Where’s Hot and Where’s Not in Asia Pacific to 2009

Which Asia Pacific destinations are expected to attract more international visitors over the next three years? Which ones will stagnate and which ones will face a contraction in the numbers?

PATA’s Strategic Intelligence Centre and tourism forecasting experts Professor Lindsay W. Turner and Professor Stephen F.Witt have run the numbers to show the numerical trends for 40 Asia Pacific destinations to 2009.

While it is difficult to continually provide accurate forecasts of tourism demand in today’s increasingly complex and volatile world, the model developed by Turner and Witt has been remarkably consistent in getting right both the direction (growth, loss or otherwise) and the strength (strong, moderate, poor) of tourism demand across the Asia Pacific region for more than five years now.

The 2006 forecasts generated last year for example, are within 6% of the actual (preliminary) aggregate arrivals data for 39 destinations across the region.

In this Issues & Trends we are using the forecasts for 2007-09 to pinpoint the origin-destination pairs that we expect will do well over the three year period to 2009.These numbers will have obvious implications for investment and budgeting in the destination marketing, hotel, aviation and tour operator sectors; they may also cause some concern in those circles where a disconnect may occur between marketing spend and the forecast returns on visitor arrivals. Others however may well feel the forecast numbers justify their existing and planned marketing strategies.

All the percentages mentioned in the following summary are compound annual growth rates (CAGR) using the year 2005 as the base year from which to measure growth to 2007, 2008 and 2009 respectively. Figures such as 10.5-12.8% indicate that in the three forecast years under study, 10.5% was the lowest CAGR and 12.8% was the highest.

NORTH AMERICA OUTBOUND

Islands and emerging destinations can expect growth

Among Asia Pacific destinations, American travellers will increasingly visit emerging destinations such as Cambodia, Vietnam, Lao PDR and Macau SAR over the next three years. Similarly, they will increasingly visit places perceived as high quality island leisure destinations such as the Maldives, the Cook Islands and Niue. Each of these destinations are predicted to show strong growth rates from the American market – Maldives (19.8-32.6%), Cook Islands (19.8-23.6%) and Niue (8.7-12.5%).

Although the actual number of American visitors will remain small – less than 10,000 a year to each destination – the increased American visitor presence on niche or boutique top-end tourism economies will be marked. In the Maldives for example the increase in US visitors will more than double the receipts from that market moving from a little over US$1 million in 2005 to more than US$2.1 million by 2009.

The mid-volume destinations that will do well by attracting increasing numbers of Americans up to 2009 include India, Malaysia, Cambodia and Vietnam. None of the growth rates will be stellar (typically 9-10%), but certainly well above the long-term world growth average of 4.1%. In addition because existing volumes of Americans already visiting these destinations are in the tens or hundreds of thousands, the local impact of converted US dollars will be warmly felt at the cash tills.

At the multi-million dollar high-volume end, China (PRC) will comfortably pull ahead of Canada as America’s most popular destination. US arrivals into China (PRC) will surge from 1.6 million in 2005 to 2.5 million in 2009, an annual growth rate of 12.5%. While much of this traffic will be for visiting friends and relatives and corporate travel as well as leisure, it is all business for someone.

Hawaii – which is treated as a separate destination for the purposes of forecasting travel demand – looks to remain the second most popular high-volume destination for mainland US travellers behind Canada. The 4.96 million who visited in 2005 will become 5.89 million by 2009.This represents growth of 4.4-4.7% a year.

However, some destinations that attract significant numbers of Americans, won’t have much to cheer about. Australia (1.7-1.8%), Canada (0.6-1.4%) and Japan (0.7-1.3%) won’t be welcoming any substantial CAGR growth in American visitors over the forecast period.

Canada however attracts a huge volume of Americans each year – 13.8 million in 2006 – so even with a relatively small percentage growth spread of between 0.6% and 1.4% will still receive around 15.2 million by 2009, based on current scenario assumptions.

“We have been concerned about the lack of growth in Canada traffic for the last couple of years,” says Scott Supernaw, Managing Director-International at Tauck World Discovery, a leading outbound American travel agent. He cites the increase in the cost of services, related partially to the strength of the Canadian dollar. “Canada also needs to be even more proactive in marketing, by creating more demand as well as joint marketing with key sellers of Canadian tour and travel products,” he says.

