Dollar sinking tourism mecca

THE sighs of relief from the mortgage belt as inflation slowed were subsumed in sunny Cairns by the sound of teeth gnashing.

Dive boat operator Perry Jones, centre, with crew Matt Quintal and Kate Godfrey, has slashed the cost of a trip from $105 to $20. Picture: Brian Cassey

THE sighs of relief from the mortgage belt as inflation slowed were subsumed in sunny Cairns by the sound of teeth gnashing.

The prospect of another interest rate rise eased, It's peak season in the north Queensland tourism centre, and hotels on The Esplanade should be packed, along with the dive boats heading to the reef.

There's just one problem: business is as bad as anyone can remember.

The boon for holidaymakers of cheap airfares, both here and abroad, and steeply discounted accommodation is turning the screws on operators who have been forced to cut prices to the bone to compete with the cheap deals overseas.

A near-record 6 per cent slump in the cost of domestic holiday travel and accommodation in the June quarter was instrumental to the lower than expected CPI result, most likely putting paid to a pre-election rate hike by the Reserve Bank.

While that was very good news for Australians with a mortgage and money left over to travel, it reinforced to Perry Jones how parlous his business had become in Cairns, ground zero for the industry's woes.

His company, Ocean Freedom, has been "giving away" $105 dive trips for $20.

"Everyone's doing it," he said of the local discounting. "We've had a 30 per cent drop in income in the last two years."

Leisure group Capta is waiving entry costs for locals to drum up business. A single-entry family pass to its Wildlife Habitat in Port Douglas would normally cost $75, but the latest offer gives Cairns residents unlimited entry for a year to this attraction and other Capta sites for just $100.

Cairns hoteliers have not seen business so bad since the pilots' strike king-hit the tourism town in 1989.

Peter Blackburn, who chairs the north Queensland accommodation division of the Queensland Hotels Association, said local hotels and resorts were locked in an unsustainable price war. "The pilots' strike had an end to it and this doesn't seem to have an end in sight," he said. "It's much worse."

Like other tourist centres, Cairns is victim of a high dollar, that effectively stretches further when spent outside Australia, and heavy discounting in international tourism markets.

The number of Australians vacationing abroad increased by about a quarter last year, and is on track to be even higher this year. At the same time, domestic tourism dropped to an 11-year low last year.

The terms of trade for industry --the difference between what Australians spend overseas, and the money foreign tourists bring into the country -- has crashed , according to the Tourism and Transport Forum. Contributing $3.58bn to the national economy in 2001-02, tourism is forecast to shift $8.9bn offshore this financial year.