Asia Travel Re:Set #1 - The 'Pilot' Edition

Digital Yuan, Airlines Slump, Travel Blacklist & COVID-19 vs Dengue

Hello! Welcome to Asia Travel Re:Set – a new resource for travel professionals, researchers and students. 

Published twice weekly, Asia Travel Re:Set will chart the transformation of Asian travel and tourism as it enters an uncertain era.

This is the “beta” edition [so please excuse any minor bugs, just this once…]

There’s plenty more stuff to come. A comprehensive newsletter will ordinarily be sent out on Sunday, with a weekly edition on Wednesday. Look out, too, for extra extras…

It’s all free for now, but a special subscriber package will launch in late October.

Thanks for being on board!

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This Week’s Itinerary: 

Unfolding Asia’s Travel Re:Set, Week by Week

Travel Snapshots

• Golden Week Airlines Boost for Hainan Island

• Tourism Losses Mount in Cambodia

• Bali Experiences Domestic Tourism Slump

• India Faces a Barren Tourism Winter

• Jetstar Suspends New Zealand Domestic Flights

Tourism Hotspots

• Japan Eases Some Travel Restrictions in South East Asia

• Thai Central Bank Issues Tourism Economy Warning

• COVID-19 vs Dengue in Singapore

• Danang Outbreak Damages Domestic Travel in Vietnam

Asia Travel Longshots

• Chinese Yuan Surge Raises Traveller Spending Power

• Asian Airlines Confront Heavy Losses

• 12 Months of Travel Trauma in Australia

• Malaysia Expands its COVID-19 Travel Blacklist

So, let’s get started …

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Unfolding Asia’s Travel Re:Set, Week by Week

Asia Travel Re:Set is a twice weekly Asia-centric newsletter. I aim to deliver original analysis and insights, new research and statistics, interviews and updates on the transformation of travel across Asia.

The new era of Asia travel will unfold gradually, perhaps at a painfully slow pace.

But it will happen.

Asia’s economies are highly interconnected. And travel and tourism are entrenched drivers of trade, finance, economic growth, job provision and poverty reduction.

COVID-19 has ruthlessly halted a decade of travel growth.

Tentative bilateral initiatives by China, Japan, South Korea, India and some South East Asian nations underscore how deeply the economic downturn is starting to bite.

So, in the coming weeks and months, I’ll produce weekly coverage from across Asia Pacific. Think: Australia to India, China to Singapore and Japan to Sri Lanka – and everywhere in between.

I hope you enjoy this “Pilot” edition.

[If you do… please tell your colleagues and friends!]

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Travel Snapshots

• 1,500: The total of extra flights Haikou Airport on the tropical island of Hainan will add for the 8-day China National Day Golden Week at the start of October.

• USD5 billion: The accumulated tourism revenue loss Cambodia is reporting so far this year due to COVID-19. In 2019, it earned USD6 billion from tourism.

• 81%: The decline in domestic Indonesian travellers to Bali in August 2021 compared to August 2019. International travel to Bali is currently prohibited.

• 70: Almost three-quarters of visitors to India in 2019 hailed from 13 countries, “all of which are battling the pandemic and have stringent and varying travel restrictions.”

• 4: Jetstar has suspended domestic flights to four cities in New Zealand due to the government’s COVID-19 curbs. The situation will be reviewed on 16 September.

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Tourism Hotspots

Japan: Some Travel Restrictions Eased in South East Asia

Positive press is a key factor in pushing restricted flight re-openings into the mainstream. Japan is a good example. In recent weeks, Japan’s Foreign Minister Toshimitsu Motegi has undertaken two tours of South East Asia. The goal was to ease travel restrictions for long-term residents, expatriates and international students.

Reciprocal agreements were signed with Malaysia, Singapore, Cambodia, Laos, Myanmar and Cambodia. In the latter two instances, the deals were sweetened by development funding. The agreement with Singapore also intends to revitalise essential business travel. Previously, Vietnam and Japan negotiated to gradually re-commence weekly flights.

This week, Japan and Taiwan will reopen borders to expatriates and long-term residents from each country. Foreign residents who lived in Japan before the outbreak may also return.

There is a caveat. Despite these initiatives, Japan retains its entry ban for foreign nationals who have recently visited 159 countries, including the US, China and all of Europe. This highlights the jigsaw nature of negotiations in Asia, where borders are tightly controlled – and will seemingly remain so for the rest of 2020.

Thailand: Central Bank Issues Strong Tourism Warning 

A South East Asian central bank says it like it actually is – and will be in 2021 – if borders are not at least partially reopened. I’ve argued for a while that the positive South East Asia’s economic rebound forecasts for 2021 must be revisited if inbound and outbound travel flows are not restored, in some form, by Q4.

