The Zurich-Mandala Climate Risk Index: The impact of climate change on the Australian tourism industry

The tourism industry plays an important role in Australia’s economy

Australia’s tourism industry has long played an important role in the nation’s economy and this will continue into the future.

Domestic travel remains the most economically significant form of tourism. Of the $173 billion in tourism spend in the year ending March 2024, 82 per cent was from domestic day and overnight travel.

However, the tourism industry – particularly in regional areas – is undergoing a period of significant change in the face of more frequent and severe weather events and other conditions driven by climate change.

Travel demand has already reached (and across some measures, exceeded) pre-pandemic levels, adding to the growing pressure on many tourism sites that are already facing increasingly complex conditions.

Governments have invested significantly in supporting the visitor economy. In parallel, but sometimes not in conjunction, funds have also been dedicated to protecting many natural and heritage sites across the country.

Climate change is significantly altering many of Australia’s tourism destinations

Climate change is already impacting many of Australia's tourism sites. Even under modest climate scenarios, this impact is expected to worsen. The Zurich-Mandala Climate Risk Index has been used to analyse the risk of climate change to 178 tourism assets, including major airports. The index uses IPCC climate modelling along with proprietary climate impact assessments to understand the unique risks faced by individual sites.

The analysis found that half of Australia’s tourism sites and airports currently fall into the highest three climate risk categories. Under the intermediate SSP2-4.5 scenario, assuming 2 degrees Celsius of warming by 2041-2060, this is set to rise to 55% of sites by 2050. Under a more extreme (3 degrees) scenario, 80% of tourism sites will experience an increase in risk between 2025 and 2050.

Analysis also found that risks varied significantly by site type (natural or man-made) and category (for example, beaches versus vineyards or rainforests). The index found that Queensland has both the highest number of sites facing risk overall (79%) and the most sites in the highest risk category compared to any other jurisdictions.

In terms of economic impact, similar revenue reductions experienced following the bushfires of 2019/20 could jeopardise up to 176,000 jobs nationally, 65 per cent of which are outside capital cities.

More must be done to ensure tourism is resilient to the reality of climate change

In the face of a changing climate, governments should consider the significant impact of natural perils – such as drought, flood and fire – on Australia’s tourism economy.

Investments should be made to improve the resilience of these assets against these various risks.

For natural sites, this requires a balance between retaining natural beauty and ecosystem balance, whilst using man-made interventions to mitigate and diversify risk.

More emphasis should also be placed on site planning for man-made sites, such as airports, railways, roads and museums. This includes location and material diversification to adapt structures to a complex mix of natural perils they may face.

Governments should also ensure climate resilience is a key pillar of its tourism strategies. Likewise, the tourism economy should be considered as part of government climate, environmental and heritage strategies.

Read the full report here.