Asia Travel Re:Set #21 – 10 Takeaways From 2020 in South East Asia
"COVID-19 will not disappear with a date change. It will be with us for some time."
Hello. Welcome to Asia Travel Re:Set.
The scale of the travel recovery challenge is starting to become clearer.
This week, the UNWTO confirmed that Asia Pacific is being hit harder than any other region by the COVID-19 pandemic. The region recorded an 82% year-on-year shortfall in international arrivals in the first 10 months of 2020.
The global average drop was 72%.
By comparison, Europe experienced a 69% downturn and the Americas 68%.
IATA also unwrapped a box of big numbers. “Right now, international travel is largely shut down in order to manage the risk,” it said this week. “The cost of that could be 46 million lost jobs in the aviation-related travel and tourism sector. That will wipe-out about USD1.8 trillion in GDP.”
At present, the UNWTO cautiously estimates that “a return to 2019 levels in terms of international arrivals could take between two-and-a-half and four years.”
Personally, I think that is optimistic.
The deep scarring caused to Asia Pacific’s travel industry eco-system will hinder a recovery for the foreseeable future.
Even if GDP growth rates start to rebound, employment and new job creation levels may remain subdued through 2021 and 2022. With perhaps one or two exceptions, income growth will be, at best, stagnant across the region.
These factors will continue to constrain the demand for travel.
Asian governments that have taken a unilateral path in locking their borders must negotiate at least bilateral agreements to partially reopen them. Regional bodies, such as ASEAN, have proved ineffective so far, and without integrated initiatives, progress on reopening borders is likely to be fragmented and subject to delays and deferrals.
In addition, the escalating sense of panic caused by outbreaks in Sydney’s Northern Beaches and Samut Sakhon in central Thailand show that new clusters - even if they are quickly contained - are capable of inflicting renewed damage to fragile public and governmental confidence.
The first few months of 2021 look exceptionally challenging. But, let’s hope that the springtime cherry blossoms bring a healthier and more positive landscape.
In the meantime, the final edition of Asia Travel Re:Set for 2020 assesses 10 key takeaways from a dismal travel year in South East Asia.
Thanks for being onboard.
Gary
Each Sunday, Gary Bowerman charts the week’s key developments for travel economies across Asia Pacific.
If you are enjoying this issue so far, please feel free to…
The Sunday Itinerary
- DashBoard
From 2 trillion down to 10 this week in South East Asia.
- QuoteBoard
Zurab Pololikashvili, Dr Mario Hardy, Alexandre de Juniac.
- ReaderBoard
5 South East Asian travel sector stories to bookmark this week.
- 10 Takeaways for Travel & Tourism in South East Asia
This year’s key takeaways include a rethink for domestic travel, a surge in new infrastructure announcements and unsolved challenges for pre-flight testing.
DashBoard
From 2 trillion down to 10 this week in South East Asia…
USD2 trillion: Estimated total loss to global GDP in 2020 caused by
travel restrictions and border closures.1 billion: In 2020, destinations worldwide will greet one billion less
arrivals than in 2019.1990: The last year that global travel demand was as low as in 2020.
72%: Year-on-year fall in international arrivals worldwide across the first 10
months of 2020.10: The global shortfall in tourism revenues is 10 times greater than in 2009,
the year after the global financial crisis.
- QuoteBoard
You heard it here…
“A coordinated approach to easing and lifting restrictions on travel
whenever is it safe to do so is essential."
Zurab Pololikashvili, Secretary-General of the UNWTO
"What would be your 'one word' to describe 2020? Mine would be 'grounded'."
Dr Mario Hardy, CEO of PATA
"2021 will be a better year. But we all know that COVID-19 will not
disappear with a date change. This virus is going to be with us for some time."
Alexandre de Juniac, CEO & Director-General of IATA
- ReaderBoard
Five travel sector articles to bookmark this week (click the underlined links to read)…
ASEAN’s Perspective on Economic Recovery - An intra-ASEAN agreement on tourism would kickstart an economic revival, says the Brookings Institution.
Domestic Tourism in South East Asia: Opportunities and Pathways - Enjoyable analysis of ways that domestic travel demand could be leveraged in future.
Restarting International Air Travel Within ASEAN - Without an ASEAN air travel bubble the region’s aviation sector will struggle to recover, says Singapore’s Aviation Studies Institute.
Are We Ready for an ASEAN Travel Balloon to Open Borders? - Forget travel bubbles, Rappler in the Philippines is advocating an ASEAN Travel Balloon!
South East Asia Covid-19 Vaccine Tracker: Who Gets What, When? - In the race for Covid-19 vaccines, Bloomberg says Indonesia has taken the lead.
