Nigel Teasdale , Partner, Bangkok office, provides us with an insight into trends out East...
A view from the East – opportunities and challenges for the tourism sector in south-east Asia
According to the latest report from the United Nations World Tourism Organisation (UNWTO) tourist numbers in south-east Asia (SEA) increased by 10% in the first four months of 2018. This is the largest percentage increase of any of the 13 regions as classified by UNWTO and exceeds the global average of 6%. Nigel Teasdale from Arc Consulting Partners discusses some of the drivers and the challenges of this growth.
While it continues to be true that many of the arrivals to the region may broadly be described as 'backpackers' and consequently deliver a lower spend, Thailand now sits in fourth place globally, behind only the USA, Spain and France in terms of tourist receipts, achieving US$57.5 billion in 2017. Contributing to this there is, anecdotally, an increasing trend for older more affluent travellers, often empty nesters, to return to destinations that they visited as backpackers, and during these visits, their hotel and ancillary spend is much higher.
A key factor in SEA arrivals is the increasing airlift into and within the region.
Major budget airlines such as Air Asia, continue to expand their network developing hubs, adding new destinations and increasing capacity on busy routes. Smaller budget competitors and scheduled airlines often respond by cutting fares to the customer’s benefit and the lower price point makes regional leisure travel available to an ever widening market.
Alongside this some countries in the region, most notably Vietnam, have relaxed visitor visa requirements, making their destination more accessible and enabling travellers to take advantage of last minute offers from airlines.
SEA hotel and resort development continue apace, typically fuelled by an abundance of attractive sites that offer low barriers to entry in terms of land price, planning restrictions and construction costs. Coupled with this there is a ready pool of mobile, affordable and enthusiastic labour. Going forward The World Travel & Tourism Council (WTTC) latest research indicates that tourism investment in the region will increase from the 2017 level of US$ 48.8 billion to US$ 86.8 billion by 2028, so the pipeline of accommodation and ancillary facilities to support the increasing airlift looks secure.
The risks to and challenges of this rapid growth come in a number of forms. Regionally the airline industry does not enjoy a strong safety record, and with at least one recent accident attributed to poor maintenance, there must be a suspicion that the rapid expansion and price competitiveness is leading to corners being cut. Furthermore in some destinations the airport infrastructure is lagging well behind the passenger growth, leading to poor arrival/departure experiences.
Natural disasters also pose a threat. There has recently been an increase in seismic and volcanic activity in particular in Indonesia, leading to tsunami damage. The Philippines, a country with huge tourism potential, also lives under the constant threat of earthquakes and tropical cyclones.
At a destination level the ever increasing visitor numbers at some honeypot locations, has led to overcrowding issues to the extent that the existing infrastructure cannot cope. The Philippines’ government closed the whole island resort of Boracay for six months during 2018 for an ‘environmental rehabilitation’. Around the same time the Thai government closed Maya Beach on Koh Phi Phi Leh Island (made famous by ‘The Beach’ movie) for four months, in a bid to halt damage caused by tourists. The hope was that the closure would allow the sea life and battered coral reefs to recover.
There are many other fragile locations in the region that would benefit from similar treatment, however the strong voice of an often relatively poor local population, that relies solely on tourism for income, is a major disincentive to such projects and as a result, these destinations risk gradually losing their cachet. Managing these competing demands may prove to be the greatest challenge that the region faces.
Nigel Teasdale based in Bangkok, Thailand, is the south east Asia partner of Arc Consulting Partners a specialist industry advisory firm in London. Arc assists owners and investors to identify, appraise and maximise the performance of businesses and development opportunities in hotels, resorts and hospitality throughout Europe.