Recovery in Victoria’s regions

Published on 22 July 2020

Photo: by Tess Kelly

What can regional tourism businesses do in the short-term to ride out the current crisis, and how might we look ahead to a stronger industry in the future?

Regional businesses are no strangers to adversity. But in the last 12 months, Victoria’s regions have run the gauntlet of devastating fires, drought, floods and now the altogether different beast of a global pandemic. The future of regional tourism is a live issue in this state.

In the July installment of our regular series of industry forums, we pulled focus on regional Victoria. When the forum took place, lockdown had just been reimposed on metropolitan Melbourne, shutting it off from the rest of Victoria, and borders with New South Wales and South Australia were also closed.

What can regional businesses struggling to make ends meet do in these circumstances? Is the future of the industry at stake? What are the opportunities presented by this moment? And what do we have to gain by getting this right?

We asked a panel with a broad and deep understanding of how regional hospitality works and what it does for Australia’s economy: Felicia Mariani (Victorian Tourism Industry Council), Andrew Ryan (Mitchelton Wines) and Alla Wolf-Tasker (Lake House). This is what they had to say.

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The lay of the land

Regional tourism employs 600,000 people directly and more than a million people indirectly in Australia (as at December 2019).

“There’s a lot of activity, jobs and community resilience that’s built around tourism, especially in communities where traditional industries have failed,” said Alla Wolf-Tasker, co-owner of Lake House in Daylesford.

When Lake House opened, she says, there were only eight other businesses on the main street in Daylesford. It’s a scene that’s hard to imagine today.

But it’s not all about destination diners like Lake House or Brae. As Wolf-Tasker pointed out, everything from butcher shops and cafes to farmgates and pubs are part of the food and wine economy that’s a huge driver of regional tourism.

The major feature of regional Victorian tourism – and the thing that’s currently a central issue – is that visitors mostly come from Melbourne and other parts of the state. Felicia Mariani, CEO of Victorian Tourism Industry Council, shared some research by Deloitte that showed only 20 per cent of visitors to regional Victoria came from outside Victoria. This was compared to rates between 30 per cent and 50 per cent in some other states.

Without that Melbourne customer base in the short-term, businesses like Andrew Ryan’s Mitchelton winery and accommodation are almost back in lockdown, after having a full hotel for most of June.

“By shutting down metropolitan Melbourne, they have shut down regional Victoria, in essence,” said Mariani.

What businesses can do

With the current lockdown restrictions on Melbourne in place until at least mid-August and the possibility of interstate border closures lasting much longer than that, businesses need to be looking at their immediate survival.

The panel had the following tips:

  • Negotiate and have the tough conversations – Calling your suppliers, your bank and your landlord is something to be done sooner rather than later. These are difficult conversations to have but it’s important to call them before they start calling you.
  • Defer outgoings and minimise costs – In those conversations, speak about what you can defer and until when. But be realistic: deferring payments for longer means a bigger bill to pay in six or 12 months. Will your trade levels be able to meet that level of debt?
  • Discounts on overheads – Ryan suggested exploring discounts rather than deferments in some cases, to avoid that bill shock once various grace periods expire.
  • Inform yourself – Do some research on what support is available, the timeframes around packages and measures, what your rights and responsibilities are, and what trading restrictions apply to your business. The VTIC has created a suite of COVID-19 resources that explain in layperson’s terms what the state of play is, where to find support and how to prepare for reopening your business when the time comes.
  • Maintain quality – It’s important to continue to offer your customers a great product. Ryan encouraged operators to really think about the customer and their mindset right now, offer them value, and believe in the quality and integrity of what you’re doing.
  • Offer something different – Some businesses are in a position where they can try something new and reimagine what their offer is. Could you do hampers, produce boxes, an online store, virtual cooking classes or baskets of products from your region to sell interstate?
  • Band together with your community – “Lean on people,” encouraged Wolf-Tasker. Great ideas could come out of it, or at least a sense that others are in the same predicament as you. Working together and supporting one another is one of the strengths of regional communities – make the most of it.

What government can do

The panel discussed some of the underlying issues that regional operators have been facing for many years now, with suggestions for changes that could speed up recovery in the regions.

  • Simplifying planning frameworks – Referred to as “the red tape, blue tape and green tape” by Wolf-Tasker, Victoria’s planning frameworks are some of the most complex in Australia according to the VTIC. While everyone on the panel agreed on the need for balancing development with community needs, complex regulations can be a disincentive for investors. “We are falling behind in that game-changing infrastructure that caters to the needs of a new consumer,” Mariani said, pointing to Great Walks of Australia and Luxury Lodges focusing on other states and territories in recent years.
  • Addressing workforce shortages – Finding workers, especially skilled ones, is a challenge that the industry believes will only be worsened by the fallout of COVID on tourism. For “people who have left the industry out of necessity, it will be a struggle to lure them back,” says Mariani. Incentives, targeted programs and training will become critical.
  • Payroll tax and penalty rates – Businesses who do most of their trade on weekends and public holidays are disadvantaged by penalty rates, says Wolf-Tasker. Looking at remedies such as refunds or subsidies could be a step in the right direction.
  • Using fringe benefits tax to encourage dining – Wolf-Tasker pointed to the example of New Zealand allowing deductions for entertaining within its FBT scheme. The rules allow for 100 per cent deductions in regional areas and 50 per cent in cities. When she visited in the last five years, “the main street of Wellington on a Thursday lunch was just booming. And the regions were booming, too.”

Retooling the industry for the future

“Never let a good crisis go to waste,” said Mariani.

Her thoughts were echoed by her fellow panellists, who encouraged operators to think hard about some of the bigger issues that will determine the future prosperity of Victorian regional tourism.

The key issue in Mariani’s mind is marketing regional destinations to visitors outside Victoria.

“How do we reposition Victoria?” she asked. “What do we want this state to be famous for? What role do our regional destinations play in driving that home?”

The opportunity created by international travel restrictions is a great one, and regional Victoria has a large gap to close in its interstate visitor numbers, as the Deloitte report showed.

She also pointed to the changed consumer mindset post-pandemic. Early research is showing preferences for holidays that feature wide open spaces, nature, health and wellness, a clean and green quality, and food and wine.

“Regional destinations have these,” she said.

Wolf-Tasker encouraged her fellow operators to rethink everything and imagine how they might like to operate on the other side.

“What do we have to lose? What do we have to gain if we do things right?”

By Emma Breheny

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