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10 Takeaways for Travel & Tourism in South East Asia
1) ASEAN is a Two-Speed Region
Until this weekend, South East Asia appeared split by 6 vs 4. Six countries - Brunei, Cambodia, Laos, Singapore, Thailand and Vietnam - could claim to have (for now, at least) suppressed COVID-19. Brunei, which has zero active cases, may even lay claim (for now, at least) to elimination.
That may have changed to 5 vs 5. Thailand is very nervous following a dramatic spike of 576 new infections, mostly in the central province of Samut Sakhon, on Saturday.
Four countries - Indonesia, Malaysia, Myanmar and Philippines - continue to lag far behind. Between them, those 4 nations, account for 99.7% of active COVID-19 cases in the region. Indonesia alone accounts for 61.9%.
“Indonesia currently accounts for 61.9% of the active COVID-19 cases in South East Asia.”
Countries like Indonesia, which is aggressively courting vaccine suppliers and has partaken in clinical trials, are resting their hopes on a rapid rollout to help level the playing field.
Even so, vaccinating nearly 270 million people is a monumental challenge - especially with new daily case numbers staying worryingly high.
At present, travel sentiment in key markets suggests that countries that have managed the virus most successfully across 2020 will top wish lists once overseas travel resumes.
But consumer attitudes may change over time if countries manage to effectively reduce transmission rates via vaccination strategies.
It is, though, a very big ask in the near term.
2) Locking Down is Easier Than Reopening
Devising and implementing a safe and manageable reopening strategy is onerous. For countries that successfully closed down, contained or eliminated COVID-19 - such as Brunei, Cambodia and Laos - the fear of inviting in even a single new case is daunting.
Adding to these concerns is the fact that many borders in South East Asia are notoriously porous.
If protecting public health and healthcare infrastructure was the accepted priority in 2020, does that change in 2021? Can economies actually survive without inbound and outbound travel? The answer is no, but the solution is unproven.
Thailand is particularly torn, presenting a veneer of reopening while installing strict protective measures in the form of a mandated quarantine and triple testing.
“If protecting public health and healthcare infrastructure was the accepted priority in 2020, does that change in 2021?”
Vietnam will face tough decisions. The economy is likely to avoid negative growth in 2020, with a strong upswing forecast for 2021. Would it risk inflicting another slowdown by inviting back tourists before vaccines are rolled out? Or will it, instead, attempt to leverage a robust domestic travel economy for an extended period?
The reopening options for ASEAN’s 4 non-contained countries appear ever-more reliant on vaccine rollouts. Indonesia and Philippines count large populations that present big geographical and logistical challenges for administering vaccines.
The borders in Myanmar and Malaysia have been closed for several months, and both countries had wrestled control of daily infections until national (Myanmar) and state (Malaysia) elections resulted in super spreading.
Malaysia for example, announced this week that it has secured sufficient vaccine supplies for only 30% of its population. The government this month permitted domestic travel to resume, but has made no announcement regarding its borders, which were closed on 18 March.
3) Singapore is South East Asia’s ‘Guiding Light’
Singapore has a plan. Although it struggled for long periods to contain COVID-19, especially in its foreign worker communities, it has always placed Changi Airport’s hub status and Singapore Airlines at the heart of its economic strategy. The structured reopening initiatives announced so far provide ample evidence.
Reciprocal Green Lanes with key commercial partners - such as China, Germany and Indonesia - have been complemented by removing the 14-day quarantine period for travellers arriving from China, Australia, New Zealand, Brunei, Vietnam and Taiwan.
Expect more nations to be included in this scheme in spring 2021, even though - at present - outbound travel from those 6 aforementioned markets is either prohibited or inhibited by strict quarantine periods for travellers returning to their home countries.
“Singapore’s willingness to bid for and secure major events, such as the 2021 World Economic Forum, sets a marker for ASEAN governments reluctant to make a move.”
Although deferred for the North East Asian winter, the Singapore-Hong Kong air travel bubble was a valiant attempt to reconnect Asia’s two pre-eminent air hubs. The postponement was down to COVID-19 case spikes in Hong Kong, not Singapore.
Meanwhile, Singapore’s willingness to consider MICE travel - and bid for and secure major events, such as the 2021 World Economic Forum - sets a marker for ASEAN governments reluctant to make the first move. While Thailand and Bali desperately search for safe ways to revive their leisure tourism economies, Singapore counts a more complex mix of leisure, transit and business travel.
Its accumulated experience in managing travel diversity combined with a finely honed sense of foresight and pragmatism could guide ASEAN through a tricky next phase.
4) Don’t Discard Domestic
By force of necessity, domestic tourism became this year’s lone-star focus once national borders were locked in March. Widely viewed as the ‘third prong’ - well behind inbound and outbound travel - domestic tourism has been poorly funded, strategised and promoted by governments and tourism boards in recent years.
Despite this institutional oversight, several countries in South East Asia - Malaysia, Thailand, Indonesia, Philippines and Vietnam are good examples - witnessed strong growth in domestic tourism over recent years.