Guam, the Northern Marianas (NMI) and Fiji are expected to face challenges in the US market, at least in the medium-term. While the forecasts suggest Fiji will overcome its 2007 downturn, Guam and the NMI seem destined to struggle to at least 2009.

Running at roughly the Asia Pacific average, New Zealand (4.7-5.7%), Hong Kong SAR (5.2-6.9%), Korea (4.4-4.6%) and Thailand (7.3-7.6%) will continue to welcome reasonable increases of American visitors.

In destinations already attracting tens of thousands of Canadians, the hot CAGR growth destinations will include Macau SAR (14.8-15.7%),China (PRC) (13.4-14.6%),Cambodia (13.4-15.8%), Lao PDR (15.7-16.8%),Chile (17.7-17.7%) and Vietnam (11.3-11.9%).

The other big North American market, Canada, broadly exhibits the same traits as the USA. Canadian arrivals at small Asia Pacific ‘dream island’ destinations are also a strong growth feature with Maldives (32.0-47.7%), New Caledonia (24.6-30.7%), Tahiti (18.5-24.7%) and Cook Islands (13.0-14.8%) all forecast to do well. Canadian growth rates into Korea (ROK), India, the Philippines, Singapore and Hong Kong SAR – typically 6-10% – should also satisfy the tourism industries there.

Canadians will not be quite as shy to visit Americans as Americans will be to visit them. The forecasts predict 15.7 million Canadian arrivals in 2009 up from 13.8 million in 2005 – a lot of business, even though it is only growing at 2-3% a year.

EUROPE OUTBOUND

Expect increased arrivals to Maldives and Southeast Asian Destinations

With the strengthening of major European currencies such as the euro and pound sterling against the US dollar, European tourists will find many Asia Pacific destinations more affordable, especially those whose currencies are pegged to (or at least hug) the US dollar, such as Hong Kong SAR, Thailand and Malaysia.

European tourists carry hard currency euros and pounds sterling. Which Asia Pacific destinations will they prefer more in the years to 2009?

In mid- to large-volume markets, increasingly large numbers of Germans – the country that invented “wanderlust” – will visit the Maldives, Malaysia, Macau SAR, China (PRC), India and Vietnam.

No surprises there. However, destinations including Japan (0.7-3.5%),Chinese Taipei (-0.6-2.0%),New Zealand (2.5-3.4%), the USA (2.6-5.3%) and Australia (1.9-2.0%) may feel they are being somewhat ignored by Germany as growth rates are generally below the Asia Pacific average of 6.4% per annum.

Britons will increasingly visit the Maldives. The increases up to 2009 will range from 12.5-16.8% a year, in line with many other of the Maldives’ major source markets. China (PRC), the Philippines, Lao PDR, Pakistan and Macau SAR will also each receive more UK visitors.

On the other hand, the UK’s forecast growth rates of 0.7-1.7% into Australia, 0.7-3.0% into the USA, an average of 2.4% into Sri Lanka and 0.5-1.4% into Canada look comparatively modest for the period.

French arrivals into the Maldives are forecast to rise from 21,640 in 2005 to 68,449 by 2009 – annual growth rates of between 33.4 and 63.2%. Vive la difference! However, among the European markets, the Italians will still dominate arrivals into the Maldives, with numbers forecast to rise from 70,112 in 2005 to a mammoth 178,000 in 2009 – growth rates of 26.4-47.9%. France will also be hot for Malaysia and Singapore as French arrivals to both are expected to more than double over the forecast period to 2009.

Apart from the Maldives, Italians will discover a new passion for Malaysia (23.3-29.9%), Lao PDR (16.8-19.4%), Sri Lanka (15.6-19.0%), Korea (ROK) (12.6-16.9%) and Hong Kong SAR (15.9-19.2%); in the case of Hong Kong SAR this CAGR growth translates into a massive leap from almost 98,000 Italians arriving in 2005 to close on 200,000 by 2009.

In the north of Europe Sweden is a source market that has a constant love affair with parts of the Asia Pacific region, particularly (in order of volume) the USA, Thailand and China (PRC). While CAGR growth to the USA and Thailand is expected to be under the average for Sweden to Asia Pacific, China (PRC) will experience very strong growth of 13.8-16.3%.