Business travel and leisure travel are vital to all economies in the region – not just for the real-time spending they generate, but the positive economic sentiment they stimulate. That feel-good factor extends to several sectors, linked both directly and indirectly to travel.

The Bank of Thailand points out that the accumulated impact of a prolonged border ban in 2020 could prove economically disastrous in 2021. The financial damage would be exacerbated by any new COVID-19 waves during the northern hemisphere winter. Thailand’s tourism-reliant economy is suffocating. It desperately needs a lifeline.

Will more countries in the region heed these words from the Bank of Thailand – before the region’s travel infrastructure is diminished beyond repair?

Singapore: COVID-19 vs Dengue

Affectionately known as the Little Red Dot, the city state of Singapore resides at the southern tip of South East Asia. It counts a population of just 5.7 million, but is the region’s integral air hub. Singapore’s only physical link to the mainland is a causeway with Malaysia. Closed for five months due to COVID-19, it reopened on 17 August for essential business travel and work permit holders residing in Malaysia. Strict weekly limits are in place.

Singapore was one of Asia’s first countries to implement protective measures to curb the spread of the coronavirus. However, a surge of infections ripped through foreign worker dormitories. It now has South East Asia’s third-highest cumulative total of COVID-19 cases, 56,982 (5 September). Yet, with just 27 deaths, it counts a world-beating recovery rate.

While battling the pandemic, Singapore is simultaneously fighting the most concentrated outbreak of Dengue Fever in recent history. So far in 2020, it has recorded more than 27,600 cases (1 September) of Dengue, which is transmitted by the Aedes mosquito. Since the start of August, new weekly infections averaged 1,248. Singapore’s National Environment Agency says “there are 340 active dengue clusters reported, where intensive dengue transmission is ongoing.”

Vietnam: Danang Outbreak Damages Domestic Travel

After 99 days without a single community transmission case, COVID-19 roared into Vietnam’s collective consciousness on 24 July. A cluster outbreak in the coastal holiday city of Danang spread nationwide, and resulted in stringent lockdown measures. Domestic travel demand, which was really starting to roll during the summer holidays, has slumped. Tourism revenue in August fell 61.8% compared to July.

With its borders currently closed, domestic tourism is the only lifeline for the country’s tourism sector, which was expanding rapidly until the advent of COVID-19. This week, some domestic flights will recommence to/from Danang.

From mid-September, the government looks likely to permit limited flights to/from 6 Asian cities, Guangzhou, Seoul, Vientiane, Phnom Penh, Taipei and Tokyo. A weekly cap of 5,000 passengers, plus widespread public fears about inbound visitors, mean Vietnam is recovering slowly from a pandemic it previously had managed to control.

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Asia Travel Longshots

China: Yuan Surge Raises Traveller Spending Power 

“Revenge Spend” was a trending hashtag in China a few months back. As the country’s economy started to recover from a national shutdown implemented to eradicate COVID-19, unlocked consumers expressed a desire to spend their way back to happiness. Travel sentiment surveys revealed a strong appetite for overseas trips, but China’s borders have remained, thus far, steadfastly shut.

As we move through September, destinations worldwide would normally be boasting about advance bookings for the upcoming Golden Week. Not this year. While, the 2020 Mid-Autumn Festival coincides with the 8-day China National Day public holiday, the beneficiaries of pent-up revenge spend will be the domestic travel sector.

That said, efforts are underway to restore international connectivity. China’s Civil Aviation Administration is removing the 75% load factor limit for incoming flights that recorded zero positive COVID-19 tests among passengers for three consecutive weeks. The cap remains in place for flights from “high-risk” destinations. 

Flights are also resuming between the capital Beijing and Thailand, Cambodia, Pakistan, Greece, Denmark, Austria, Sweden and Canada. More direct flights are promised “in accordance with outbreak risks, tourist demand and other factors.”

Although this doesn’t mean an imminent revival of China’s prized outbound travel sector, all progress is encouraging. And when Chinese travellers are once again free to travel, their revenge spend behaviour may be bolstered by the currency in their pocket – or, at least, that which underpins their Alipay and WeChat Pay cashless accounts.

This week, China’s central bank announced that the Yuan (or RMB) had increased in value by around 4.2% since May 2020. It’s worth remembering than China’s outbound travel surge during the 2010s was heavily supported by a strong Chinese currency.

Meanwhile, the People’s Bank of China is pressing on with a pilot scheme to create a “digital Yuan.” China’s ‘Big Four’ banks – ICBC, Agricultural Bank of China, Bank of China and China Construction Bank – plus Postal Savings Bank of China and China CITIC Bank, have joined up.

