Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Reinventing Asia’s tourism sector: coronavirus response calls for new tactics

By Murray Hunter - posted Friday, 22 May 2020


Long after the Covid-19 emergency restrictions and lockdowns have been lifted, one of the last industries that will recover is international tourism, which has been decimated by border closures, leaving air transport and airports to grind to an almost-complete halt.

Most hotels are empty, temporarily closed, with some never to open again. Resorts, tourist attractions, sporting complexes and golf courses, entertainment venues, and restaurants are shut down. Tour operators are dormant without any incomes for at least three months. This has cost billions of dollars in revenue, millions of jobs, with thousands of companies closing their doors never to reopen.

The peak Asian tourist season has been lost, along with the annual Chinese New Year travel frenzy. The Songkran festival in Thailand and Easter were cancelled. Muslim Eid this year will either be cancelled or heavily restricted. Great international sporting events like the Tokyo Olympics, Formula One, International Tennis, Tour de France, and football calendars have all been cancelled. Parks, beaches, forests, entertainment precincts, and promenades are eerily empty.

Advertisement

International tourism is an important economic contributor across the Asian region. Thailand had almost 40 million international visitors last year. Estimates of tourism contribution to GDP vary between 14-21 percent, depending on how it is counted. Importantly, Thai tourism employs about 3 million jobs, or 10 percent of the workforce, and supports many small and micro-businesses.

Malaysia had 26 million international visitors in 2019. The government has been promoting tourism in an effort to decrease its reliance on the export of primary products. Tourism contributed more than 13 percent to GDP in 2019 and employed 3.4 million people, or 23 percent of the workforce in 2017. The government has long promoted domestic tourism with its Cuti Cuti Malaysia (holiday in Malaysia) campaigns, with a large stock of budget hotels, resorts, and homestays across the country. Singapore had 19.1 million international visitors last year, as an important regional tourist hub, contributing around 4.1 percent to GDP.

Vietnam, where the government is trying to diversify the economy away from manufacturing, received approximately 18 million visitors in 2019. Currently, tourism contributes around 6.6 percent towards GDP, employing almost 2 million people, or 3.6 percent of the workforce.

Indonesia is growing in popularity as an international tourism destination with 16.1 million international arrivals in 2019. Tourism contributes around USD 62 billion of just under 9 percent of GDP. The tourism sector employs around 4.5 million people or around 100 percent of total employment. Apart from Bali and East Java, Indonesia is geared towards the well-developed domestic tourism sector, which still dominates.

The Philippines had almost 9 million international visitors last year, with the sector employing around 5.3 million people and contributing around 12.7 percent of GDP. Cambodia and Laos had 6 million and 4 million international visitors respectively last year. Myanmar had 6 million international visitors last year, contributing 6.8 percent to GDP and employing more than one million people. Tourism has been rising very quickly in Cambodia: it's becoming a very popular place, contributing around 32 percent to GDP and employing almost one million people. Laos is much less dependent on tourism, accounting for approximately 13.7 percent of GDP in 2017. Some 80 percent of the region's tourists come from within the region itself. China is an important outbound contributor with, for example, Thailand receiving 10 million Chinese tourists representing 27.5 percent of tourist arrivals.

The impact of the loss of international tourism will be different on each country within the region. Least affected will be Vietnam and Laos. Malaysia and Indonesia have large domestic markets that can partly compensate for the loss of international tourists. Thailand and Cambodia are the most vulnerable countries.

Advertisement

A number of challenges facing sections of the tourism industry existed before the Covid-19 crisis. Speculative investment in hotels resorts, homestays, restaurants and other tourist attractions have been made across the region without adequate due diligence around true market opportunities. As a result, a large number of underperforming, cash-strapped projects were already floundering. In many places, hotels and resorts are in oversupply.

Some resorts have been built in places where tourists don't go, a long way from restaurants, food stalls and shopping centres, without any thought to logistics and marketing. A rush to cash in on the homestay movement has left places like Perlis, Malaysia without enough long-term rental accommodation stock. Many white elephants have been built without business wisdom and craft expertise.

Even before the Covid-19 crisis, the number of Chinese visitors to Thailand had dropped due to well-publicized fatal accidents, forcing some small to medium establishments specifically aimed at Chinese clientele to either go up for sale, or close up. A recently introduced Hotels Act in Thailand requires hotels to keep records and pay tax. It has caused much owner anxiety, leading to many boutique hotels, resorts, and guesthouses going up for sale. In Malaysia many long-established local Chinese-owned and managed medium hotels are on the market due to the difficulty in competing against the new generation of budget accommodation.

