Contours of Asian tourism

Today, writes Peter Semone, Asia represents one of the planet’s hottest tourism destinations and one of the least understood source markets for the world’s premier destinations.

Forty years ago, few would have imagined that Asia would grow to represent nearly a third of all international tourism arrivals (IVAs). Nor would anyone have anticipated that the continent would develop economically and socially and become a major generator of tourists.

History

The launch of the Boeing 747 in the late 1960s was instrumental in the development of Asia as a travel and tourism destination. Throughout the 40’s, 50’s and most of the 60’s, international travel was an activity reserved for the privileged; not only costly but time consuming. The 747 brought speed, scale and economy to long distance travel and allowed access to distant lands like Asia.

In the early days it was the prosperous western economies of Europe and North America that acted as a producer of tourists to the then less developed destinations of Thailand, Singapore, China, Malaysia and India. Asia was the destination and Europe and America – which collectively produced over 80 percent of tourist demand to the region – were the driving source markets.

Tourism growth statistics from 1960 to 2004 are indicative of the fabulous growth of Asia as a world class tourism destination. In 1960, there were a total of 69 million recorded IVAs (International Visitor Arrivals) globally. At that time, Asia received 802,666 IVAs, a mere 1.2 percent of global demand. Today, Asia represents 28 and 30 percent of global international tourism receipts. Few experts would predict against the region continuing to record fabulous levels of growth in the short and medium term.

In Asia today, the travel & tourism industry generates around 1.2 trillion US dollars of economic activity and directly employs some 125 million people within the sector. This represents almost one-fifth of tourism’s total, worldwide, economic impact and represents 56 percent of all travel industry jobs.

Despite the difficulties of 2003 and the Severe Acute Respiratory Syndrome (SARS) scare, which brought much of the region’s tourism industry to a halt, 2004 proved a record year for Asian tourism with just over 200 million IVAs. Fortunately, 2004 posed few external challenges to the Asian travel and tourism industry, with the exception of the tragic tsunami, which in the final days of the 2004 claimed the lives of thousands of tourists and locals alike; an incident that will long remain a vivid reminder of the force of nature.

Asian sub-regional performance

Of the three recognized sub-regions of Asia, Northeast Asia, which includes The People’s Republic of China (PRC), Chinese Taipei, Korea (North and South), Japan, Macau and Hong Kong, represents the highest level of travel and tourism demand. The region accounts for some 163 million arrivals, 75 percent of all Asian IVAs and 21 percent of global travel demand.

Southeast Asia, which includes Thailand, Malaysia, Vietnam, Loas PDR, Singapore, Indonesia, Myanmar and the Philippines represents the second largest tourism focal point with just under 50 million IVAs in 2004, representing 18 percent of Asian and 7 percent of world tourism demand. South Asia, comprising India, Nepal, Bhutan, Sri Lanka, Bangladesh, Pakistan and the Maldives, has also proven consistent in its growth of tourism. The region attracted nearly 6 million visitors in 2004, accounting for 3 percent of all regional IVAs to Asia.

Increasingly, the make up of inbound visitors is changing throughout the Asian region. Whereas in the past, American and European travellers represented a major portion of total IVAs to Asia, this predominance has shifted. Increasingly, Asian tourists are propagating tourism within their own region. In 2004, almost 70 percent of all visitors to Asia originated from Asia.

The Asians with economic prosperity, increased social freedoms, and political liberalisation have grown in affluence and in the process have caught the travel bug. People from all corners of Asia are increasingly interested in experiencing the outside world and what better place to start than their own region, steeped in tradition and endowed with incredible natural beauty.

China tourism steams ahead

The People’s Republic of China (PRC) is breaking growth records in nearly every industry, and travel and tourism is no exception. China’s total tourism movements in 2004 were almost 1.3 million movements. While the numbers remain heavily skewed towards domestic movements, it is indicative of increased freedoms and desires to travel. In 2004, 1.1 billion Chinese undertook domestic trips, which in comparison to all international travel flows of 762.5 million, is a very significant number.

Few would question that the huge domestic volumes of travel will eventually lead to greater international travel demand from China. As the Chinese become increasingly addicted to travel as a lifestyle alternative, they will demand greater variety of destinations and activities. Travel is like any habit, the more one partakes the more one desires and the Chinese are becoming addicts.