The new digital currency is designed to remove restrictions on using the Yuan across borders and enable it to better compete with major currencies. This week, Morgan Stanley forecast that the Yuan could become the world’s third reserve currency (after the US Dollar and the Euro) by 2030.

One to watch, for sure.

Takeaways:

• China’s Yuan rose 4.2% against the US Dollar

• Progress is being made to resume international flight connectivity

• A pilot scheme is under way to develop a “digital Yuan”

Quote:

“Frontline employees in [China’s] civil aviation industry will be the next key group to take a COVID-19 vaccine… to guard against any second wave of the epidemic that may occur in China in the autumn and winter.” Global Times, 3 September.

Asian Airlines: Financial Losses Weigh Heavily Across The Region 

Statistics from several sources underscore the intense pressure piling onto Asian carriers. Cross-border travel remains mostly prohibited, and domestic air travel is proving unable to offer much financial solace. Cautious government policies aligned with public fears about contracting the coronavirus and losing their jobs continue to depress demand for air travel.

Last week, air capacity (not to be confused with load factor) in North East Asia was operating at a 23.6% deficit compared to 20 January. Some of this recovery is due to cheap flight deals in China, and a higher volume of cargo flights. South East Asia continues to struggle, with -64.4% of comparative airline capacity, and South Asia fares slightly better at -59.8%, according to OAG. Four Asian markets, China (#1), Japan (#3), Indonesia (#5) and India (#7) are ranked in the world’s top 10, but are performing at capacity levels of -9.3%, -46.8%, -42.0% and -61.6% compared to January.

Last week, the Sydney-based Centre for Aviation (CAPA) held its annual meeting for Asia Pacific airline leaders in a virtual event. The unsurprising conclusion was that the region’s airlines face two crucial priorities: “short term survival, and figuring out how they need to adjust to the post-COVID-19 industry landscape.” It adds that the real disruption to the airline market “could play out over the next few years.”

A “financial disaster facing Asia-Pacific airlines is becoming clearer as the region’s carriers report their latest results.” In a detailed assessment last week, Orient Aviation examined the perilous state of play for the aviation sector.

Seismic Q2 losses and profit warnings were reported by airlines from Japan to Australia, Malaysia to Hong Kong and Indonesia to China. These heavy debt burdens spell out clearly that the hoped-for 2021 rebound in aviation is receding into the mist.

The bright spots appear to be South Korea and Taiwan, where air freight and domestic travel are carrying the load.

That’s about as positive as we can muster right now.

Takeaways:

• Chinese airlines have recovered to within 10% of January’s capacity

• South East Asia airlines are operating 64% less flights than in January

• Deep airline losses will impact air travel “for the next few years”

Quote:

“Overall, the picture for Asia-Pacific airlines is grim. Carriers have hundreds of planes parked at their home bases and at aircraft parks in California and Australia. Most have been in discussions with Boeing and Airbus about postponement or even cancellation of scheduled deliveries,” Orient Aviation, 1 September.

Triple Travel Trauma Continues in Australia

It’s been a traumatic 12 months for Australia’s travel sector. In September 2019, bushfires began ravaging the entire country. They wrought devastation across the summer season. The destructive power of nature was immediately followed by COVID-19.

After an initial surge in cases – including the infamous Ruby Princess (aka “The Plague Ship”) incident, in which cruise passengers were allowed to disembark in Sydney without testing, despite COVID-19 being rife on board – Australia seemed to have the situation under control. Indeed, in late April, the Australian and New Zealand Prime Ministers publicly talked up prospects of a “COVID-safe travel bubble.”

Those hopes were extinguished by a case surge in Melbourne. As a result, lockdown measures were introduced in Victoria state. By 5 September, Australia counted 26,207 COVID-19 cases, 19,479 of which are in Victoria. The next highest figure is New South Wales with 4,104. Five states and territories count less than 1,000 cumulative cases. Melbourne has now extended its lockdown for another 2 weeks, until 28 September.

These disparities set in motion a series of inter-state spats and border closures, which threaten to derail a domestic tourism revival. On Friday, the government attempted to soothe simmering political tensions between the states in order to reboot domestic travel ahead of the upcoming summer season.

With Australia falling into recession for the first time in 29 years, players in travel are pinning their hopes on a domestic uplift. The government has extended the inbound and outbound travel ban (plus a prohibition on cruise ships) until 17 December (at least). While inbound arrivals are vital for Australia, domestic travel spend counts an even higher value. Tourism Australia Research reveals Australian travellers taking trips at home last year outspent international visitors by a ratio of more than 2:1.

