a temporary measure.

ACTING CHAIR: Treasury have some figures saying the decline has been happening for three or four years. Do you have any comment on that?

Mr Woodward : I suppose that would fit in anecdotally with what our suppliers have said, yes.

ACTING CHAIR: You did say in your opening statement—and can we get a copy of that.

Mr Woodward : Sure.

ACTING CHAIR: I thought you said somewhere that one of the reasons for the decline was the increase in the working holiday-makers' fees—did you say that? What did you mean?

Mr Woodward : Not so much the increase of the fee—I know it has been reduced in this package, but it still is a more expensive option than New Zealand and Canada in terms of the fees for their similar visas.

ACTING CHAIR: Do you have any idea of what the fees are in those places? I suspect we have got them.

Mr Woodward : I believe they are significantly less—perhaps around 50 per cent of what Australia's are.

ACTING CHAIR: Some figures which one of the submitters have given to us—and I assume they are correct—suggests that the minimum hourly wage in Australia is far higher than Canada and New Zealand and that the tax in Australia, even at 19 per cent, is higher than Canada, 15 per cent; and New Zealand, 10.5 per cent. The end result of that is, according to this submission, that the net hourly rate in Australia for a backpacker is $14.34 versus $9.41 in Canada, and $13.65 in New Zealand, so net they are getting more here. However, the qualification is made that the cost of living in Australia is higher. Are you familiar with any of those figures or can you comment on those?

Mr Woodward : I am not too familiar with the offering in those countries and, looking at the package overall, these factors need to be taken into consideration and I suppose they need to be put out there as well. If a working holiday-maker coming to Australia would end up earning the same dollar amount that they would in New Zealand and Canada, then certainly that should be part of a campaign by Tourism Australia targeting this market to clear up any miscommunication on the matter.

ACTING CHAIR: That is a figure that I had not previously seen—and I assume it is correct; it is in a submission made to us. You do not directly employ working holiday-makers, so you do not have to register. I was going to ask you whether you were familiar with the new requirement to register. That is probably something you do not get involved in, because you—

Mr Woodward : I am slightly familiar with that but, obviously, it does not directly impact on us, so I am not too across it.

ACTING CHAIR: If you were in charge of this area of policy and activity, are there any suggestions you could make as to improvements to the package?

Mr Woodward : As I said, I think the percentage of the tax and how that sits comparatively to other countries to make sure that we are on a level playing field needs to be looked at. As I said, I think it is positive that there has been a commitment made by Tourism Australia for some campaign activity specifically for this market. I think it has been a long time coming as we have been seeing a decline in this market for quite some time. Hopefully, it is not just a little too late.

ACTING CHAIR: Thank you very much for your evidence today. I appreciate you coming along and the information you have given us.

Mr Woodward : Thank you.

ACTING CHAIR: We will send you a copy of the Hansard transcript. You can have a look through that and if there are any corrections you want to make to that please let the secretariat know.

Mr Woodward : Sure.

ACTING CHAIR: Again, thanks.