Wollongong's Lord Mayor believes a shortage of high-quality accommodation, and poor transport links to Sydney, have contributed to Wollongong lagging behind other major cities in terms of overnight visits.
New figures show fewer Australian travellers chose to stay overnight in Wollongong than in any other major Australian city, in the year to March.
Wollongong's average population growth rate between 2001 and 2011 was also the lowest of Australia's top 18 cities.
The figures were included in the third State of Australian Cities report, released by the federal government this week.
It showed that Wollongong hosted close to 1.4 million domestic visitor nights in the year to March, fewer than cities like Toowoomba, Geelong and Newcastle, and a slight drop compared to 2008.
However, international visitor nights rose slightly, from 1.1 million in 2008 to 1.2 million in 2012.
Lord Mayor Gordon Bradbery said domestic tourism generally was under pressure from the high Australian dollar.
But he believed tourism in Wollongong had a bright future, along with residential opportunities.
"The issue is that we haven't got an adequate share ... and I think that's related to a couple of things in as much that I think we need more high-standard hotel accommodation down here," he said.
"Not only that, the connectivity with Sydney, even though we are so close to the international airport, for people to jump on a train and come down here is a long and laborious task."
IRIS Research released figures this week showing tourists spent more than $700 million in Wollongong in the 12 months to June, the majority coming from domestic visitors.
Destination Wollongong general manager Mark Sleigh said the city was "on the cusp" of becoming Australia's "leading regional centre".
He argued that June data from Destination NSW showed strong growth in domestic overnight stays, compared to 2011.
He also said the State of Australian Cities report did not recognise day trips, which were one of the city's strengths.
"Other cities, due to their distance from major populations, require an overnight stay, whereas Wollongong is an hour down the road from Australia's largest city, so while our overnight numbers are never going to be as comparatively high, we have a different market."
The Australian Cities report also showed more Wollongong residents owned their own homes in 2011 than in other major cities, with 52.4 per cent of homes owned outright. That was a significant decrease since 1996.
Wollongong's labour force participation was the lowest of the cities surveyed. Male participation fell between 2008 and 2012, while female participation increased over the same period.
Wollongong's average population growth rate of 0.7 per cent was well below the national average of 1.5 per cent.
STATE OF WOLLONGONG
Australia’s ninth largest city
Lowest annual average population growth rate for major cities of 0.7 per cent
1.4million domestic visitor nights to March 2012, the lowest for major cities
52.4per cent of homes owned outright, the highest proportion for major cities
Highest proportion of government housing in 2011
57.2per cent labour force participation rate, lower than the national average
Decreased male participation, increased female participation