Australia was 17th among worldwide destinations for Chinese tourists on package holidays in the second quarter, lagging behind Russia in 13th place, Vietnam in seventh and leader Thailand, according to the China National Tourism Administration. The halcyon days of the 1980s and early 1990s - a time when Australia's economy transitioned to services and Crocodile Dundee lured Americans down under - seem a distant memory.

"Five-star hotels look too old, service is not so good and prices are high for what you get,'' said Kevin Xu, general manager of Grand City Tours, which says it's the biggest Chinese travel agent in Australia. "In other parts of Asia, hotels are new and service is excellent. There are also not enough four-star hotels in the Sydney and Melbourne CBDs and in high season they increase prices a lot.''

Xu's assessment contrasts with the self-congratulation among government and tourism officials when Australia recorded more than one million Chinese visitors last year.

The reality is the country is stuck in a 20th-century time warp after diverting investment to the resource industry to cash in on Chinese demand for iron ore and coal. But as commodity prices have fallen and China itself transitioned toward a more consumer-oriented economy, Australia once again needs a strong services sector with tourism as its centrepiece.

The country's pristine coastline, sparkling Sydney harbour and the vast outback were magnets for US and Japanese tourists late last century and they remain a major lure for visitors. In TripAdvisor's 2016 travellers' choice awards, Sydney and its Opera House still - just - ranked in a list of the top 25 global destinations and landmarks, while Whitsunday Island off the Queensland coast was named the world's 12th-best beach.

Xu, who has run his company for 22 years, acknowledged that Australia's tourism bodies have helped ensure there are enough Mandarin speakers available to help Chinese visitors, and cited Queensland's Gold Coast region as having good facilities and services.

But that aside, the country needs to do better to really capitalise on China, which is the world's biggest spender on foreign tourism. Australia's hotels and resorts and their level of service are nowhere to be seen in TripAdvisor's roll call of the world's best.

"We can do a lot more,'' said Matt Bekier, chief executive officer of casino and hotel group Star Entertainment Group. "If you look at Australia's market share in the flow of Chinese tourists, we're losing market share. There are more of them going to Switzerland, which is harder to get to and more expensive. Capacity is a big deal. Where do they go? We don't have the hotel rooms. There's just not enough capacity here.''

His concerns on hotel space echo those of Xu. Tourism Australia has said it recognised about five years ago the need for new, higher-standard hotels, and has since been marketing tourism projects to Chinese and Southeast Asian investors. It's cited Dalian Wanda Commercial Properties's plans to invest about $2 billion on Sydney and Gold Coast projects including hotels and Sunshine Insurance's purchase of Sydney's Sheraton on the Park as success stories.

China is Australia's most valuable tourist market, with visitors spending more than $7.7 billion per annum, according to Tourism Australia, a figure it estimates could climb to $13 billion by 2020.

Indeed, the Australian Chamber of Commerce and Industry said in July tourism could become the country's biggest export earner within a decade, but needs sound government policies to help drive the industry. Tourism could rake in almost $68 billion by 2025, it cited Tourism Research Australia as saying, from $39 billion in the year through June.

That's a great opportunity for Australia, says Paul Bloxham, chief economist at HSBC Holdings. To give an idea of the potential of China's outbound travel market, he cites his favourite statistic: that only 5 per cent of China's more than 1 billion people hold a passport.

"It's not as obvious that Australia has a comparative advantage in tourism like it does in resources,'' said Bloxham. "We need to work harder if we're going to be competitive in the tourism space.''

Bloomberg