Travel sector watches for rate rise impact on holiday plans

The industry is split on whether increased mortgage costs – and the falling dollar – will crimp demand for overseas trips.

Tourists near Alberta in Canada. The country has become a hotspot for Australian travellers, agents say. Picture: George Rose/Getty

Rising interest rates, a falling dollar – and expensive international flights – are weighing on the travel industry as it attempts to claw itself out of the pandemic.

Travel agents say that’s not yet stopped Australians from spending up on summer holidays.

But Graham Turner, the managing director of the ASX-listed Flight Centre, says there’s no doubt higher interest rates will slice into his group’s revenues.

“For some people interest rates will make a difference. It will be like the (dropping) Australian dollar. It’s another thing to worry about,” he said, adding the most significant issue was the lack of flight availability and the resulting higher airfares.

“Normally flights are quite expensive, (but) the interest rates will just add to that pain a little bit more. Particularly for people with big mortgages. People with no mortgage are not worried,” he said. “(But) if you have a big mortgage and you do a lot of travel it will cause a bit of indigestion.

Mr Turner said the fall in the Australian dollar has added about 10 per cent to the cost of travel to North America.

“This will make people drop the length of their stay and the standard of their accommodation,” he said. “I think Australians love to travel and will do anything but if you are on a budget those (cuts) are things people will do.”

For those without a mortgage there is strong interest in travelling at Christmas, with major interest in Japan despite remaining Covid-19 restrictions, he said.

Skiing in Canada is also popular this year, with flights to Vancouver and Calgary heavily booked, said Mr Turner, adding that Europe and the UK are also popular for the festive season. “They really do Christmas well in places like London, a lot of people go there,” he said.

But Goldman Travel managing director David Goldman, said he had yet to see any difference to booking patterns despite this week’s cash rate hike – the fifth this year – by the Reserve Bank.

“There’s been no change at all. Absolutely not,” he said.

People are booking wherever they can get flights, according to Mr Goldman, who says Italy’s Dolomite Mountains are popular at year’s end. “Fiji, Hawaii and Asia are also popular, it’s wherever you can get flights, it’s expensive to travel because of the reduced air capacity,” he added.

Meanwhile Helloworld chief executive Andrew Burnes said his customers, who are aged mainly in their 50s, 60s, and 70s, are largely outside the mortgage belt and are not loaded up with excessive debt.

“We have not discerned a lot of change,” said Mr Burnes.

“Interest rate rises obviously have a negative impact on younger Australians who have actually got significant borrowings, but that is not our typical traveller,” he said, adding that over many years the group has not detected significant demand changes as a result of currency shifts.

Helloworld has struck a deal with Singapore Airlines and will be selling return flights from most major cities to European capitals starting from $1239 in economy and $6399 in business. “I expect fares on many carriers will go back to their previously competitive levels,’’ Mr Burnes added. “

Meanwhile, Webjet chief John Guscic said there’s been no change in booking patterns over the last handful of rate increases.

“We have seen no change in the demand patterns for Australians to travel. It’s been remarkably consistent,” Mr Guscic said.