“With nowhere else to go, local travellers took advantage of heavily discounted flight tickets and hotel rates to explore their home lands.”
Much of this was short-trip travel for long weekends and public holidays, but it was a noticeable - if neglected - feature of pre-pandemic visitor economies.
This year, with nowhere else to go, local travellers jumped in their cars and took advantage of heavily discounted flight tickets and hotel rates to explore their home lands.
Tourism authorities hastily assembled new promotions targeting home-grown tourists, and governments offered a mix of cash subsidies, vouchers and tax breaks to incentivise more people to travel more often across their own nations.
From zip-lining in Laos to curated photoshoots amid the purple-top flowers of Long Bien in Vietnam and dining on local snacks beside the paddy fields of Sekinchan in Malaysia, 2020 unlocked new patterns of domestic travel demand.
Let’s hope that destinations use some of the inside-track insights learned across the year to revitalise their positioning when borders reopen and the rivalry to attract cross-border travellers intensifies.
5) Fierce Competition Up Ahead
So, what will Vaccine Travelnomics look like in South East Asia? Much will depend on the speed and scale of vaccine rollouts. Once we move through the interim period of travel bubbles, green zone commuting and charter-focused re-openings, destinations will need to rigorously strategise for an era of intense intra-regional competition.
In 2019, the 10 South East Asian nations welcomed around 135 million arrivals. Of those, nearly 40% were from other South East Asian nations, and more than 30 million arrivals were from China. Add in the other key markets of Japan, South Korea, India, Middle East and Russia, and its clear to see where the marketing dollars will be spent.
“Expect an even deeper level of price slashing at least in the initial ‘normalisation’ period.”
And, if we thought discounting on flights and hotels was aggressive this year to attract domestic travellers, expect an even deeper level of price slashing at least in the initial ‘normalisation’ period.
This, of course, will favour the larger, deep-pocked travel operators - and may result in a further shakedown and consolidation across the region’s travel industry.
In 2019, South East Asia recorded the strongest arrivals growth of any region, but since March 2020 its borders have remained either bolted or tightly controlled. So, when - realistically - will international travel return to a sustainable level?
Looking ahead, this week’s The South East Asia Travel Show tackles the big questions facing travel & tourism in the region - and asks whether, as we await vaccine rollouts, the issues around PCR and antigen tests and quarantines will ever be solved.
— Click HERE to listen to the podcast —
6) Air Travel is Everything: For Now
The rebirth of international travel, whenever it occurs, will be driven by aviation - but expect a stronger suite of self-drive options to emerge. South East Asia should push this fast-expanding niche sector much harder.
Its 10 nations offer a panoply of off-track destinations. Moreover, a noticeable 2020 uptake in driving trips among domestic travellers - as well as in key inbound markets like China - should prove ample incentive to curate new self-drive experiences.
Joined-up rail infrastructure is another South East Asian weak point, although moves (by investors from China and, to a lesser degree, Japan and South Korea) to redress this are underway, and are discussed in section #7 below.
“State flag carriers with opaque operating models carried heavy luggage into the pandemic.”
ASEAN’s aviation infrastructure remains in flux. If they all pull through, LCCs like AirAsia, Lion Air, Scoot, Jetstar and Vietjet will be vital to rebuilding intra-Asian route networks, given that is what they did so well in recent pre-pandemic years. The Chinese carriers, too, will carry heavy hopes and expectations across the region.
State flag carriers with opaque operating models, such as Garuda Indonesia, Malaysia Airlines, Vietnam Airlines and the bankruptcy protected Thai Airways, carried heavy luggage into the pandemic.
Each of these - plus the heavily recapitalised Singapore Airlines, which has raised SGD12.7 billion in additional liquidity this year - will follow a leaner operational path as we enter a likely period of regionalisation in travel, in which short and mid-haul point-to-point flying in Asia Pacific may dominate.
7) The Travel Infrastructure Build-Out Will Accelerate
As reported in Issue #17 and Issue #18, although international travel was on pause in 2020, several new transport infrastructure projects were announced across ASEAN.
Despite soaring levels of government debt, the momentum will continue to build. Funds are flowing into ASEAN transport projects from China, South Korea and Japan. The US can’t afford to be left out, while India, Middle Eastern and European nations are scouting opportunities and collaborations.
“Although international travel was on pause in 2020, several new transport infrastructure projects were announced across ASEAN.”
Among the projects given a green light were new airports in Cambodia and Vietnam and terminal upgrades in the Philippines, the Thai Riviera road network, an extension of the Vientiane-Vang Vieng highway to the Chinese border, and a cross-sea bridge in Malaysia.
