Reinventing Asia’s tourism sector: coronavirus response calls for new tactics

Hong Kong hotels suffered low occupation rates over the last nine months due to political problems. With occupation rates down as low as 25 percent, many hotels have closed for renovations or closed down permanently. The two-month forced closure of Malaysian and Thai hotels has led to financial stress that may lead to a rationalization where up to 1,000,000 rooms could disappear from the market.

Underlying profitability within the hotel industry is marginal due to maintenance and operational costs, and the difficulty of raising prices due to stiff competition. Families and corporations who own unencumbered freeholds can survive, but those which have borrowed from banks face a crisis of survival.

Even when hotels can reopen, many large operations rely on weddings, banquets, conferences, and corporate training for up to 35 percent of their income. These events won't be immediately allowed because of the new social distancing restrictions. Developers are eyeing high rise hotel properties for condominiums, shared accommodation, or office space conversions.

Airbnb outlets, particularly those within major cities, have been hit hard as speculative investor hosts leaving the market. This has left a much smaller stock of well-located properties and apartments that rely on local rather than foreign custom. Large restaurants geared towards high volume business such as banquets and buffets will not be able to be profitable under the new social distance restrictions due to their need for high volume.

However, the Covid-19 crisis hasn't been without some positive aspects. The overcrowding of tourist attractions has waned, allowing beaches and parks to regenerate. There are reports that turtles have returned to hatch at Port Dickson in Malaysia. Beaches and coral reefs around Krabi are quickly regenerating themselves. Attractions like Angkor Wat and Bangkok's Royal Palace are now empty, and not likely to be overcrowded for a while to come.

New social distancing regulations has also brought new innovations. A restaurant in Amsterdam has developed an all-weather greenhouse dining concept, which can potentially add charm to the dining experience.

How is the tourism industry going to reinvent itself? Travelling internationally is just going to be difficult this year. A number of regional airlines are in deep financial trouble, and international air tickets will most likely cost around 5 to 6 times what they cost before the covet-19 crisis. Consequently, with international tourism not expected to recommence anytime this year and the negotiation of any kind of Asian travel bubble likely to take months, a domestic tourism led recovery is the only short-term option.

Leisure travel will most probably bounce back before business travel. However, how long that takes will depend how long domestic travel restrictions remain in force. In Thailand, Phuket and Pattaya were especially hit hard by tough provincial lockdowns, but these are probably not the places domestic tourists would want to go because they are expensive. It will most probably be the quieter family-oriented places that locals will want to visit first.

Malaysia, on the other hand, has been driven by public sector seminar tourism. to resorts owned by Government Link Companies over the last decade. It will probably be "hometown" tourism and homestays that will appeal first to a public allowed to venture out once again. Vietnam, very mildly hit by Civid-19 infections, is already seeing this happen through the provinces.

Domestic tourism opens up a completely different paradigm from organized group tourism. Domestic tourists are much more willing to patronize small family restaurants, food stalls, and hawkers instead of large restaurants. Domestic tourists will interact with the local economy much more, thus dispersing money towards owner/operators rather than corporation-owned businesses. Large hotels and resorts that want domestic custom will have to reframe their branding and prices towards this market. We may see a few brand conversions occur within the industry.

The Covid-19 crisis will give some advantage to Vietnam and Cambodia with their low Covid-19 case rates over Thailand, Malaysia, and Singapore. The Tourist Authority of Thailand is eying the concept that it's better to have a million wealthy tourists than five million frugal tourists, and is espousing its desire to develop quality tourism. However, with the high baht and high prices of food and accommodation in busy tourist precincts, European tourists can now get better packages much nearer to home.

The China factor is very important to those countries that want to attract mass tourism. However when Chinese tourists can once again travel it's likely China will punish those countries by restricting travel to countries that showed racial hate towards China. India may now begin using its outbound tourism power as a diplomatic tool in the future as well.

Asian capacities to accommodate international tourism are diminishing with the forced rationalisation of the tourism industry. Airlines are collapsing, both Thai and MAS are in deep financial trouble. SIA needs assistance, and Air Asia is financially strained. Many hotels and resorts will never open again. Many up-market and high volume restaurants will also shut down, because the new social distancing regulations will hinder their ability to be profitable. It's likely two segments of the hotel industry will survive: those owned and managed by large corporations and those small to medium hotels and resorts that are unencumbered by loans and borrowings. New banner brands will emerge as will new innovations.