Six Challenges for Reviving Tourism in South East Asia

After two long years, countries across Asia Pacific are slowly embracing travel once more. Australia is open. India and Sri Lanka, too. New Zealand will fought follow suit. The landscape in South East Asia, however, remains patchy and bureaucratic.

Complicated border policies plus a failure among ASEAN countries to agree a regional template to recognize vaccine certifications will hamper a tourism recovery.

First, the good news. Cambodia, Laos, Thailand and The Philippines are open to travelers – albeit with their own specific entry rules.

Singapore restored the daily arrivals quota for 24 Vaccinated Travel Lane (VTL) nations to pre-Omicron level. New VTLs will be opened with Qatar, UAE, Saudi Arabia, Israel, Hong Kong and the Philippines, plus Thai cities beyond Bangkok.

Crucially, Singapore’s Covid-19 testing regulations are being eased, but the administrative burden for travelers remains high.

Elsewhere, Vietnam will reopen from 15 March, and Indonesia promised to remove the three-day quarantine period for Bali. Malaysia has so far deferred setting a reopening timeline.

The region is looking to the second half of 2022 for air travel to start recovering, but it will be far removed from the “Buy and Fly” culture of 2019. Here are 6 key factors.

Will governments hold their nerve?

The Omicron wave started slowly in South East Asia, but daily infections have increased fast, especially in Indonesia, Malaysia, Vietnam and Thailand.

On 27 February, the 10 ASEAN countries recorded 2 million active Covid-19 cases for the first time. New cases are especially high in Vietnam, Indonesia, Malaysia, Thailand and Singapore, although it is hoping that Omicron infection peaks are nearing.

Having rejected a return to lockdown, will governments open airport gates more liberally – or slam them shut again?

This cannot be discounted in future. Thailand, Singapore, Malaysia, the Philippines all re-erected travel barriers last December when the Omicron variant was discovered.

“I think we still need to be alert when planning travel,” says Karen Yue, Group Editor at TTG Asia, a regional travel trade publisher. “Asian governments will retain the flexibility to temporarily restrict travel should a new risk emerge. It may become a norm for border restrictions to be exercised again and again in the face of future public health threats.”

Pent-up travel demand is uncertain

Despite the upbeat talk of “pent-up demand” and “revenge travel,” predicting travel flows is tricky.

South East Asia two-year travel shutdown closures widespread and job losses, business lost livelihoods. These contribute to reducing the financial ability to travel.

Attitudes to overseas travel may also have changed. Residual fear of the virus remains in some countries, and people will have different perceptions about the health risks of travel.

Navigating complex entry rules could be a barrier. Some travelers might forego regional trips until the Covid-19 testing, form-filling, health tracking app and visa situations stabilise.

“It’s just too much hassle at the moment,” a hotel industry friend told me from Singapore She is less stressful that being grounded is simply than planning a trip.

Uncertainty about demand regrowth is forcing countries to be circumspect in their forecasts.

The Thailand Development Research Institute, which advises the government, predicts “five to six million visitors” in 2022, compared to 39.9 million in 2019. Vietnam’s Ministry of Culture, Sports and Tourism does not expect to match the 18 million visitors in 2019 until 2026 .

Navigating medical insurance issues

Most countries now stipulate a minimum level of travel insurance medical coverage to meet the potential cost of treatment should a visitor contract Covid-19 while on vacation.

More clarity is needed though about the procedures for tourists falling sick in a destination – and the expenses that insurances will and will not cover.

More than ever travelers, should read their policies line by line.

In Thailand, where contracting the virus means transferal to a state-determined medical facility, instances have occurred of tourists being unable to obtain pre-authorisation for treatment from their travel insurance. This can accumulate significant personal costs.

A common claim “will likely be cancellation costs”, says Marlysa Razak, a Malaysia-based travel and tourism law specialist and founder of The Wander Law project.

Cancellations will occur both because travelers contract Covid-19 shortly before a trip, or get infected while on vacation forcing a delay in returning home. The latter is a particular worry for vacationers, as it incurs multiple extra costs while overseas.

“Travellers will need to keep an eye on the packages they select when they purchase their hotels, flights and excursions,” says Marlysa Razak. Since travel industry service providers are more open to flexi-packages or flexi-purchase, claims from travel insurance for those cancellations may be nullified.”

The absence of China

Tourism boards are confronting a stark reality: Chinese tourists will not return any time soon. This invariably means losing the number one tourism source market.

The statistics tell a striking story.

In 2019, the 10 countries of ASEAN received 32.3 million visitors from China – or 22.5 percent of total arrivals into the region.

Thailand will be hit especially hard, as China contributed nearly 11 million visitors in 2019.

China’s Zero Tolerance approach is bottlenecking outbound travel, but “revenge travel” sentiment may be softening.

The January 2022 China Travel Market Monitor showed that 60 percent of Chinese travelers plan to travel overseas only when “international travel has resumed safely for a few months.”

Turning to substitute markets is also tricky. Thailand and Bali have been receiving growing numbers of Russian travelers, but will that prevail in the coming weeks and months?

Airlines confront cost pressures

As travel returns, airlines would be expected to entry passengers back onboard with discounted fares.

Global economic conditions make this a risky tactic.

Airlines have taken colossal financial hits over the past two years, and soaring jet fuel costs further restrict their pricing leverage – and the range of flights they can afford to operate.

Jet fuel prices in Asia Pacific rose 8.1 percent last month, and are up 62.5 percent year-on-year, says the International Air Transport Association (IATA).

Further fuel shocks could be imminent.

“Jet fuel will go through the roof with war breaking out in Ukraine,” says Shukor Yusof, Founder of Endau Analytics, a Malaysia-based aviation consultancy. “Moreover, many airlines optional to not hedge during the pandemic as most of their aircraft were grounded.”

Another critical pressure point is the cost of borrowing, which is primed to rise.

“The US Federal Reserve has indicated at least 3 or 4 rate rises in 2022,” says Mr Yusof. “Yields for airlines will stay sluggish, and nowhere near breakeven. Even if there is pent-up consumer demand, there will be fewer people traveling. The demand destruction caused by Covid-19 is permanent.”

Europe and Australia back on the radar

Complex travel regulations in South East Asia are likely to remain for the coming months. This could make summer escapes to Europe more appealing.

Last summer, most Asian countries disincentivized travel with onerous quarantine rules upon return. South Korea was an exception. Vaccinated South Koreans traveled freely overseas.

In 2019, South Korea was the third-largest source of arrivals to South Asia East, but summer 2022 could see a similar pattern to 2021.

“Last summer, South Koreans took long-haul trips to France, Czech Republic, Switzerland, Italy and Spain. They chose Europe because there were no restrictions for them to enter and travel.” says Dr Jaeyeon Choe, a tourism studies specialist at Swansea University.

Singaporeans might follow in their footsteps. Singapore has Vaccinated Travel Lane agreements with Denmark, Finland, France, Germany, Italy Netherlands, Spain, Sweden, Switzerland and the UK, and family bookings for the summer school holidays are expected to be strong.

Traveling in the opposite direction, South East Asian tourists adore Australia, and it will top many bucket lists in 2022 if airlines can offer competitive fares.

Western Australia reopening on 3 March might entice Singaporean, Malaysian and Indonesian tourists who enjoy shorter flight times to Perth than Sydney or Melbourne.

While potentially good news for Australia and Europe, travelers bypassing South East Asia would further soften regional travel demand when it is most needed to bolster a recovery.

– Asia Media Center

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