Meanwhile the China-Laos high-speed railway is due to open in 2021 and the Jakarta-Bandung high-speed railway may be extended to Surabaya. A 3-phase high-speed railway in Thailand would eventually connect Bangkok with Vientiane - and the China-Laos railway. Beyond these high-profile projects, several other rail network upgrades are expected to reshape and vastly improve train travel in South East Asia.
8) Will MICE Come Back?
Yes. It has to. Forget the Zoominar hype, Asian economies will re-grow at a rapid clip, and promoting, showcasing and selling new products and services make MICE vital.
The challenge is managing large events safely and effectively. Hybrid events may play a part, but trade shows, large conferences and the contract/deal signings they generate need to be in-venue and in-person, not virtual.
“Singapore’s hosting of the 2021 World Economic Forum, from 25-28 May, will be scrupulously watched across Asia and worldwide.”
Singapore’s hosting of the 2021 World Economic Forum, from 25-28 May, will be scrupulously watched across Asia and worldwide. If Singapore succeeds in putting on a show, it will prove that South East Asia is a region capable and ready to manage major events once more.
Incentive travel is likely to be the outlier. A combination of constrained corporate budgets, leaner workforces and a reluctance to travel and socialise in groups may drench - rather than dampen - demand at least through 2021.
9) Vaccines vs Quarantines vs Testing
It is widely accepted across the travel industry that vaccine makers hold the keys to rebuilding aviation, hospitality and tourism.
But as we bid farewell to 2020, estimates about when enough people will carry digital vaccine passports to make a genuine difference vary greatly. A good example is Singapore, which has a small population of slightly less than 6 million but does not expect to complete its vaccination programme until the third quarter of 2021.
“The myriad challenges are highlighted by the number of daily air passengers who arrive and test positive at Asian airports.”
IATA is not the only travel sector body pushing for international collaboration on pre-flight testing and information sharing, though it is possibly the most vociferous. There are myriad challenges, however - highlighted by the number of daily air passengers who arrive and test positive at Asian airports.
Thailand counted 41 imported infections on Saturday, while Singapore recorded 17.
The finger of blame is often pointed at fraudulently obtained testing certificates and faulty ‘false negative’ testing procedures. Sometimes, airlines take the hit by having an affected route service postponed for 2 or 3 weeks.
No-one, however, seems to question the widely accepted 72-hour window for securing a negative test result. This 3-day hiatus provides ample time for passengers to come into contact with the virus.
Testing is so important because unless hard quarantines are removed, people will not travel in viable numbers.
Tinkering at the edges - as Malaysia has (and Thailand is considering) by reducing the quarantine period from 14 to 10 days - is a cosmetic adjustment. The outcome is unlikely to change, particularly given the cost of paying for your own quarantine.
Introducing fast, accurate airport testing labs alongside mechanisms for carrying and sharing this vital test data along each touchpoint of each journey remains the travel industry’s foremost challenge.
10) Setting the Table for Culinary Tourism
And so, looking ahead. It’s time to get hungry.
Gourmet tourism was expanding fast across South East Asia before the pandemic, and will be a vital driver of travel demand in future.
Each of the 10 South East Asian nations boasts rich culinary cultures, and distinctive dining experiences for travellers to indulge themselves. Defining a distinctive sense of difference could prove to be a valuable marketing tactic.
“Gourmet tourism was expanding fast before the pandemic, and will be a vital driver of travel demand in future.”
Chinese tourists in particular are keen to experience new flavour combinations, but also to seek out the culinary backstories that bring them closer to local cultures.
They want to know more about how and ingredients are nurtured, they want to meet and chat with farmers and artisan food producers. They want to learn about the classic recipes and contemporary inspirations of the chefs that cook their meals.
In essence, they want to travel along the food chain from farm to plate, and from grape to glass.
For 2021, China’s 3 largest cities, Shanghai, Beijing and Guangzhou, count a total of 85 Michelin-starred restaurants (43, 30 and 12, respectively). By comparison, the 2021 Thailand Michelin guide counts 28 starred restaurants, while the new Singapore edition has been delayed by a long period of pandemic-related restaurant closures.
Those figures highlight the quality, diversity and range of dining experiences that Chinese consumers are now accustomed to - and the elevated expectations they take with them on overseas trips.
As Michelin summarised about the dining scenes in Beijing (“a growing commitment to sustainable gastronomy”) and Shanghai (“a gastronomic landscape that shines by its open-mindedness”), there are plenty of takeaways to be gleaned about the future of gourmet tourism - even in such a downbeat, domestic travel-led year like 2020.
And, that’s a wrap for Issue 21 - and 2020!
Asia Travel Re:Set will return on 10 January. Until then, you can catch me on Twitter and LinkedIn, and at Check-in Asia.
Feel free to send thoughts and feedback to gary@check-in.asia
The website is starting to take shape (the holding page is at www.asiatravelreset.com) and will be launched in January.
Happy Holidays… and roll on 2021.
Gary