It is with this in mind that one must consider the phenomenal growth and potential of China’s outbound tourism. The Chinese engaged in 28 million international trips in 2004, including border crossings to Hong Kong and Macau. The World Tourism Organisation (WTO) predicts that by 2020 there will be more than 100 million outbound travellers from China. Given the fact that China has surpassed all predictions, this number may be conservative.

China has recently surpassed Asia’s pre-eminent supplier of tourists – Japan. In 2004, China produced 28 million outbound travellers, albeit a large percentage of which travelled to neighbouring Hong Kong and Macau. It is only a matter of time before the Chinese explore beyond their familiar destinations. Comparatively, the Japanese have consistently provided 16+ million outbound travellers to global international traveller numbers. However, this number has been stable for nearly a decade and it is unlikely to grow at anywhere near the rate of Chinese outbound.

It’s no wonder tourism destinations around the world are waking up to the importance of Chinese tourism and scrambling for a share of this burgeoning outbound travel market. A staggering 32 million international trips are likely to be taken by residents of mainland China in 2005.

And the momentum is growing. Preliminary data from the Ministry of Public Security indicates 14.61 million outbound trips were taken in the first half of 2005 which equates to close on 32 million trips for the calendar year, based on 2004 travel patterns.

To get an accurate understanding of the China outbound market, one should consider the large proportion of mainland travellers visiting the special administrative regions of Hong Kong and Macau. In 2004, these regions recorded 21.8 million arrivals from China. This represents 80.4 percent of the total 27 million arrivals from China recorded by all Asia Pacific destinations, including ‘border hoppers’.

Not surprisingly, given the easing of access, the increasing economic purchasing power and the close geography of Hong Kong and Macau, the number of mainland visitors to Hong Kong and Macau has been growing rapidly. 56.1 percent of all Hong Kong’s arrivals and 57.2 percent of Macau’s arrivals come from China.

The strength of the China market also unquestionably helped Hong Kong to recover rapidly from the worst of the SARS crisis in 2003. However, there are also marketing implications and risks associated with one source market becoming so dominant to a destination.

Excluding Hong Kong and Macau, 30 Asia Pacific destinations have consistently reported on arrivals of residents and nationals of China since 2000. Collectively, those 30 destinations received 5.3 million arrivals in 2004.

The winners by volume

The average annual rate of growth (AARG) between 2000 and 2004 of the top 10 destinations (excluding Hong Kong and Macau) shows some of the best performing destinations over the past five years (see Table 1).

Australia has grown steadily at an average of 20 percent a year since it became the first western destination with approved destination status (ADS) in 1999 . In the five years since ADS was initiated, numbers from China have more than doubled.

Singapore recovered rapidly from the SARS crisis in 2003 to record an average growth of 19.3 percent and displace both Thailand and Vietnam as the top volume market in 2004 after Hong Kong and Macau. Japan, Korea, Canada and Vietnam also recorded consistent growth.

Visits to the USA have declined since 2000, due at least in part to the increased difficulty in obtaining visas after tightening of security post 9/11. However, the gain between 2003 and 2004 was remarkably strong at 28.7 percent, and may herald a return to continued growth.

Thailand is the third biggest volume market excluding Hong Kong and Macau and yet arrivals have been relatively flat over the past five years. In fact, Thailand has surrendered the top spots to both Singapore and Vietnam during 2004, losing significant numbers since its dominant days of 2001.

While Mongolia recorded strong growth, it was driven more by people visiting friends and relatives and official visits by government delegations than pure leisure tourism.

Inbound visits

Beyond the strength of China’s outbound potential, it is also important to recognise that China continues to grow in popularity as an international tourist destination. In 2004, an astonishing 110 million people visited China. While these numbers include cross border visits from Hong Kong and Macau of nearly 90 million, they are, nonetheless, extremely impressive. Similarly, the first six months of 2005 have shown consistent growth with 7 million more visitors than the same period of 2004; a 13.4 percent increase.

China is a tourism phenomenon from all perspectives and one which no one can overlook. China is the Asian locomotive of international inbound and outbound tourism.

