ASIA PACIFIC. The Pacific Asia Travel Association (PATA) today hosted a webinar to examine the effects of the coronavirus on travel markets. It examined how the travel and tourism industry in Asia Pacific in particular can mitigate against the impact of the downturn in outbound China traffic.

A key message from panellists (PATA CEO Dr. Mario Hardy, travel analyst ForwardKeys Vice President – Insights Olivier Ponti and travel research firm Twenty31 Consulting Partner Oliver Martin) was the need to rebalance the tourism business from its recent heavy reliance on Chinese outbound travel.

“Tourism is very much an emotional game. We tend to look at things logically as marketers but on issues like this emotion kicks in” – Oliver Martin

Martin said: “We have been lucky in the Chinese outbound market growth but have become so reliant on that market at the expense of not doing things differently or balancing our portfolio of geographic markets. We have to do this so we are not beholden to the impact of one crisis.”

Oliver Martin: “We have been lucky in the Chinese outbound market growth but have become so reliant on that market at the expense of not doing things differently or balancing our portfolio of geographic markets”

Hardy added: “It is critical that destinations do not just rely on one source market but have a balanced portfolio. This should be a wake-up call to anyone in tourism that we need balance in our source markets.

“China will still be critical in the recovery. What we need to do as an industry is to pay attention to our business partner in China and provide assistance to them. They are suffering the most here. For business who trade with China, can they offer refunds or letters of credit or other measures so we can maintain these very important relationships for the future?”

Changing patterns of travel?

Martin said that the travel industry had shown itself to be resilient but questioned whether there would be change to Chinese travel patterns once recovery occurs.

“We are in a world that has ups and downs. We had 9/11, the Gulf War, SARS in 2003, the economic crisis in 2008; travel will always react. Travellers will stop travelling to one destination, but they will re-jig their plans to another destination and things will just move.

“But today, from a perception and data perspective, this appears different to how SARS was perceived. This is very much about Mainland China, which is directly impacting the Chinese outbound flows. Part of this is precipitated by the airlift component dramatically dropping off: so many destinations now have little or no direct air [connections] into the China market. That is having a dramatic impact on the Chinese ability to travel.

“We know there is a direct correlation. If there is positive consumer sentiment, people will travel; if the inverse is true then people won’t travel.

“The Chinese traditionally after Golden Week are energised and excited for the New Year so make travel plans, but that is not happening right now. One of the bigger risks to our industry is the question mark over the next 60, 90 and 180 days; it is that grey space of consumers not making their travel plans.”

Olivier Ponti: “What we see now is a strong decrease in bookings for coming weeks and months. If those booking don’t pick up in coming weeks then the whole sector will be in trouble in coming months.”

Ponti said: “It is important to take into account the fact that there is a direct impact from this crisis. That is people cancelling their trips and there is a delayed impact: people who should be preparing their trips for the summer holiday are not booking.”

Martin added: “In Canada after SARS it took us several years to get to the pre-2003 arrivals and spend levels. I don’t want to be alarmist and say this will happen but there will be a big decline short-term in Chinese outbound travel.

“If DMOs (destination marketing organisations) and their partners can quickly pivot and look at other alternative markets we can recover some of those numbers this year. But there may be a longer term impact on China. The Chinese will return eventually once this settles down and they have confidence in the economy and health situation, but may switch to north and southeast Asia, already popular but close to home. The impact on long-haul markets from China could take longer to recover, whether that is UK, US, Australia or others.”

Salvaging 2020

Speakers urged other countries to focus on how to salvage their tourism business for 2020, but to act fast.

Martin said: “We are telling clients not to give up on the China market but also to look more closely at India. India is a powerful market: the Indians love south-east Asia, they spend, they travel, so this is an opportunity for these destinations and for other places such as Australia or Canada that have [until now] put more investment into China.

“Indians are no different from other travellers. They are interested in getaways, spending time with family, exploring other cultures. They have great air links, disposable income and if I were a southeast Asian destination I would put in place packages to incentivise them to come there.

“Also, look at Thailand, Vietnam, Indonesia and Malaysia. Although relatively small outbound markets they have high discretionary spend and excellent regional air links. They are also interested in the Middle East so could be opportunity markets to go after in trying to shore up the decline in Chinese outbound travel.

“The Middle East can also bank on Indian and European travellers as they know and trust their destinations.

“In times of crisis, beyond that, your domestic market is also a great source of travel and tourism. People can fill hotels on weekend when business travellers are not there, and they can disperse throughout the destination during festivals or events.”

PATA CEO Dr. Mario Hardy (right): “From past events typically it takes about six months to recover but here it may be different and could take even longer. It’s the big question: how long before recovery begins?” Also pictured at the webinar today is PATA Director Communications & External Affairs and event moderator Paul Pruangkarn.

Regaining trust

Speakers also noted that that building trust in tourism destinations takes time.

Ponti said: “You can only have recovery once people are convinced the crisis is over. As long as trust is not there, people will not travel until they know that this is under control, especially that it is safe to travel within China. It’s too early to talk about recovery yet.