Meanwhile, destinations across Asia Pacific are missing out on Aussies who spend big and travel long. Australia is the number one inbound market for New Zealand, Bali (4th overall for Indonesia) and Fiji (where it accounted for 47% of arrivals last year). It’s 5th for Singapore, 6th for the Philippines, 9th for Malaysia and 16th for Thailand. Further afield, Australia ranks 7th in Canada, 11th in the US and 10th in the UK (but 5th for visitor spend).

New Zealand still appears likely to be the first destination Australian travellers will be permitted to visit. Australian media reported last week that the two governments are working on a travel bubble, but this may begin on a state-by-state, rather than fully bilateral, basis. In addition, community transmission of the coronavirus will have to fall to zero before any agreement is ratified.

On 7 September, Australia secured deals for 84.8 million doses of COVID-19 vaccines from the universities of Oxford and Queensland, subject to completing clinical trials.

Will Australia wait for a vaccine before reopening international travel?

Takeaways:

• Australians travelling internationally spent AUD26 billion more overseas than overseas visitors spent in Australia

• Domestic travellers outspent international visitors in Australia by more than 2:1

• An Australia-New Zealand travel bubble is still under discussion

Quote:

“We should aim for Australians to be able to go to work, to be able to be with their family at Christmas, and to return to visit their friends and to look forward to a positive 2021. We cannot resign Australia to being a dislocated nation under COVID-19,” Scott Morrison, Australian Prime Minister.

Aussie Travel Extra
As a quick plug, this week’s The South East Asia Travel Show (which I co-host with Hannah Pearson) reflects on 12 troubled months for Australian tourism. We discuss the big travel sector issues of the moment, and – with the help of 3 local experts in hospitality, business travel and inbound travel – look ahead to 2021 Down Under.

Malaysia: Government Expands its COVID-19 Travel Black List

The Malaysian government has stepped up its ‘maximum suppression’ approach to COVID-19. On 31 August, Prime Minister Muhyiddin Yassin announced the nation’s borders will stay closed for the remainder of 2020. Small concessions were allowed for returning foreign residents and students holding requisite visas and spouses of Malaysian nationals.

Last week, Malaysia’s Security Minister issued a new ‘travel blacklist’. Entry will be denied for non-Malaysians holding one of 6 types of visa/pass for Malaysia from 12 countries with more than 150,000 COVID-19 cases. The initial black-listed 12 were: Bangladesh, India, Indonesia, Philippines, Brazil, France, Italy, Russia, Saudi Arabia, Spain, UK and the US.

On 7 September the list was increased to 23 countries by adding Argentina, Chile, Colombia, Germany, Iran, Iraq, Mexico, Pakistan, Peru, South Africa and Turkey.

Malaysia has assiduously upheld its commitment to a “Zero COVID” strategy, after an early surge in infections. The nation of 32 million people entered a strictly applied 7-week lockdown, known as the Movement Control Order (MCO), on 18 March. At the time, Malaysia counted the 4th-highest total of COVID-19 cases in Asia (after China, South Korea and Japan), and the highest in South East Asia. By 5 September, it ranked 11th in Asia and 4th in South East Asia, with 9,385 cases and 128 deaths. During the previous week, the daily average of new cases was 11.3. However, daily cases increased to 62 on 7 September.

Daily life in the capital, Kuala Lumpur (known locally as ‘KL’) is largely back to normal, although many offices remain closed. Several others are operating staggered rotas or partial weeks. All residents are legally mandated to wear facemasks in public, and must undergo temperature checks and QR code scans (using the official MySejahtera health tracking app) upon each entry to any office, public building, shopping mall, store, restaurant, café and bar.

After a slow start following the removal of a ban on domestic flights in mid-June, more Malaysians are taking short breaks within borders. In August, I took domestic flights to Penang and Langkawi. Hotels and resorts, which lowered their rates to entice travellers, reported 75-80% weekend occupancies. Weekdays are weaker. Airlines are offering more flights than two months ago, although many business travellers are being encouraged by their companies to self-drive for trips within peninsula Malaysia.

It remains to be seen whether this domestic travel upsurge will endure. From October, seasonal rains will render the popular east coast islands – such as Redang, Perhentian and Tioman – off limits to visitors. With a narrowed range of domestic destinations on offer, hotels and resorts in accessible destination may raise rates.

The months ahead will test the economic viability of Malaysia’s closed-border policy.

Takeaways:

• Borders remain closed for the rest of 2020

• A new ‘travel blacklist’ features 12 countries

• More countries may be added to the list in the coming weeks

Quote:

“I’m not saying we’re happy. I’m saying we regret the decision but we respect the sovereign decision of Malaysia,” Harry Roque, Press Spokesperson for President Rodrigo Duterte of the Philippines.