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1998 Outlook for Tourism in the PATA Region

Destination Performance in 1996

Growth for the Pacific Asia region in 1996 was well above the world average, at eight percent compared with world growth of just under 5 per cent - itself an improvement on the previous year, reflecting a stronger world economy. Pacific Asia's share of world arrivals continued to increase steadily, achieving a 16 percent share in 1996, up from just over 12 percent in 1990. Perhaps even more importantly, tourism receipts have increased at an even faster rate.

Despite this growth, the Pacific Asia region took second place in the world's tourism growth rankings. Although undoubtedly infrastructural constraints and environmental concerns - problems of which the industry is only too aware - had an impact, this steady slowing down of growth rates reflects a process evident since the beginning of the decade as the tourism sectors of PATA countries continue to mature.

Growth in Arrivals for 1996
(Percentage increase from 1995)
Philippines 16.5%
Indonesia 16.4%
Hong Kong 14.7%
Japan 14.7%
China 14.6%
Australia 11.7%
Source: 1997 PATA Annual Report

There were some extreme variations in the performance of PATA member countries in 1996. Among the major destinations, the Philippines was the winner with a n impressive 16.5 percent increase on 1995, suggesting that at last this destination may be beginning to fulfill its undoubted potential. Indonesia, too, continued its inexorable rise, followed by Hong Kong which was no doubt benefiting from increase interest prior to the change of sovereignty which took place at the beginning of July. Strong rates of growth were also demonstrated by Japan (14.7 percent), China (14.6 percent) and Australia (11.7 percent). Less successful as destinations were the two major outbound markets of the Republic of Korea and Chinese Taipei which declined by 1.6 percent and one percent respectively, while Malaysia also declined, by 1.3 percent, and Thailand - although fulfilling the targets set by its tourism authorities - achieved below average growth. The countries of the South Pacific reflected the mixed performance in the region by spanning the entire growth spectrum, ranging from an increase of 22 percent for American Samoa to a decline of seven percent for the Solomon Islands.

The Major Markets

According to PATA's own data, the number of markets which fuel the region's growth is relatively small: some 20 countries - 10 in Asia, six in Europe, two in Australasia, plus the U.S. and Canada - accounted for almost nine out of every 10 arrival in the region in 1996 (indeed, the top 10 origin markets accounted for over 71 percent). These markets on which PATA member countries are so dependent and in which so much market potential rests, have increased their concentrations by over two percentage points sine 1995.

Major Markets for the Asia Pacific Region for 1996
(Percentage Share)
Japan 20%
United States 11%
Chinese Taipei 8%
People's Republic of China 6%
Republic of Korea 6%
Singapore 5%
Malaysia 4%
Australia 3%
Germany 3%
Indonesia 3%
Thailand 3%
Source: 1997 PATA Annual Report

More strikingly, the increase in inter regional travel, ant its growing share of the total relative to long-haul travel into the region, continued in 1996. Thus the 12 major outbound markets of Asia and the Pacific - Japan, Chinese Taipei, China, the Republic of Korea, Singapore, Malaysia, Australia, Indonesia, Thailand, Hong Kong, the Philippines and New Zealand - accounted for an increased share of visitors to the Pacific Asia region, growing from 61 percent of all arrivals in 1995 to 64 percent in 1996.

North America, the next major origin region, although growing in volume showed a slight decline in share, with the two major markets, the U.S. and Canada, accounting for 13.4 percent of the total in 1996. Europe, too, showed little change. It is worth nothing that Europe as a region still holds greater importance for the PATA countries than North America.

Japan is by far the largest market for the PATA region. Almost twice the size of the next largest and representing one in five of all arrivals, it is a primary source of demand for almost all the major destinations. Despite its continuing economic difficulties at home, Japan's outbound market reflected the strength of the yen in 1996: worldwide it grew by just over nine percent and to the region by 12 percent.

Even stronger in 1996 was the market from South Korea which, since the relaxation of travel restrictions some eight years ago, has gone from strength to strength. A sluggish economy and the country's political uncertainties did nothing to dampen the fervor of the traveling South Koreans in 1996. A total of some 4.6 million departures worldwide means that it has not yet reached the size of the market from Chinese Taipei (5.7 million departures worldwide), but it is growing at over twice the pace - 22 percent compared with 10 percent; for travel to the PATA region, South Korea grew by 25 percent compared with Chinese Taipei's 13 percent in 1996.

Outbound travel from China - the fourth largest market for the region grew faster than all but Singapore in 19996. Since outbound travel for private and leisure purposes was first allowed by the Chinese government in 1990, a slow trickle from a population of some 1.2 billion has begun to have a major impact on destinations in the region.

Other Asian outbound markets in order of size are Singapore, Malaysia, Indonesia, Thailand, Hong Kong and the Philippines. Together these six countries accounted for one-sixth of all arrivals in the Pacific Asia area.

The U.S. is an extremely important market for this area, second only to Japan and accounting for some 12 percent of all arrivals in the region. However, 1996 saw growth well below the average for the region - and nearly one percentage point below its overseas performance.

The Pacific Asia region's major source markets in Europe did not perform particularly well in 1996. The U.K. is the major origin market - accounting for just under a third of all arrivals from Europe. It was the only major European country to show strong growth in 1996. Germany is number two, with just a three percent share of all arrivals in the Pacific Asia region, followed by France, Italy, the Netherlands and Switzerland. All performed poorly, with growth rates for all but Switzerland of two percent or less.

