Australians are cocooning. In full disclosure, I had not heard of this term until recently when I was discussing the impacts of housing on domestic tourism with Felicia Mariani, who used the word to describe the situation so succinctly. Cocooning is a human behaviour that was first coined in the 1980s and in short, it can be described as “staying inside one’s home, insulated from perceived danger, instead of going out.”
In many ways, caravan and camping is a form of ‘travel cocooning’ as Australians retreat from international travel to the safety of domestic holidays. We seek familiarity, low risk and to reconnect with the social values of family, friends and community. While travelling at home is mandated right now given our international border closures, historical recreational vehicle manufacturing data shows people seek the safety of caravan and camping in times of uncertainty. It’s also one of the reasons caravan and camping was so quick to recover.
While we tend to travel at home more, we are also more likely to spend on items that make our ‘cocoons’ more comfortable: we renovate, landscape, buy a second car, buy furnishings and we build new homes. In fact, the government through their financial stimulus measures, has turbo charged our economy through building grants, superannuation access and wage subsidies. The metrics for this are so hot right now, you’d be forgiven for thinking you are looking at a Bitcoin chart!
While cocooning has spurred the growth in caravan and camping to heights we have not seen in many decades, especially from a manufacturing perspective, the demand for housing and new vehicles is putting intense pressure on supply chains. Let me unpack this further for you.
Right now, Australians are saving for one of four things: a holiday, a rainy day, to invest or to spend on their house. Although as seen in the below chart, most savings plans are directed towards the house. If we take these planned savings along with the current economic demand trends from the charts above, we see there is significant pressure growing on commodities.
This behavioural trend is not just unique to Australia; however, it is evident in many advanced economies around the world – people are hunkering down. This is leading to enormous pressure being placed on commodity supply chains including timber, rubber, iron ore and steel. The below charts show the demand impact over the last 12 months.
However, this issue is not just demand related, it is also being acerbated by COVID-19 disruptions and challenging trade relations. To provide context, Australia relies on timber imported from Indonesia and Malaysia. These two countries are reliant on migrant workforces from across Asia, of which many of these workers have returned home due to COVID-19. This is leading to supply shortages and the mass purchasing of commodities by larger markets i.e. the US. There is no doubt that COVID-19 has highlighted the unique challenges of globalisation that need to be overcome.
So, how does this all relate to caravan and camping sector and domestic tourism? In short, we need timber, plastics, steel, rubber and so on, to manufacture caravans, motorhomes, cabins, and components. We need it for the vehicles that tow our caravans and we require commoditites for our OEMs to be able to access raw materials to construct the components that go into many of our sector’s finished products. These supply issues are causing real world challenges:
- Order books for recreational vehicles are blowing out, many Australians are now waiting anywhere between 6 to 18 months before they can hit the road and travel. Whilst they are waiting, they are not travelling.
- The cost to source goods and components is increasing as demand outstrips supply; international ports become lotteries as businesses compete to get their goods on and offloaded; and sourcing locally has a higher cost. This all-impacts manufacturing business and consumers as prices increase.
- Cabin supply, which provides vital accommodation for holidaymakers and workers alike in regional Australia, is disrupted. This is causing challenges as we see crowding out occurring as workers and holidaymakers compete for the same accommodation.
These framing conditions are capping the industry’s ability to scale up to support Australia’s economic recovery as well as the ability for businesses to increase capacity. We also cannot forget about our cocooners, as a backlog of new home building and renovations are being pushed into late 2022, these Australians are now in a holding pattern as builds are delayed yet mortgage repayments begin (and lets not mention the potential for interest rate increases!).
Why does this all matter? Well simply put, with the loss of international tourists from the Australian market, who on average spend more, we need more Australians undertaking holidays to fill the $52 billion gap. So, whilst cocooning Australians has been a positive for the quick recovery of the caravan and camping industry, it is now capping the sector’s ability to increase domestic tourism demand.
Now you may say ‘Australians are travelling, and they only get so many days off a year’. However, I will leave you with this last insight. In May 2021, AustraliaNOW research suggested that Australians have an average of 21 days annual leave accrued. Of these people, 53% of them stated that they are holding it for when international borders open. With Deloitte forecasting that we maybe waiting until 2024/25 until international travel returns to previous levels, that’s a long time for Australians to be holding onto their leave.
Improving supply chain flow is critical if the caravan and camping sector to sustain its growth and support economic recovery. If we can get just 1 million Australian households to spend an extra two nights caravan or camping in a year, this would equate to an extra $390 million of visitor expenditure in addition to the $8 billion that is already generated annually. This would go a long way in supporting regional communities, economies and industry businesses.