Travelers return to Southeast Asia, but inflation could hurt recovery

After more than two years of lockdowns and border controls, Southeast Asia is finally experiencing some semblance of the old travel days.

Flights are steadily returning to 2019 levels in major countries in the region, with Singapore, Thailand and Malaysia being the most popular destinations this year, according to analytics firm Cirium.

In Singapore, which had the most inbound flight bookings in the region this year, bookings rose from around 30% of 2019 levels in January to 48% by mid-June. The Philippines also saw a spike in bookings, from about 20% in early January to almost 40% by mid-June, according to Cirium.

Tourism is a key source of income for Southeast Asia, a region that was visited by foreign visitors more than twice from 63 million in 2009 to 139 million in 2019, according to the United Nations World Tourism Organization.

The industry accounts for about 10% of the gross domestic product in Vietnam, Singapore and Malaysia, and between 20% and 25%.% GDP of Thailand, Cambodia and the Philippines, according to May 2022 report published by the Asian Development Bank.

Chart of Cirium by absolute number of seats booked in 2022 in Southeast Asia and Nepal.

The pandemic “was probably more devastating in Southeast Asia than in the rest of the world. [because] governments have kept borders closed for almost two years, said Gary Bowerman, director of travel research firm Check-in Asia. “There were even restrictions on domestic travel.”

“If you compare that to North America or Europe, for example, in both 2020 and 2021…they had some tourism and travel flows,” he said.

Changing travel habits

Most Southeast Asian countries, including Singapore, Thailand, Indonesia, Malaysia, Vietnam and the Philippines, have stopped requiring fully vaccinated travelers to be tested for Covid-19 before travel.

After In April, Singapore removed the pre-trip testing requirement as the business “takes off quickly and furiously,” said Stanley Fu, founder of local tour operator Oriental Travel & Tours. He said travelers are booking longer trips and spending more than they used to.

Prior to the pandemic, the company received about 20 tour bookings per week, mostly for tours lasting three to four days. It now processes 25 bookings per week, some for trips of up to 10 days. Average spending on private tours has risen from about $2,000 per person before the pandemic to $4,000 to $6,000 today, Fu said.

“It’s because of the journey of revenge,” Fu said. “They’ve accumulated enough in the last two years.”

As tourists spend more time in Singapore, Fu and his team of tour guides take customers to places off the usual tourist route – out to the suburbs to watch the locals practice tai chi and order coffee at Singapore-style shopping malls. . said.

Joanna Lu of Ascend by Cirium, the company’s consultancy arm, says people are also spending more time planning their trips. They will “make sure they are immune to unexpected changes,” she said.

Not your usual tourists

With China largely shut down, tour operators in Southeast Asia will target Japanese, South Korean and Indian tourists in particular to make up for the lack of Chinese visitors, Check-in Asia’s Gary Bowerman said.

Sajjad Hussein | Afp | Getty Images

Visitors from China made up more than 30% of tourists to some Southeast Asian countries in 2019, according to the Asian Development Bank, a fact that makes China’s long-term border closure even more painful for the region.

“The traffic downturn in China intensified in April as strict travel restrictions restrict air travel in, to and out of the country,” Lu said, adding that she does not expect the situation to change anytime soon.

John Grant, chief analyst at travel data firm OAG, said Asia’s travel recovery is lagging behind other continents due to its reliance on foreign visitors, especially from China, as well as the region’s differing reopening strategies.

Southeast Asia accounts for about 66% of flight capacity, as measured by the number of seats on scheduled flights, compared to pre-pandemic levels, according to the OAG. Europe and North America have returned to about 88% and 90% of pre-pandemic capacity, respectively, according to the OAG.

Cloudy skies ahead

The recovery of travel in Southeast Asia is also facing other global headwinds: rising costs and interest rates, inflation and a potential recession.

According to the International Air Transport Association, aviation fuel prices rose by 128% in early June compared to last year. As a result, airlines are raising fares, but “at least to date it hasn’t affected demand as people have two years of unmet demand,” Grant said.

But that could change quickly if fuel surcharges coincide with inflation that eats away at travelers’ discretionary spending, he said.

Rising interest rates are likely to depreciate developing-country currencies against the US dollar, making imports more expensive and reducing travelers’ spending on non-essential expenses like vacations, Bowerman said.

Where are the workers?

Even if Southeast Asia continues to attract tourist flows, air carriers may have to turn them away if they can’t find enough workers to service their flights.

Many airline workers quit or were laid off during the first two years of the pandemic. The aviation industry had 50% fewer jobs at the end of 2021 compared to the pre-pandemic period – from 87.7 million to about 43.8 million – according to the global air transport association Aviation Benefits Beyond Borders.

Flight cancellations, delays and overcrowded airports upset the summer tourist season in Europe and North America. Low wages made airport and airline jobs unattractive. workers in Europe are on strike against low wages and poor working conditions.

The chaos of travel in other parts of the world, which has not yet affected Southeast Asia, is a situation that officials in the region hope to prevent.

Singapore’s Changi Airport Group wants to fill 250 vacancies by the end of the year, according to the agency. Singapore Airlines has selected more than 800 flight attendants from several thousand applications, “three to four times the number” received in the days before the Covid pandemic, CNBC said in an email.

The Malaysian Aviation Commission told CNBC local airlines are “actively looking for employees” but “demand for air travel remains uncertain as Malaysia enters the endemic phase of Covid-19.”

Singapore Airlines said passenger traffic averaged about 61% of pre-pandemic levels in the first quarter and expects to rise to 67% in the second quarter of 2022, the airline said in a May 2022 statement.

Roslan Rahman | Afp | Getty Images

But there were traces of cracks. In April, Changi Airport Group had to change the time of some flights According to local media reports, during the four-day long weekend due to lack of staff.

This was reported by the Malaysian media. that about 1 out of 10 domestic flights that operated during the Hari Raya Aidilfitri celebrations in late April and early May were delayed, due in part to a shortage of workers.

Mayur Patel, OAG’s regional sales director for Japan and Asia Pacific, said airlines were denied additional landing or takeoff slots because airports lacked the staff to accommodate the extra flights.

“I think the plan is to get back to pre-Covid levels, but with [the] Uncertainty with China, it will be… difficult,” Patel said.

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