If Southeast Asian nations aspire to avoid prolonged pandemic-driven recessions, many will need to open their closed borders and welcome back the foreign tourists that buoyed their economies before Covid-19.
Since the Covid-19 outbreak began in January, which first severely cut the number of Chinese tourists in the region and then hit other nationalities as the virus spread to Europe and North America in March, tourist arrivals have dwindled to historic lows.
The United Nations World Tourism Organization (UNWTO) forecasts global tourist arrival numbers to fall by as much as 80% this year, resulting in lost revenues to the tune of US$1.2 trillion. Southeast Asian tourism has been the second hardest-hit region in the world trailing only Northeast Asia, according to UNWTO.
Cambodia’s Ministry of Tourism this week estimated that the sector, worth around $4.3 billion in 2018, will lose $3 billion in 2020. Tourism numbers in Vietnam were down 98% year on year in May. Thailand, projected to see an economic contraction of at least -5.3% this year, officially estimates its tourism-related losses could be over $40 billion.
In 2018, tourism accounted for 32% of gross domestic product (GDP) in Cambodia, 20% in Thailand and 9% in Vietnam, according to UNWTO. The sector accounts for 6.7% of employment in Cambodia and around 9% in Thailand and Vietnam.
The Southeast Asian states have been fortunate from a health perspective. Thailand, Vietnam and Cambodia have all reported relatively small numbers of Covid-19 infections compared to regional neighbors. So far there have been only 58 deaths in Thailand, and reportedly none in Cambodia and Vietnam, according to government figures.
That should work in their favor once international travel recommences and tourists seek perceived as safe lightly infected countries. All international flights to Thailand are banned until at least June 30.
Vietnam looks set to open progressively, with Phu Quoc island and some resort towns opening later this month, but most other sites not until later in the year.
The Tourism Authority of Thailand last weekend designed a new campaign to rebrand itself as a “trusted destination”, an effort to attract young affluent travelers, Reuters reported.
None of the three countries expect normal tourism services to resume until at least later this year, with hopes of a revival during the November-January peak season.
A majority of experts surveyed in a recent UNWTO report said they expect international tourism to begin recovering next year, while a slightly smaller percentage said a revival could begin by the end of 2020.
Those somewhat upbeat projections likely assumed there will not be a massive “second wave” of the disease and that tourists will not shy from exotic long-haul destinations.
More than 3,000 tourism-related businesses in Cambodia have closed, with nearly 45,000 job losses, according to the Ministry of Tourism. Those losses will certainly climb higher if tourism doesn’t recover until later in the year.
Cambodia, Thailand and Vietnam’s governments have all introduced stimulus packages to help businesses in their tourism sectors stay afloat during this crisis, ranging from tax exemptions to financial bailouts.
But these survival packages may be creating what some analysts are starting to refer to as “zombie companies”, firms that are kept alive during the crisis but which are certain to fail once the state ends its subsidies.
Few experts reckon that Bangkok, Phnom Penh and Hanoi have the funds to keep their tourism sectors afloat if they don’t see a recovery until the end of the year.
There are also questions about how readily people will take on credit to create new businesses to replace those in the tourism sector that have already gone bust. Those that survive will face new added costs of doing business.
“Hygiene and health standards will become even more important forcing hotels to deliver cleaner rooms, beds, and foods,” a recent report on Southeast Asia by Emerging Market Experts said. “Also restaurants have to uphold better standards and prevent overcrowding. All these measures will result in bigger costs for companies.”
Those higher costs will be more readily absorbed by larger companies than small ones, a new market norm that could drive a sharp consolidation in the sector that drives out small-scale operators.
A senior executive from Thailand’s Central Group, which manages 46 hotels and resorts across the kingdom, was recently quoted in media saying that the company intends to “limit occupancy at 50% on some properties so guests experience social distancing that they are comfortable with.”
Tourism, of course, is especially vulnerable to boom and bust cycles.
A World Bank report noted that Phuket, a tourism reliant province in Thailand, had a higher poverty rate in 2018 amid a tourism boom than in 2000 when tourist numbers were on a much smaller order of magnitude.
This anomaly, the report suggested, was because “households in this province are sensitive to changes in the tourism industry.”
To be sure, the region’s tourism sectors faced many problems before the pandemic struck, a trend some saw as a race to the bottom to attract greater numbers at the expense of the environment and national brands.
A World Bank report released in January found that spending per tourist declined by 0.3% in Thailand last year compared to 2018, despite an increase in overall tourist numbers.
In Cambodia, actual revenue per tourist fell by much more, from $809 in 2013 to $552 in 2018, according to a World Bank economic update on Cambodia from last November.
It noted other “worrying trends” in Cambodia’s tourism sector, including a low level of repeat visits, with just 21.3% in 2018 compared to almost 70% in neighboring Thailand.
A World Bank report on tourism in Vietnam from last year asserted that continued growth of the sector “if not well managed, could have adverse economic, environmental, and social impacts.”
“Rapid visitor growth has been achieved, in large part, through a shift to a lower-spending visitor mix, a continued emphasis on mass-market tourism products, and increased concentrations of visitors into already-crowded and popular local destinations,” the report stated.
Whether the pandemic will push the countries’ tourism sectors up the value chain from less low to more high-spending travelers is not immediately clear. The Tourism Authority of Thailand has been pushing for “quality” over “mass” tourism since 2016, albeit with limited success.
Much will depend on the future of Chinese tourism.
In Thailand, the number of Chinese tourists rose from just 800,000 in 2008 to more than 10 million a decade later, when they accounted for 27% of all visitors, according to the World Travel & Tourism Council
In Cambodia and Vietnam, too, Chinese travelers are now the largest national group. In 2018, some 2 million Chinese tourists arrived in Cambodia, up 67% from the previous year, and accounted for more than a third of all tourists, according to records from the country’s Ministry of Tourism.
One common frustration is that many Chinese tourists prefer to travel on package tours, where their hotel and food bills are often paid upfront, although this prevalence has been declining in recent years. For smaller restaurants, hotels and other outlets, this often deprives them of foot traffic.
Chinese spend an average of $1,536 per tour in Thailand, compared to $2,125 for Europeans, who tend to stay for 17 days while Chinese spend eight days on average in-country, according to statistics quoted in a recent South China Morning Post report.
But a recent survey by C9 Hotelworks survey of wealthy Chinese found that roughly 80% said they now want to avoid large organized tours because of the pandemic, which could allow Southeast Asia’s tourism sectors to target only the most affluent of Chinese visitors.
Chinese tourists made an estimated 170 million outbound trips last year, according to China’s National Bureau of Statistics. Before Covid-19, industry forecasts expected that number to grow to 260 million by 2030.
Those up-and-up estimates look somewhat less likely at the height of the pandemic. That has some looking for new “silver linings” with one wire report suggesting Vietnam should take a health-conscious, eco-savvy approach to re-opening that targets higher-margin independent travelers.
But as the region’s governments seek new growth engines to power their economies out of virus-caused recessions, it’s just as likely they look for a return to mass-market tourism as fast as humanly possible.