KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...

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Commercial-in-Confidence KI Traveller’s Levy Impact Assessment TABLE 4.9: PRICE ELASTICITY SENSITIVITIES, OPTION 1, 2011 Low Base High Levy rate $8.55 $8.55 $8.55 Change in visitors -2,300 -4,620 -6,930 Domestic overnight visitors -1,190 -2,370 -3,560 International overnight visitors -400 -790 -1,180 Day visitors -730 -1,460 -2,190 Change resident trips -840 -1,690 -2,530 Change tourism expenditure ($real) -$0.94m -$1.87m -$2.81m Levy revenue ($real) $1.83m $1.80m $1.77m 4.5.2 DEMAND GROWTH While less significant in the short term, over time, the levy revenue raised and the tourism expenditure foregone will depend on growth in baseline demand for visitation to KI. To test the impacts of growth diverging from the parameters in Section 4.2.1 a ‘high case’ (25% increase) and ‘low case’ (25% decrease) for demand growth have been modelled. As the results in Table 4.10 below show, the modelling, even over the longer term, is relatively insensitive to changes in demand growth. TABLE 4.10: FORECAST DEMAND GROWTH SENSITIVITIES, OPTION 1, 2011 Low Base High 2011 2011-19 2011 2011-19 2011 2011-19 Levy rate $8.55 $8.55 $8.55 Change in visitors -4,590 -42,570 -4,620 -43,330 -4,660 -44,110 Domestic overnight visitors International overnight visitors -2,360 -21,670 -2,370 -21,910 -2,390 -22,150 -770 -7,570 -790 -7.950 -810 -8,340 Day visitors -1,450 -13,320 -1,460 -13,470 -1,470 -13,620 Change resident trips -1,690 -15,460 -1,690 -15,460 -1,690 -15,460 Change tourism expenditure ($real) -$1.86m -$17.20m -$1.87m -$17.45m -$1.88m -$17.71m Levy revenue ($real) $1.79m $16.65m $1.80m $16.96m $1.82m $17.29m 4.5.3 THE IMPACTS OF IMPROVED QUALITY To this point, the modelling results have considered the impacts of a levy on the KI tourism industry purely in the context of the price impact, without accounting for the potential impacts of improved tourism infrastructure on visitation. However, there are a number of reasons to suggest that an improvement in tourism infrastructure – particularly roads – may in fact have a positive impact on tourism visitation. 31

Commercial-in-Confidence KI Traveller’s Levy Impact Assessment Visitor dissatisfaction with current road standards The corollary of the high level of road usage by tourists is the importance of road quality to the KI tourism experience. There is evidence that the value of the tourism experience is diminished by the current state of the roads, with a large proportion of visitors identifying road condition as a detractor from the tourism experience. Indeed, responses from visitors leaving the Island suggest that road and road infrastructure are: the number one source of dissatisfaction with their visit to Island; and the number one suggested key improvement. Visitor responses with regard to improved road standards Visitor responses from the Kangaroo Island Traveller Survey provide insights into how visitation to the Island might respond to a levy if it was associated with improved or bettermaintained roads. Noting that at this stage the findings reflect the responses of 330 surveys fielded over a relatively short space of time (the latter suggesting any seasonal differences in visitor perceptions may not be captured), several key results emerge: around 80% of visitors indicate that a modest Traveller’s Levy would not impact on their decision to visit the Island; around 20% suggest a modest levy coupled with improved/better maintained roads would increase their likelihood of re-visiting; and around 30% suggest a modest levy coupled with improved/better maintained roads would increase their likelihood of recommending the Island to others. 4.5.3.1 MODELLING THE IMPACTS Overall, there is a genuine likelihood that the improvement in tourism infrastructure that accompanies a Traveller’s Levy may – coupled with adequate promotion and marketing – in fact partially or wholly offset the price impact of a levy. This may be through increased revisitation or – in light of the fact that for many, KI is a one-off experience – through positive reputation impacts. Indeed if the improvement in infrastructure is perceived sufficiently important to tourists’ decisions, it may in fact increase visitation. In this case, the Traveller’s Levy scenario results in increased visitation and hence not only greater revenues for Council, but greater tourism income for the Island as well. Determining the magnitude of such impacts is hampered by limited quantitative information on how visitation might respond to improvement in the quality of their tourism experience. Though data from the Traveller Survey is instructive, it is insufficient to reliably undertake such an exercise. The approach taken here therefore is largely illustrative, with the impacts of an increase in visitation equivalent to the average decrease under Option 1 modelled (on average, 2.8%). This is not to imply that a 2.8% increase is the likely outcome, but rather to illustrate what the impacts of a change of this magnitude would be. As Table 4.11 shows, this scenario results in an additional 4,300 visits annually, generating $1.45 million in additional tourism expenditure, while at the same time raising greater levels of revenue over time. 32

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