Asia prepares for fallout from war; stronger focus on shorthaul expected

This year's ITB takes place as war clouds loom over Iraq, and as Asian tourism boards and suppliers cobble together contingency strategies to protect their inbound business, and battle for market share in a crowded, competitive marketplace.

Already, post September 11 and amid the global economic slowdown, markets have started shifting for destinations in Asia. Most countries have seen marked increases from shorthaul markets and declines from longhaul sources in the past year.

Despite the difficult conditions, Asia's inbound tourism industry remained resilient, mainly thanks to shorthaul markets.

Take these key indicators.

• Singapore
The city state managed to squeak through 2002 with a 0.6 percent growth to reach 7.57 million but it was clear the region was its saviour.

China was its fastest growing market in 2002, growing by 34.7 percent to 670,058. In terms of market share, it moved from fifth place to third place, overtaking Malaysia and Australia. India rose from ninth to seventh position, overtaking USA and Korea.

The UK saw a 0.3 percent drop to reach 458,466 arrivals last year.

• Thailand
The kingdom managed to achieve a 7.3 percent increase over 2001 to reach 10.8 million arrivals last year. Thailand was one of the few major destinations in the region to see an increase from Europe. Between January and November 2002, Thailand received 2,340,720 arrivals from Europe, up 5.03 percent. ASEAN arrivals however grew by 12.32 percent to reach 2,175,924. China alone increased 9.8 percent.

•Hong Kong
The territory achieved a record-breaking year with arrivals topping 16.5 million, an increase of 20.7 percent over 2001. And there is no mistaking where most of that growth is coming from. China dominated the picture with 41.2 percent of all arrivals, nearly 6.83 million in total, and growing by more than 50 percent over 2001.

• Malaysia
Malaysia also managed to post a growth in inbound last year, with arrivals growing by four percent to 13.3 million. Its top six markets - Singapore, Thailand, Indonesia, China, Japan and Brunei - are within the region.

The UK comes in at seventh place with 239,294 arrivals in 2002.

• Australia
Up to November 2002, the UK delivered 539,400 visitors to Australia, a three percent increase. In the same period, German arrivals totalled 121,800, down nine percent. In comparison, arrivals from China and Korea rose 19 and 13 percent respectively in the first 11 months of 2002.

These trends, coupled with fears of a war that would affect travel over the Middle East as well as economic woes in Germany and the US, are prompting Asian tourism boards to intensify efforts to drive even more quick-fix, shorthaul demand.

In a survey undertaken by the Pacific Asia Travel Association (PATA) in which 12 tourism boards were asked what they would do in the case of war, most indicated that they would be looking closer to home for business.

One said, "It will be difficult to attract long-haul tourists, and travel and tourism in the region will depend mainly on short-haul travel within neighbouring countries."

Another added, "Arrivals from Europe and Americas (in some areas) will decrease because of the need to fly through the Middle East. Travellers will look for other markets which are safer and away from conflict. They will definitely find such markets in the Pacific Asia region. Therefore there will be increased tourism activities and travellers in the region."

Concerns were however expressed that a war would have a negative impact overall due to anti-US sentiment among countries in the region and "overarching fears of travel to a region where there is a significant Muslim population".

The Tourism Authority of Thailand (TAT) said last week that it would shift its focus yet further towards the Asia region to counter the imminent threat of war on Iraq.

TAT governor Juthamas Siriwan said that it had to be prepared to shift focus away from the Middle East, which is one of three major markets targetted by the TAT last year. In the event of war, she said, its marketing budget for the region would be withdrawn.

Key markets identified by the TAT are India and China, as well as Russia and Eastern Europe. With or without a war, most tourism boards have already drawn up 2002 strategies that reflect the market shifts.

The Singapore Tourism Board (STB), under the new leadership of chief executive Lim Neo Chian, has a new structure in place. As part of the revamp, seven geographic areas have been identified, five of which are focused on Asia. Western markets, including Europe and the Americas, have been lumped into one division.

"We now have to look at how we distribute our resources and how we channel those resources into our growth areas," said Lim.

Malaysia has said it would continue with its strategy of tapping the ASEAN and Asian markets.

HKTB's executive director Clara Chong said that although the mainland was a "natural" market for Hong Kong and would again be a focus of its marketing strategy in 2003, the other shorthaul and longhaul markets would continue to command a significant share of the board's marketing resources and budget.

Their push towards new Asian markets is finding resonance in source markets like India where during the recent Outbound Travel Mart held in New Delhi, tour operators predicted that Indian travellers would head to South-east Asia this year. China, for instance, which saw an increase of 10 percent in Indian arrivals last year, is planning to open an office in Mumbai.

With such focus on Asian markets, suppliers are predicting a bloodbath in terms of competition as everyone goes after the same piece of the pie.

Already a competitive region, suppliers are predicting even further drops in yields as businesses compete for the Chinese and Indian markets in particular.

This, they say, could spell opportunities for those who persevere and continue to invest in the longhaul markets.

In the PATA survey, a couple of tourism boards, for example, indicated they would be increasing promotional activities in the longhaul markets including North America.

The shift in focus by Asian tourism boards has fuelled debate within the Asia/Pacific travel trade as to whether shorthaul markets could ever replace longhaul markets in terms of yield and long stays. The private sector is anxious that the high yield, long stay markets not be neglected as tourism boards play the arrivals game.

In Singapore, for instance, despite the small rise in arrivals, the average occupancy rate of hotels in 2002 dropped 1.8 percent to 74.5 percent while average room rate dipped 5.3 percent to S$126.3. Revpar (revenue per available room) decreased by 7.6 percent to S$94 in 2002, according to STB statistics.

Tom Nutley, chairman of Reed Travel Exhibitions, perhaps summed up the state of play for this year when he said at AIME, "Everyone is looking to spread their business and reduce reliance on particular markets because you never know which markets are going to be hit when."