ASIA PACIFIC OUTBOUND

Chinese travellers will power regional travel growth

Around 75% of arrivals into Asia Pacific destinations come from Asia Pacific. The giant Northeast Asian source markets of China (PRC), Japan and ebullient Korea (ROK) dominate the traffic, while in South Asia India, with its rapidly expanding middle-class, is becoming a serious provider of international travellers. But where are they all going? Which Asia Pacific destinations are gaining or missing their share?

With China (PRC)’s economy surging and its Approved Destination Status countries becoming more numerous, travel hungry Chinese will power significant growth across Asia Pacific.

The China factor will be particularly impactful in high-volume destinations that already receive a lot of Chinese and are on the brink of receiving a lot more. For example the 10.5 million Chinese mainland visitors into Macau SAR in 2005 will become 14.7 million by 2009 (8.9-10.8%).Similarly while Chinese mainland arrivals into Hong Kong SAR will ‘only’ grow 7.7-8.1% per annum, this translates into a numeric increase of more than 4.3 million additional arrivals by 2009 Chinese traffic into Korea (ROK), New Zealand, the Philippines and Canada – relatively high volume destinations mostly receiving hundreds of thousands of Chinese a year – will more than double.

Korea (ROK) will therefore receive almost 1.5 million Chinese by 2009, up from 709,000 in 2005 (growth rates of 20.2-26.2%).With similar growth rates, New Zealand must prepare to take care of more than 200,000 Chinese mainlanders by 2009, up from 87,000 in 2005 (23.4-25.2%); by the end of 2006 New Zealand had already received close on 106,000 Chinese visitors.

While CAGR increases from China (PRC) into other established or ‘mature’ large-volume Chinese destinations such as Singapore, Japan, Malaysia and Indonesia will only be in the teens, this still means that numbers will generally come close to doubling between 2005 and 2009 for those destinations.

China (PRC’s) impact will also be strongly felt –although disproportionately – in many lower volume island destinations. The fastest growing recipient of Chinese travellers amongst this group will be the Maldives where rates of 40.4-66.9% will propel arrivals from 11,600 in 2005 to over 45,000 in 2009; already in 2006 the volume had more than doubled to 26,400.

Sri Lanka and Guam can also expect very strong Chinese arrivals growth rates, which could have a big impact on the local economies, even though absolute numbers remain small. Equally, Cambodia (in effect Siem Reap / Angkor Wat), where Chinese arrivals were already at 59,000 in 2005 must prepare to receive 145,000 Chinese by 2009 –growth rates of 25.1-31.3% a year.

Japan has long been a major provider of international travellers for many years and although outbound growth has virtually stalled for some time now, it has done so at a volume of around 17.5 million. Over the forecast period while the vast majority of Asia Pacific destinations will only register modest increases of Japanese visitors, there are a few that can expect strong increases of over 20%. Key amongst these are the Maldives (25.6-44.9%), Macau SAR (16.7-18.6%), Nepal (12.1-17.9%) and Vietnam
(10.8-14.2%).

In Hawaii – for decades a mass volume Japanese favourite – arrivals are forecast to increase by only 0.6-1.8% per annum but the translation of that into a numeric count means that Hawaii will be receiving more than 1.6 million Japanese visitors per year by 2009.

Similarly, the Japanese (and Korean) love affair with Australia seems to be slowing with CAGR growth expected to drop to between 0.7% and 1.8% per annum. Similarly for Guam where the number of Japanese visitors will only inch up to between 0.3% and 0.5% to reach 976,000 by 2009. While this is still growth it is well behind the 4% growth expected across the Asia Pacific region.

Fiji and Tonga will have a struggle to hold on to existing Japanese arrivals numbers while Indonesia, Bangladesh and the NMI are all expected to record fewer arrivals over the forecast period. Korea (ROK) is a source market that has been booming of late, with outbound volumes peaking at more than 11.3 million last year and with many Asia Pacific destinations reaping the benefits of that growth. Palau is a good example in this regard as it has seen numbers from this market surge from just under 2,200 in 2005 to almost 11,800 in 2006 and expectations are that these numbers will reach over 17,000 by 2009.