Martin added: “It’s a great point. Trust takes so long to build in the reputation of companies, brands and locations. It takes years to build but seconds to lose. Tourism is very much an emotional game. We tend to look at things logically as marketers in the travel trade but on issues like this emotion kicks in.

“As much as governments and partners put a logical, fact-based presentation on this, once the health situation gets under control, it will still take months to get people to think beyond the irrational and emotional and put their trust back in brands and destinations. Now it’s about what we can do short term and tactically to salvage this year.”

Outbound China travel patterns may change, said speakers, while inbound tourism to China may take longer to recover (Shanghai skyline pictured)

Hardy said: “From past events typically it takes about six months to recover but here it may be different and could take even longer. It’s the big question: how long before recovery begins?

“The World Health Organisation has said that we have not yet reached the peak. We have to monitor case numbers. When we see a drop in these, even a small drop, this marks the start of the end. Once we have that tipping point we may be able to understand how quickly recovery will take. It’s also interesting to look at other decades and situations. When recovery come, numbers grow not only normally but even faster than before.”

Ponti stressed that one had to be careful about monitoring only cancellation numbers to track advance bookings.

“Cancellations are a tool to monitor the direct impact. We know that about 12% of bookings are cancelled across a typical year but in the first days after the travel restrictions we saw that rate hit more than 33%, and it has been increasing. But there comes a moment when if there is no booking, then cancellations are not relevant any more. Then you have to look at new booking trends. What we see now is a strong decrease in bookings for coming weeks and months. If those booking don’t pick up in coming weeks then the whole sector will be in trouble in coming months.

“A crisis of this scale is not unique. What it usually provokes is displaced tourism. Very often people keep travelling. What’s happening now is that people have stopped travelling.”

Measuring the impact

Ponti also revealed some ForwardKeys figures on year-on-year bookings made in the week of 19 January and the changes compared to 26 January after travel restrictions had been placed.

The fast-changing pattern of outbound travel bookings from China over consecutive weeks in January, versus this period in 2019; click to enlarge (Source: ForwardKeys)

It confirmed the sharp drop in flight bookings for the Chinese New Year period, 10 January to 6 February.

The Chinese New Year holiday season typically begins a fortnight before Golden Week and travel reaches its peak just before Golden Week starts, noted Ponti. This year, outbound travel reached a new peak and the season was on course to break all records. Although the majority of Chinese had left before the travel restrictions took effect in the week of 20 January, cancellations from that point on changed the picture dramatically.

All regions apart from Europe saw dramatic declines in bookings after travel restrictions began; click to enlarge (Source: ForwardKeys)

Up to 19 January, outbound travel bookings from China (excluding Hong Kong and Taiwan, where political unrest has impacted travel) were +7.3% ahead, benchmarked against the equivalent period in 2019. One week later, as of 26 January, when Wuhan Airport was closed and the Chinese government stopped outbound tour groups from travelling, bookings for the Chinese holiday period were -6.8% behind.

The dramatic slowdown has affected travel to all parts of the world. Asia Pacific, the region which attracts over 75% of Chinese New Year travellers, has been worst hit. As of 19 January, bookings were -1.3% behind where they were at the equivalent moment in 2019; a week later, they were -15.1% behind.

The deterioration seen for other global regions has been similar, but less severe. As of 19 January, bookings to the Americas were -14.3% behind, to Africa and the Middle East they were -0.7% behind and to Europe were +10.5% ahead. A week later, bookings to the Americas were -22.5% behind, to Africa and the Middle East were -9.9% behind and to Europe were +0.5% ahead.

China as a destination has also been severely affected by the Coronavirus crisis. Up to 19 January, inbound bookings for the Chinese New Year period were +4.5% ahead of where they were at the equivalent point last year. A week later, they were -7.2% behind.

The impact on arrivals to China in recent weeks; click to enlarge (Source: ForwardKeys)

The weakest origin market has been the Americas, where bookings fell from +0.4% ahead to -13.4% behind. Asia Pacific, China’s largest source market, with a 65% share of visitors, fell from +6.0% ahead to -6.2% behind in the period. A healthy growth in bookings from Africa & the Middle East stalled from +10.9% ahead to +3.9% ahead and bookings from Europe slipped from +1.0% ahead to -7.1% behind. ForwardKeys plans to issue regular updates on bookings trends.

Summarising, Ponti said: “The key takeaway is that when you have such a crisis you have to look at not only the negatives, but also the opportunity. It forces you to look at your own business in new ways, to reinvent yourself and if you can do that, once the crisis is over, you can expand your business. So once recovery comes it usually goes well beyond pre-crisis levels. If you survive you will have found new ways to move forward and cover new ground.”

Martin said: “That is what happened to us at Destination Canada – we were once about moose, mounties and mountains. 2003 was a massive hit but we developed new strategies to disperse people beyond traditional gateways. It forced us to be different and had a positive net impact on our industry. My thought is that DMOs need to step up, make tactical changes and examine how we can recover.”