Trend Setter

10 Trends That Will Shape The Future Of Asia-Pacific Travel

In the second of a two-part series, the Express Hotelier & Caterer highlights the possible direction of Indian and regional tourism as the industry goes from good to better

In its Asia Pacific Aviation Outlook 2004 report issued in January 2004, the Centre for Asia-Pacific Aviation says the advent of low cost airlines will be one of several factors that will make 2004 a year of massive opportunity for Asia-Pacific airlines, airports and tourism

Infrastructure networks

Throughout the Asia-Pacific region, billions of dollars worth of highways, ports, airports and railway networks are being built to accommodate the growing need for leisure travel, trade and personal mobility. According to the UN Economic and Social Commission for Asia and the Pacific, the estimates of transport infrastructure investment requirements for East Asia alone were US$ 1,000 billion in the decade of the 1990s, US$ 1,500 billion for the decade 1996 to 2005 and more than US$ 1,800 billion for the next decade.

As governments cannot meet this financial need, private sector funding is being tapped. Between 1990 and 2001, port development projects involving private sector participation accounted for US$ 10.97 billion of investment across 12 Asian developing countries. During the same period US$ 3.22 billion was invested in airport projects, US$ 11 billion in railway projects and US$ 34.59 billion in road projects involving private sector participation.

Significant progress is being made in Southeast Asia where the well-known Mekong river is being criss-crossed by a number of bridges. The first bridge opened in April 1994 funded by the Australian government. It has today become the most important source of visitors to Laos.

In 2004, construction is to begin on the second Thai-Laos Friendship Bridge across the Mekong, linking the northeastern Thai province of Mukdaharn and the western Laotian province of Savannakhet. Set for completion in 2005, the 1.6 kilometre bridge is being partially funded by the Japanese government.

The bridge is projected to be an important part of the East-West Economic Corridor that will run from Myanmar, across Thailand and Laos to Vietnam. It will link to the central region of Vietnam, opening up road access to major cities like the former Vietnamese capital of Hue, a UNESCO World Heritage Site, and the port of Danang. A third bridge linking Thailand and Lao PDR across the Huang River, one of the tributaries of the Mekong, is also due to start in early 2004.

A critical section of the long-standing Asian Highway project has also come closer to completion with an agreement by the governments of Thailand, Myanmar and India to develop a US$700 million 1,360-km highway linking the three countries. The highway will link Moreh in the West Indian state of Manipur with Mae Sot district, Tak province, in Northwest Thailand passing through the historic temple city of Bagan in Myanmar. The first phase of 263 kilometres from Mae Sot to Thaton in Myanmar will begin in early 2004 and is expected to cost US$45 million.

Low cost airlines

Over the next six months, the aviation industry in Southeast Asia will be transformed irreversibly by the expansion of the low cost airline phenomenon. The impact will be to precipitate broader changes to airline operations overall, leading to a more sustainable service and operating formula."

In its Asia Pacific Aviation Outlook 2004 report issued in January 2004, the Centre for Asia-Pacific Aviation says the advent of low cost airlines will be one of several factors that will make 2004 a year of massive opportunity for Asia-Pacific airlines, airports and tourism. It predicts among other things:

• Rapid acceleration in liberalisation of air transport services;
• An increasing focus on investment opportunities in Asia, improving the prospects of an array of airport privatisations; and
• An aggressive response from national flag carriers to the need to restructure.

The Centre's managing director Peter Harbison says low cost airlines are revolutionising the point to-point airline market and, in turn, the way all airlines think about costs. Governments too are being forced to re-evaluate their aviation and tourism strategies to embrace the changing environment. The domino effect of new airline entry and of liberalisation, promoted by China and probably by India, could in fact sweep change across the region remarkably quickly, Harbison says.

China alone is planning to build 96 new airports. Major investments in airports are also being made in India, Laos, Cambodia and Vietnam. Bangkok is set to get a new airport in September 2005.

More intra-regional travel

Put all the above developments together, and it becomes obvious that the future of travel within the Asia-Pacific will grow exponentially. This will be further amplified by the influx of Middle East travellers as they swing away from the US due to problems related to discrimination and visa requirements.

Promoting within the region could well mean a significant reallocation of marketing money, possibly away from Europe. Many Asia-Pacific sellers are finding it difficult to continue to maintain a presence at the European travel trade shows, and regional travel trade shows are also emerging.

At the moment, there is a clear distinction between the European market which has a long length of stay but low daily expenditure and the Asia-Pacific market which has a short length of stay but a high daily expenditure. Asia-Pacific tourist boards need to keep a balance between the two and will maintain a presence at the European shows, but may be forced to re-evaluate the situation if travel advisories continue to complicate matters.