Other Asia Pacific destinations expected to see sharp growth in Korean arrivals will be the Maldives (34.7-60.8%), Myanmar (30.1-43.2%), Macau SAR (26.6-30.8%) and the NMI (14.4-21.9%); all are predicted to have very strong double-digit growth rates to 2009.

Vietnam, Lao PDR, Singapore and Malaysia will also do well. But perhaps the most significant gain will be by Japan where very good growth rates of over 12% on an already high volume relationship mean that numbers will grow by an additional one million arrivals from 1.7 million in 2005 to 2.8 million by 2009.

To a certain extent, worries that Guam may have about sluggish arrivals growth will be tempered by 8% more Koreans each year. Over the last few years, international outbound movements from India have attracted the attention of many marketers as this market is now travelling in strong numbers and in relatively large family groups.

In addition the Indian traveller is a consistently higher-thanaverage spender in many destinations. Over the forecast period to 2009 the biggest CAGR growth in Indian international travel within the Asia Pacific region will be to Macau SAR, where Indian arrivals are forecast to more than triple to 2009. Other destinations that are expected to perform well with this source market include Australia (14.8-18.8%), China (PRC) (13.6-14.7%), Singapore (12.8-13.5%), Hong Kong SAR (11.3-11.6%), Canada (10.9-11.8%) and the USA (9-11%).

More modest growth will be into the neighbouring South Asian destinations of the Maldives, Sri Lanka, Nepal and Bangladesh. There will also be modest single-digit growth into Japan, Korea (ROK) and Chinese Taipei.

The Maldives, Samoa, Macau SAR and Thailand will attract healthy increases of Australians, many of whom will increasingly choose Hawaii, which will register 16% growth a year. The forecasts suggest that the only Asia Pacific destination in this forecast series that Australians will not travel to in increasing numbers will be Indonesia; there numbers from Australia are predicted to decline marginally from 407,000 in 2005 to around the 400,000 mark by 2009.

Not surprisingly, and while there is no great expectation that arrivals into Indonesia will surge, despite the country’s undisputed attractions, the forecasts for all markets with the exception of Chinese Taipei, Japan, Australia and New Zealand are positive.

RECURRING TRENDS AND CHALLENGES TO COME

The Asia Pacific forecasts to 2009 suggest a number of recurring patterns and themes. China (PRC) for example, will remain a phenomenon. Macau SAR and Malaysia seem to have the Midas touch and several small ‘romantic’ island destinations including the Maldives, the Cook Islands and Tahiti are increasingly hot.

In a world where people are becoming more affluent and travel is becoming relatively cheaper, it is no surprise to forecast growth. And perhaps it is no great achievement to get growth. As long as you don’t have disease, war or political/social instability – or even if you do in many cases – the international visitors will come.

The forecasts also show however, that we can’t always bank on the expected. The post-colonial synergy and shared cultural heritage synergies, often based around language between destination and market, seem to be fading somewhat. The French are now keener to visit Malaysia and Singapore than Indochina, where the Brits are heading to the relative neglect of more traditional destinations in the region.

Similarly, the Chinese are now looking beyond Vietnam and India is increasingly likely to look beyond its South Asian neighbours .In addition, Pakistan, Sri Lanka and Nepal, all destinations which have had more than their fair share of crises, are all forecast to do well.

While the overall trend is strong growth, dozens of destinations in Asia Pacific are facing challenges – some short-term others longer-term –that are hindering arrivals growth. Over the period to 2009, a number of Asia Pacific destinations have particular hurdles to clear and while they may take some consolation in that the problems are short-term or merely specific to one or two source markets, the very nature of global change suggests some are facing underlying endemic or structural issues that are difficult to shake off.

A question for debate is the degree to which destinations with lower than average performances are suffering unforeseen consequences. It may simply be that they are realigning their strategies in favour of new and different source markets.

In addition, this article has focused solely on the numbers of international travel flows. Other variables such as length of stay and of course visitor expenditures and movements within a country destination need to be considered in parallel. Destinations can see (and some already have) a reduction in absolute arrivals numbers work hand-in-hand with increases in revenues to the destination.

But that’s a discussion for another time.