Tasmanian tourism chief Luke Martin says the federal government should extend the Bass Strait passenger vehicle equalisation scheme in Tuesday's budget before it winds up next month.
Mr Martin said the scheme had boosted travel on the Spirit of Tasmania which, in turn, benefited the state's regional areas.
"Extending that seems like the logical thing they could do," he said.
IN OTHER NEWS:
"For $6 million, it would have generated hundreds of millions of dollars of visitor spending in the state."
He said Prime Minister Scott Morrison's message that national borders would be closed indefinitely should be a warning for tourism-based businesses to recalibrate towards the domestic market.
Mr Morrison told newspapers over the weekend there was a long way to go before the country opened its borders for international travel.
He said there was not yet enough evidence to prove COVID-19 vaccines did not prevent transmission of coronavirus.
For the year ending in December, visitors to Tasmania dropped by 64 per cent to 485,300 in 2020 and expenditure dropped by 56 per cent to $1.11 billion.
There were 1.35 million visitors that spent $2.54 billion in the state over the 12 months prior.
There were 282,900 international visitors to the state in 2019 that spent $555 million during their stay.
Of these, 711,700 visited the North, 512,900 visited the North-West and West Coast, and 357,400 visited the East Coast.
Mr Martin said as long as international borders stayed closed, people would continue to travel at home.
"We're going to have parts of industry that do well like now, but for those businesses that are reliant on international tourism, they do need to see how they can reset their business," he said.
"I don't see how hanging on and waiting until the end of the year is something anyone could plan on at the moment.
"We're not talking about having an international bubble at the end of the year."
Mr Martin said tour operators in Tasmania almost exclusively relied on international visitors and business from cruise ships.
He said some accommodation businesses and high-end restaurants that had heavily geared themselves towards the international market had found they have had to slowly transition.
"Now is the time for them to realise that there is a really vibrant domestic tourism market and they've got to reset their products and marketing for that market," Mr Martin said.
He said Tasmania's tourism sector was in a far better position that some major Australian cities and tourism regions, such as north Queensland.