A $20 million push by the state government to boost tourism in regional NSW has fallen flat, with the number of international visitors heading outside Sydney falling sharply over the past year.
The NSW government has a target to double overnight tourism expenditure by 2020 through Destination NSW, an agency with a $135 million annual budget.
Despite Destination NSW pumping $18 million into regional promotions over the past year, an Auditor-General's report found visitor numbers plunged by 43,000 to 570,000, a fall of 7 per cent in one year.
The Auditor-General, Peter Achterstraat, said the only explanation he had received from Destination NSW was that the slide was due to a fall in the number of backpackers.
Industry experts said a shrinking number of travellers from Britain, the US and New Zealand last year had hit the regions hard. Those markets had been discouraged by the high Australian dollar.
With foreign visitor numbers to Sydney down just 0.6 per cent to 2.6 million, it was believed the regions were being affected because Asian tourists, the main growth area of the market, preferred to stay in Sydney.
Tourism Industry Council NSW general manager Andrew Jefferies said: "There are certainly changes in the mix. Most international tourists from China are first-time travellers who don't disperse as much as the traditional visitors from the UK, US and New Zealand."
The changing traveller mix raised questions about whether Destination NSW had the right priorities in its promotional budget.
Mr Achterstraat found the agency spent $18 million on marketing for regional areas compared to $8 million spent on Sydney-focused programs.
In turn, spending by international tourists in regional areas fell due to a 5.6 per cent decline in international visitors. Foreign tourists spent $660 million in regional areas in 2011-12 compared to $699 million in the previous year.
International visitors spent $5.44 billion in Sydney, and fractionally less than $5.45 billion in 2011.
Labor's tourism spokesman, Steve Whan, said Sydney and NSW should be two of the easiest destinations to promote.
"The O'Farrell government has little chance of doubling tourism by 2020 when in their first two years, the numbers are going backwards," he said. "A one-off round of funding is no substitute for working with Regional Tourism Organisations to put in place ongoing tourism strategies for country NSW."
A spokesman for the NSW Tourism Minister, George Souris, blamed the higher Australian dollar and the near 30 per cent rise in the cost of working holiday visas for keeping away travellers from traditional markets.
"Visitors from these traditional markets are more inclined to visit regional NSW overnight, including working holiday visa travellers. Visitors from non-European and emerging markets are traditionally less inclined to visit regional NSW overnight. However these visitors make day trips to regional NSW destinations."