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The State of Pacific Asia`s Hospitality Industry

This Global Hotel Network Report, sponsored by Kohler, takes a look at The State of Pacific Asia`s Hospitality Industry from the perspective of…

This Global Hotel Network Report, sponsored by Kohler, takes a look at The State of Pacific Asia`s Hospitality Industry from the perspective of Peter de Jong, President & CEO, Pacific Asia Travel Association (PATA). He reports:

The Pacific Asia region is the engine of global tourism growth – the fastest-growing region in the world, economically and demographically. The PATA region holds about 65 percent of the world`s population and already stimulates 60 percent of global tourism demand. The travel industry in Pacific Asia is growing about twice as fast as the global average. The 21st Century will see Pacific Asia rise to the forefront of human endeavour.

But while the mid- to long-term future is bright, the short-term is being undermined by security issues and the prospects of war in Iraq. Thirteen months and one day after 9/11 in New York came 10/12 in Bali; a western hemisphere event followed by a eastern hemisphere event; hard target financial followed by soft target tourist; two senseless tragedies however you care to look at them.

Fortunately the downside effects on our industry of these tragic events have not been as severe as one might have feared. Travel and tourism has always played to the slightly more adventurous and risk-taking sides of people.

The relative resilience of our industry is revealed in the latest figures produced by the Bali Tourism Authority. Hotel occupancy on Bali averaged 70.2 percent in the first 12 days of October. By November 1 occupancy had dived to 15.3 percent. In December a revival kicked in with occupancy averaging 38.4 percent before peaking at 77.7 percent on December 31.

Despite the impact of September 11, 2001 and the Bali blasts, 2002 was not as bad as expected. PATA Strategic Intelligence Centres (SIC) year-to-date international visitor arrivals (IVA) figures for Pacific Asia destinations were mixed. South Asia experienced the worst of it. Pakistan suffered a 36 percent drop in arrivals.

After making progress in resolving its domestic conflicts, Sri Lanka reversed an early downward trend to finish the year to November, 12 percent up. In Northeast Asia, China (PRC) and Hong Kong SAR arrivals grew strongly at 22 percent and 19 percent respectively. Lao PDR and Vietnam were the stars in Southeast Asia at 35 percent (year-on-year to March 2002) and 12 percent respectively. The Pacific turned in a mixed result. However, arrivals in Fiji increased 17 percent, while visitors to both Micronesia and Tonga increased 14 percent.

There have been a mixed bag of changes in specific markets in Pacific Asia. PATA`s figures show that travel departures from USA, Japan and Malaysia experienced double-digit declines. Conversely, we saw double-digit increases in outbound from Thailand, Philippines and Korea (ROK).

At the heart of the Pacific Asia hospitality industry, hotels have faced many challenges in the past 18 months. Declining business travel, price discounting and high insurance premiums are well documented. Operating performance has been disappointing but not disastrous. Accor, for example, reported a 2.1 percent decline in full-year sales. Hotel investment activity in the US was well down in 2002.

Other destinations are doing quite well. Research conducted in Bangkok by hospitality consulting firm, HVS International, shows that while only one new hotel is scheduled to open in the city this year, investment in conversions and extensions to five-star hotels is high.

However, due to security and geo-political reasons, the hospitality industry faces further uncertainty and volatility in 2003. A US-led war against Iraq seems likely, so it is difficult to confidently make industry predictions. As an organiser of major travel events, such uncertainty adversely affects PATA too. Our industry needs stability and peace, a state of being we formerly took for granted.

Faced with such uncertainties, there are four areas industry leaders should address in the weeks and months ahead:

1. Iraq is a geo-political issue neither PATA nor anybody else can do very much about now, except to plan contingencies. The Asian Development Bank identifies war in the Gulf as one of the major risk factors for Asian economies in 2003. Will it happen? If so, when? How long would it last? What would be the effects on my business if it lasted one week, one month or one year? PATA`s Strategic Intelligence Centre predicts that a short war fought soon followed by a stable peace would eliminate energy price premiums and boost consumer and business confidence. A protracted conflict with a troubled aftermath would inflate energy costs and may tip some countries into recession. Pacific Asia is quite well buffered, in part due to the intra-regional flows operating here. A soon-to-be-released PATA forecast factoring in the Iraq conflict will show that, of 39 destinations covered, two thirds are expected to show positive gains in 2003 while 90 per cent should see growth in 2004.

2. Security is a critical factor that needs addressing. A key survey of the hotel sector, conducted by Pertlink for Hotel Asia Pacific after the Bali attacks, paints a disconcerting picture of hotel security in Pacific Asia. One in three hoteliers fear for the safety of their properties, yet many have done little to boost security. Less than a quarter have increased their security budgets. The statistics are doubtless open to challenge; however, the fact that the survey has identified so many security loopholes should be of concern to hoteliers and the travel industry in general. The industry should do more to find cost-effective means of making soft targets harder.

3. Crisis management remains high on the agenda. PATA will start to play a leading role and lend assistance. For example, within 24 hours of the Bali blast, PATA and the Indonesian Culture and Tourism Board set up a crisis communications/press centre at Kuta Beach in Bali. In December PATA dispatched a six-member Bali Task Force. In mid-January, based on the Task Force`s findings, PATA senior executives visited Jakarta to make recommendations to Indonesia`s tourism leaders. While PATA can help, it is imperative for the industry as a whole to adopt and practice crisis communication techniques. After all it is travel, tourism and hospitality businesses that stand to lose the most in the aftermath of a tragedy. To help to mitigate loss in the event of future disasters, PATA is compiling a comprehensive crisis management manual that will be made available to all government members by mid-2003.

4. Travel advisories issued by governments have been a concern to all PATA member governments, especially since October 12. While it may be convenient to paint a region or a country with a broad brush, it is often unfair and inappropriate to do so. PATA is pushing for standardisation in the reasoning and wording of travel advisories and is urging that advisories be issued with more sensitivity and practicality in mind. And that they are quickly and publicly lifted, once the local situation has improved.

As the leading voice of travel and tourism in the Pacific Asia region, it is PATA`s responsibility to protect our industry`s interests. Should PATA assume an assertive advocacy role on behalf of Pacific Asia? Should PATA build a direct relationship with the travelling public? Should PATA develop special relationships with China and India on behalf of our members?

We believe the answer to these three important questions is: Yes, we must! Travel and tourism breeds understanding and tolerance among cultures and nations, as it has always been the industry`s business to bring people together. If we could go that step further to bring people, policy-makers and businesses together in meaningful exchange and friendship, we create fertile ground for peace to grow. While peace is good for our businesses, our people, our customers, our region and our world, all of us in Pacific Asia should have business contingencies prepared because global peace is likely to remain elusive in the short-term.

Co-Founder & Chief Editor - TravelDailyNews Media Network | + Articles

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.