Hong Kong hotels suffered low occupation rates over the last nine months due to political problems. With occupation rates down as low as 25 percent, many hotels have closed for renovations or closed down permanently. The two-month forced closure of Malaysian and Thai hotels has led to financial stress that may lead to a rationalization where up to 1,000,000 rooms could disappear from the market.

Underlying profitability within the hotel industry is marginal due to maintenance and operational costs, and the difficulty of raising prices due to stiff competition. Families and corporations who own unencumbered freeholds can survive, but those which have borrowed from banks face a crisis of survival.

Even when hotels can reopen, many large operations rely on weddings, banquets, conferences, and corporate training for up to 35 percent of their income. These events won't be immediately allowed because of the new social distancing restrictions. Developers are eyeing high rise hotel properties for condominiums, shared accommodation, or office space conversions.

Airbnb outlets, particularly those within major cities, have been hit hard as speculative investor hosts leaving the market. This has left a much smaller stock of well-located properties and apartments that rely on local rather than foreign custom. Large restaurants geared towards high volume business such as banquets and buffets will not be able to be profitable under the new social distance restrictions due to their need for high volume.

However, the Covid-19 crisis hasn't been without some positive aspects. The overcrowding of tourist attractions has waned, allowing beaches and parks to regenerate. There are reports that turtles have returned to hatch at Port Dickson in Malaysia. Beaches and coral reefs around Krabi are quickly regenerating themselves. Attractions like Angkor Wat and Bangkok's Royal Palace are now empty, and not likely to be overcrowded for a while to come.

New social distancing regulations has also brought new innovations. A restaurant in Amsterdam has developed an all-weather greenhouse dining concept, which can potentially add charm to the dining experience.

How is the tourism industry going to reinvent itself? Travelling internationally is just going to be difficult this year. A number of regional airlines are in deep financial trouble, and international air tickets will most likely cost around 5 to 6 times what they cost before the covet-19 crisis. Consequently, with international tourism not expected to recommence anytime this year and the negotiation of any kind of Asian travel bubble likely to take months, a domestic tourism led recovery is the only short-term option.

Leisure travel will most probably bounce back before business travel. However, how long that takes will depend how long domestic travel restrictions remain in force. In Thailand, Phuket and Pattaya were especially hit hard by tough provincial lockdowns, but these are probably not the places domestic tourists would want to go because they are expensive. It will most probably be the quieter family-oriented places that locals will want to visit first.

Malaysia, on the other hand, has been driven by public sector seminar tourism. to resorts owned by Government Link Companies over the last decade. It will probably be "hometown" tourism and homestays that will appeal first to a public allowed to venture out once again. Vietnam, very mildly hit by Civid-19 infections, is already seeing this happen through the provinces.

Domestic tourism opens up a completely different paradigm from organized group tourism. Domestic tourists are much more willing to patronize small family restaurants, food stalls, and hawkers instead of large restaurants. Domestic tourists will interact with the local economy much more, thus dispersing money towards owner/operators rather than corporation-owned businesses. Large hotels and resorts that want domestic custom will have to reframe their branding and prices towards this market. We may see a few brand conversions occur within the industry.

The Covid-19 crisis will give some advantage to Vietnam and Cambodia with their low Covid-19 case rates over Thailand, Malaysia, and Singapore. The Tourist Authority of Thailand is eying the concept that it's better to have a million wealthy tourists than five million frugal tourists, and is espousing its desire to develop quality tourism. However, with the high baht and high prices of food and accommodation in busy tourist precincts, European tourists can now get better packages much nearer to home.

The China factor is very important to those countries that want to attract mass tourism. However when Chinese tourists can once again travel it's likely China will punish those countries by restricting travel to countries that showed racial hate towards China. India may now begin using its outbound tourism power as a diplomatic tool in the future as well.

Asian capacities to accommodate international tourism are diminishing with the forced rationalisation of the tourism industry. Airlines are collapsing, both Thai and MAS are in deep financial trouble. SIA needs assistance, and Air Asia is financially strained. Many hotels and resorts will never open again. Many up-market and high volume restaurants will also shut down, because the new social distancing regulations will hinder their ability to be profitable. It's likely two segments of the hotel industry will survive: those owned and managed by large corporations and those small to medium hotels and resorts that are unencumbered by loans and borrowings. New banner brands will emerge as will new innovations.

  1. Pages:
  2. 1
  3. 2
  4. All

Article edited by Margaret-Ann Williams.
If you'd like to be a volunteer editor too, click here.

Originally published in Asia Sentinel



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

3 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Murray Hunter is an associate professor at the University Malaysia Perlis.

Other articles by this Author

All articles by Murray Hunter

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Murray Hunter
Article Tools
Comment 3 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy