Despite the tsunami tragedy that struck at the end of the year, the Asia-Pacific travel industry put the shocks of 2003 firmly behind it in 2004 with record numbers of travel bookings, according to figures released by Abacus International.
In 2004, there were more than 52 million bookings on the Abacus system, an increase of 28 per cent on 2003 and 30 per cent on the benchmark year of 2002. Total bookings showed healthy month-on-month increases in all months except October. This was because October 2003 bookings were exceptionally high due to airlines lowering fares in order to stimulate travel in the wake of the SARS outbreak. The exceptionally strong increases from March to June reflected low bookings in some markets when the SARS crisis was at its height.
“Without a doubt, 2004 was the best year for travel in Asia-Pacific in a decade,” said Don Birch, President and CEO of Abacus. “The year started out strong and kept getting stronger as it moved from a period of recovery to one of rapid growth. Economies across the region are on a roll, and growing prosperity in markets such as China, India, South Korea, Taiwan and Vietnam has translated very quickly into demand for travel.”
“At the same time, governments around the region are looking to the future and are recognising that travel and tourism can be a potent force in the growth of their domestic economies. Generally every 1% increase in GDP increases travel by 1.5%. As a result, they have placed new emphasis on developing tourism infrastructure and facilitating easy and safe travel across their borders,” said Mr Birch. “For example, most Asian countries, and Hong Kong, Thailand, Macau, Malaysia, India, Singapore and Japan in particular, have aggressive inbound travel objectives.
Intra-Asia travel accounted for 81.3% of bookings on the Abacus system during the year, outperforming all other routes.
FIT bookings during 2004 increased 22 per cent over 2003 and 12 per cent over the benchmark year of 2002. AAPA members (Association of Asia Pacific Airlines) are reporting continued strong growth in to 2005.
Growth by Region 2004 vs 2003 2004 vs 2002
North Asia (China, Hong Kong, South Korea, Taiwan) 28% 13%
IndoChina and Central Asia (Cambodia, Kazakhstan, Laos, Myanmar, Thailand, Vietnam) 25% 27%
South Asia (Australia, Bangladesh, Brunei, India, Indonesia, Malaysia, Nepal, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka) 17% 9%
The best performing months were March with more than 3 million FIT bookings and September with more than 2.9 million FIT bookings.
Electronic ticketing (e-tickets) adoption exploded during 2004, with the number of e-tickets issued through the Abacus system increasing 195 per cent (to 2.86 million) over 2003’s total of 973 000.
In December 2004, e-tickets accounted for 20.6 per cent of all tickets sold, compared to 9.9 per cent in December 2003. Singapore led e-ticket adoption (up 193 per cent in Y2003 and 9349 per cent Y2002) ahead of Taiwan (140 per cent/1737 per cent) and Hong Kong (185 per cent/3817 per cent)
Asia-Pacific travel – full speed ahead
Change came fast and furious to Asia’s travel industry in 2004. Twelve months ago, the recovery from the SARS outbreak was starting to gather steam, the first few low-cost carriers appeared in the skies and economies around the region were looking ahead optimistically, but cautiously.
The uncertainty was quickly set aside as the industry shifted into top gear, fuelled by buoyant economies, strong consumer spending power, major steps by key markets to liberalise aviation and an explosion of choice in terms of travel options, carriers and distribution channels.
According to the World Tourism Organisation, the travel industry in Asia-Pacific grew faster than anywhere in the world, up almost 40 per cent on 2003, a year hit hard by SARS, fears over the war in Iraq and terrorist activity. The growth was despite higher fuel prices, which increased costs to airlines, the lingering threat of Bird Flu and the freak tsunami that badly damaged tourism infrastructure around the Indian Ocean as the year drew to a close.
Low-cost carriers (LCCs) became a force in the region during 2004, with more than 20 LCCs flying international and domestic routes in Asia-Pacific.
“In many respects, Asia is an ideal growth environment for LCCs, with 130 cities with populations of more than 1 billion people, major centres in close proximity and a strong demand for cost-effective travel. In the short and medium term, LCCs will continue to lower the threshold for air travel for millions of travellers in the region,” Mr Birch said.
“The emergence of the LCC sector has gone hand-in-hand with the quickening pace of aviation deregulation in key markets and greater moves towards greater trade and tourism integration,” he said.
Competitive pressures, greater complexity in options and pricing, new channels of distribution and wider availability of the Internet dramatically accelerated change to the travel landscape during 2004. Faced with commission caps from airlines, an increasing number of travel agencies made the transition from simple ticketing brokerages to full-service travel consultancies.
For Abacus the non-air side of business has grown by 48% over 2003 which for Abacus-connected travel agents means hotel bookings have come to comprise 10-15 per cent of their revenue
The year ahead
Mr Birch made five key predictions for Asia-Pacific travel in the year ahead.
Asian travel growth will continue to be robust
Mr Birch said he is confident that, barring a major geopolitical catastrophe, 2005 would see the growth trend continue, “Regional economies are on track for 4-6 per cent GDP growth in 2005, which I believe will translate into a travel growth rate of 6-8 per cent across the region. Intra-Asia travel accounted for 81.3 per cent of Abacus bookings in 2004, outstripping all long-haul routes. I would expect this performance to continue in 2005.”
Recovery from tsunami will be rapid
While the December 26 tsunami caused serious damage to resorts in 12 markets around the Indian Ocean, Mr Birch predicted the impact would be short term.
“Already we are starting to see a recovery in affected markets. Travel is incredibly resilient, and we know from experience that recovery time is surprisingly short following a crisis. I am confident that travel from Asia to Thailand will be close to previous levels by April, long distance international visitors will be at 80 per cent of previous levels by October and completely restored by the middle of 2006,”
“The latest figures also suggest that many leisure travellers are choosing to travel to other destinations in the region while reconstruction work in affected destinations is underway. Indeed, there is a strong movement in many countries to encourage travellers to return as soon as possible to ensure that local economies are not further damaged from the absence of tourists.”
The tsunami was unlikely to have a major impact on economic growth within the region. “Travel to resorts represents only a small percentage of the 120 million international journeys forecast for next year in Asia-Pacific,” Mr Birch added.
More industry co-operation on crises
In 2005, there will continue to be crises that challenge the travel industry in Asia-Pacific, although hopefully not of the same scale as the tsunami disaster or SARS. Tourism demand is particularly sensitive to health and safety concerns, and recent crises have tested the industry’s ability to cope with a substantial drop in business.
“The fact is, at any given moment a country somewhere in the region is facing a tourism crisis,” said Mr Birch. “The challenge for travel industry leaders has been to find ways to prevent travel being derailed in the long term.”
Mr Birch said that through the trials of the past, the industry had learned to better manage crises. Organisations such as the Pacific Asia Travel Association (PATA) and the Association of Asia Pacific Airlines (AAPA) have taken the lead in addressing consumer and media concerns and developing strategies to manage future crises.
“The need for strong, centrally co-ordinated leadership and willingness among the industry to work together and pitch in when times are tough is as important as ever,” Mr Birch said.
LCCs will continue to flourish
2005 will be a golden year for LCCs in Asia. Aviation liberalisation will continue to gather pace across the region, paving the way for new LCC players and the development of new markets. There is still plenty of capacity for LCCs, particularly serving secondary communities as an affordable alternative to road or rail transport.
This expansion will be good for the entire travel industry. LCCs will stimulate demand for travel across the board, expanding the market for both LCCs and network carriers, driving the development of tourism infrastructure, creating jobs and delivering choice and convenience for travellers.
“This is an exciting time for LCCs in Asia,” said Mr Birch. “The doors to new markets have opened, and LCCs have flown in. Those who can identify and secure their market niche, manage costs by concentrating on their core capabilities and put in place an effective distribution network, will have a terrific year.”
Mr Birch also predicts that more LCCs will adopt GDS distribution, particularly in markets where the effectiveness of direct distribution is limited by the availability of the Internet.
While the number of new players will exceed exiting players in 2005, the following 12 months will see the start of a shakedown of the LCC sector.
“Longer term, we will see some consolidation and attrition as the market reaches saturation point, and a gradual shift to the middle ground by airlines – network and LCC – as they adopt successful elements of each other’s business models,” Mr Birch said.
China will drive Asia travel
China, with 1.3 billion citizens and more than 20 million outbound passengers a year, will continue to be the key driver for Asian travel and tourism in 2005.
While the pace of economic growth in China is likely to slow in 2005, the travel growth will continue to surge at 15-20 per cent a year. The second phase of a broad move to shift the Chinese aviation industry from state control to a market-based model will only accelerate this growth.
“Without a doubt, China represents the future of travel in Asia, with almost unlimited growth potential” Mr Birch said.
The majority of Chinese travellers still favour familiar destinations such as Hong Kong or Macau. But as the market matures, and Chinese have access to more information through the Internet, Chinese travellers are seeking more diversity and choice when buying travel.
“Over the next year we will see greater numbers of Chinese travellers in markets such as Thailand, Malaysia, Singapore and South Korea,” said Mr Birch.
“However, China’s sheer geographic, economic, technological and cultural diversity present a huge challenge for travel suppliers,” said Mr Birch. “Companies that are successful in attracting visitors from China will be those that understand what motivates the Chinese traveller, adopt technologies that allow them to be responsive to their changing needs, and seek partners for growth.”