India also on Track

Another noteworthy destination in Asia is India. In 2004 the subcontinent produced 350 million tourism movements, of which 6,000,000 (nearly 2 percent) were outbound movements. From a yield perspective, the Indian market tends to out perform the Chinese outbound market, with average lengths of stay and per diem expenditures proving to be longer and higher. India, with its 1 billion-plus population and ever growing service sector, is another Asian outbound market to watch.

One area fuelling the growth in Asian travel and tourism is the emergence of regional low cost carriers (LCCs). In the past three years, there have been well over a dozen start-up LCCs in Asia. While some have experienced marginal success, others have been hugely successful in penetrating existing business and leisure markets and at the same time stimulating new travel demand.

Another fundamental change in the Asian aviation scene, to a large degree brought about by the LCCs, is a shift from the traditional hub and spoke system previously dominated by Tokyo, Seoul, Hong Kong and Singapore, to one that equally values secondary cities. Increasingly, air service is expanding to include places like Surabaya, Kuching, Chiang Mai, Macau, Davao and other smaller, yet no less important, Asian cities. With half of the world’s population living within 3 hours air travel of Hong Kong, this means a huge potential for growth in regional and international travel in the coming years.

This is stimulating huge attention from governments throughout the region. The Centre for Asia Pacific Aviation (CAPA) reports that some 190 airport related projects are under construction, with countries like India and China leading the way. Thailand, which in 2006 will unveil its new Suvarnabhumi Airport, is planning for capacity of 100 million by the year 2020. In comparison, Don Muang (Bangkok’s current International Airport) recorded passenger movements of 38 million in 2004. Similarly, airports like Incheon (Seoul, Korea), Chek Lap Kok (Hong Kong), Pudong (Shanghai, China) and Narita (Tokyo, Japan) are preparing for exponential growth in passenger and cargo movements.

Exploiting the Asian Opportunities

For those who are well connected and familiar with Asian tourism, the opportunities abound. For those to whom Asia represents a new opportunity, the challenge may be more daunting.

There are two specific business opportunities for tourism professionals throughout the world. One, naturally, is to tap into the potential of the Asian outbound market. This requires cooperation between public and private sector stakeholders to nurture a consistent and manageable level of growth in tourism flows from Asia.

The other opportunity exists in contributing to Asian tourism infrastructure through the export of technical and managerial expertise. In order to do this, suppliers of these services need to develop networks and partnerships in Asia. To this end, organisations like the Pacific Asia Travel Association (PATA) can pave the way for new and exciting relationships.

Founded in 1951, PATA is the leading travel trade membership association acting as a catalyst for the responsible development of the Asia Pacific travel and tourism industry. PATA is unique in-so-far as it is the only significant membership body in the region – if not the world – that gives equal representation to both public and private sector members.

While PATA is an association – and that is our primary management focus – it just so happens that our members are involved in all facets of the travel & tourism industry and that, therefore, is our sector focus. PATA provides leadership and advocacy to the collective efforts of nearly 100 government, state and city tourism bodies, more than 55 airlines and cruise lines, and hundreds of travel industry companies. In addition, thousands of travel professionals belong to more than 30 PATA chapters worldwide.

An intrinsic value of PATA is the broad base of its membership with an extensive network of governments, airlines, airports, hotels and resorts, tourist attractions, media, educational institutions, investment & financial institutes, tour operators, travel agencies and more. All facets of the travel and tourism industry are represented within our partnership of both public and private sectors, large and small organisations, developed and developing nations, and companies that are directly and indirectly reliant on travel flows.

Our goal is to help members develop and increase business opportunities through a wide array of events, marketing intelligence, communications and networking and to receive industry-wide recognition and exposure through the prestigious PATA brand.

Asia has come a long way since the 1960s. Today, it is a burgeoning travel emporium with equally huge inbound, outbound and domestic potential. Asian tourism is here to stay and smart tourism operators are finding ways to tap into this last bastion of massive tourism expansion. Anyone serious about doing business in travel and tourism in the 21st century must include a plan for Asia in their corporate strategies.

Table 1: Top ten Asia Pacific destinations for China travellers by volume, 200 & 2004

Peter A. Semone

As Vice President – Development, Peter A. Semone oversees the business development of the Pacific Asia Travel Association (PATA). He joined PATA in 2002 after a decade working in the Indonesian Archipelago. He holds a BA in International Relations from the University of Pennsylvania and an MMH in Tourism Development from Cornell University’s School of Hospitality Management.