Visa problems

As airlines grow and transportation infrastructure takes hold, the single biggest obstacle to capitalising on all this hardware will be the software -- visa policies. For years, many Asia-Pacific governments have allowed visa-free access to Europeans, Americans, Australians, Japanese and other citizens of industrialised countries. Now, they are totally confused on how to handle the future travellers from China, India, Russia and other countries within the region.

Each of these countries have problems with illegal immigrants, crime syndicates and other undesirables that governments want to keep out. However, they also want to ensure that genuine tourists, business travellers, convention delegates and visiting friends and relatives traffic gets fair and easy access. How these visa issues are sorted out, especially in view of continuing security concerns and the 'war on terror', is going to be a major challenge in future.

Indeed, visa issues were among the top items for discussion by ASEAN tourism ministers at their meeting in Vientiane, Laos, in early February 2004. They expressed frustration with growing confusion in the region's visa policies which they feel is impeding the overall goal to facilitate seamless travel by ASEAN citizens within the region and holding up plans for a single visa for travel to ASEAN, based on a standard set of application forms and paperwork requirements.

ASEAN has dozens of sea, air and overland border checkpoints through which visitors can travel. Although ASEAN heads of state signed a landmark tourism agreement last November 2002 declaring in principle a desire to create a visa-free zone for ASEAN citizens by 2005, the declaration has made little progress.

In fact, on February 1, Indonesia reinstated a visa policy, slashing the number of visa-free markets from 48 to 11, with some of the remaining 37 countries becoming eligible for visa on arrival (with payment). This reinstatement has been a long, difficult and controversial process as various government departments struggled with details of which nationalities should require visas, how much they should be charged and at which international checkpoints they should be available. Meanwhile, Malaysia is pushing for the electronic 'MyKad' card which is used to travel between Singapore and Malaysia, to be expanded throughout the ASEAN region.

Hotel investors becoming more cautious

The string of crises have made Asia-Pacific bankers and financiers much more careful. At a recent hotel investors summit, many said that while there is no shortage of money available for hotel investments in Asia, they stressed they are becoming more cautious in their approach, "harsher" in scrutinising the numbers and focusing more on the 'right deal' rather than the amount of money required.

According to Doug Coulter, senior investment officer of the International Finance Corporation, a division of the World Bank, "We are clearly looking for project innovation and a developmental element. But we also want corporate governance and an improved general institutional framework." Gucharan Kadan, Group Head of Commercial Real Estate, Standard Chartered Bank, said the primary focus in terms of hotels will continue to be Asia and Middle East, especially China, Hong Kong, Singapore, India and the UAE. The bank is also involved in other parts of the industry like tour operators.

There is increased investor interest in leisure and boutique hotels in Japan. A lot of institutional capital such as from Germany and Japan is starting to look at Asia. Middle East money is also coming in.

Kadan said in the last two-three years, there has been a swing away by hotel operators from owning property. "Now they want to become only operators. The whole risk profile has changed. This will make it difficult for stand-alone owners to get recourse loans unless they can show how they plan to manage and market their properties,” he said.

Japan slowing down

Once the fastest growing source-market, outbound travel from Japan has hit the skids. According to preliminary estimates, the number of Japanese travelling abroad in 2003 fell by 19.5 per cent over 2002. About 13.29 million Japanese went abroad in 2003 compared with 16.5 million in 2002, a decline attributed to fears over SARS and the US-led war in Iraq. There was only a slight recovery in numbers in the second half of the year, when risks appeared to have receded. This means that Japanese outbound travel is now at the same level as in 1994, when it totalled 13,579,000.

In 2003, Japanese travellers to China totalled 2.25 million, down 22.93 per cent over 2002. Similar declines were experienced by Korea (1.80 million Japanese arrivals, down 22.3 per cent), Taiwan (660,000, down 33.4 per cent) and Guam (660,000, down 15.7 per cent).

However, the Japan Travel Bureau Foundation projects that Japanese outbound travel will surge again and reach 17 million in 2004, the highest level attained since 2000 when a record 17.8 million Japanese travelled abroad. The forecast is based on a variety of economic factors including an expected GDP growth of 1.8 per cent for 2004 and the anticipated continued strengthening of the yen.

Conclusion

Large populations and growing economies in the Asia-Pacific will clearly make it the most important region of the future. The potential for travel is unlimited. While Europe will continue to remain an important source market, it will continue to decline in terms of market share. This will have a significant impact on marketing dollars and how and where they are spent. International travel shows like the ITB will have to work harder to find ways to maintain the interest of Asia-Pacific exhibitors.

(Courtesy: Imtiaz Muqbil, Travel Impact Newswire)