Prospects for 1998

Despite the diversity of tourism flows within and into the PATA region, the figures mentioned above show that just 10 countries generate over 70 percent of all arrival in the region. The prospects for the PATA region in 1998 essentially rest on the performance of these 10 key markets which are, in order of importance, Japan, the U.S., Chinese Taipei, China, South Korea, Singapore, Malaysia, the U.K., Australia and Indonesia. The research center of London-based Travel & Tourism Intelligence has produced an assessment of the prospects for travel to the Pacific Asia region from these 10 markets countries in 1998, specially prepared for this year's PATA Annual Report and incorporating the macro-economic forecasts of the Economist Intelligence Unit.

As far as leisure travel prospects are concerned (probably accounting for around 70 percent of all trips), the underlying trends in origin country economics - notably the predicted growth in income and private consumption - set the pattern for travel demand. Two of the world's biggest and most important travel origin markets illustrate the point. Japan currently has an economy which is only slowly emerging from recession. Income growth for 1998 is forecast to be only 2.4 percent and private consumption will expand by just two percent that year. Nevertheless, the key features of the Japanese outbound travel market are the strength of the yen and the fact that almost 17 million Japanese travel abroad each year. International travel has rapidly become a standard activity. In 1998, Japanese outbound travel can be expected to continue to grow despite the country's modest economic prospects, not least because the yen is forecast to continue its appreciation against the U.S. dollar by almost 10 percent.

The other very similar case is that of Germany. Although it is just outside the PATA region's top 10 origin markets (number 11 in 1996), Germany still sent some 1.8 million people to the region in 1996 and remains one of the world's biggest outbound markets. It shares with Japan a strong international currency and an ingrained international travel habit. Germany's economic prospects for 1998 are similar to those of Japan, with real income forecast to rise by 2.6 percent and real private consumption by only 1.9 percent, as Germany's recovery from recession is led by exports rather than domestic consumption. Nevertheless, the deutschmark is expected to continue to strengthen against the U. S. dollar by some three percent, and unemployment, although still high, should fall by one percentage point on 1997 levels.

After Japan, the three most important origin markets in Asia for the PATA region are Chinese Taipei, China and South Korea. These three countries together generated almost 15 million visitors to the region in 1996, and all have excellent prospects as travel origins for the region. In Chinese Taipei and South Korea both income and private consumption will grow by over six percent in 1998; in China, income is forecast to grow at 8.6 percent and consumption at just under eight percent. These countries are the heart of future travel growth in the region; their potential, based on average dollar incomes, is huge. South Korea has an average income per head of some USS11,000; in Chinese Taipei it is just under USS13,000. In China, however, it has not yet reached USS700, and yet almost 5 million Chinese traveled abroad in 1996. There is no better illustration of the ultimate potential of this vast country; if and when travel restrictions are eased and as dollar equivalent incomes grow, China should lose little time in becoming one of the most important travel origin markets for the PATA region.

Elsewhere in the region, Singapore is forecast to expand its income by over seven percent in 1998 and its private consumption by over five percent. The respective forecast for Malaysia are 7.2 percent and 8.1 percent, making this market an especially dynamic prospect, with Indonesia exceeding eight percent for income growth and approaching that level for consumption growth. On the currency front, the Singapore dollar is forecast to strengthen a little against the U.S. dollar in 1998, the Malaysian ringgit will remain stable and the rupiah of Indonesia is forecast to devalue slowly by about 3.6 percent a year against the U.S. dollar. Barring any major external catastrophe, the underlying prospects for these three markets are also good.

The final top 10 origin country for the region is Australia. Here economic growth is forecast for 1998 at around 3.8 percent and private consumption at 3.2 percent - both strong levels by recent standards. With the Australian dollar broadly stable against the U.S. dollar, the basic prospects for the economy are reasonable.

Outside the PATA region there are just two countries in PATA's top 10 origin markets - the U.S. and the U.K. The U.S. economy in 1997 has reached what is regarded as being close to its limit of non-inflationary growth, as a result of which its economy is forecast to slow down to a two percent growth in incomes and 2.2 percent growth in private consumption in 1998. The year should still be a good one in which to market PATA destinations in the U.S.

The U.K. economy is also forecast to moderate its rate of growth in 1998, but will still turn in a good performance, with income rising by 2.3 percent and consumption by 3.1 percent. The strength of the currency in 1998 is predicted to be good nevertheless, inflation is under control, unemployment is falling and generally this most important of European markets for the PATA region should deliver acceptable growth in 1998.

Economic trends do not tell the whole story. Some countries limit travel abroad for political or administrative reasons; others may not have much of an international travel tradition, non-tourism influences such as key elections, political instability or uncertainty, natural disasters and so on can dampen travel demand in the short term.

Marketing Priorities

Two confident conclusions about 1998 can thus be drawn. The first is that through 1998 the global economy and particularly the economics of the PATA region's most important origin markets will be relatively healthy. The demon of inflation is largely under control; open markets are functioning with reasonable efficiency in most regions with international trade also enjoying a measure of stability and relatively liberal expansion. This leads to the second conclusion, which is that the conditions for the continuing expansion of the PATA region's tourism sector are generally favorable. Leaving aside the possibility that extraneous events can affect even the firmest of short term predictions, 1998 should see strong growth in travel to the region.

The immediate challenge for 1998, however, is one of marketing; how can one tourism destination best ensure that it achieves at least a fair share of those markets next year? How can a destination translate encouraging general origin market performance into increased arrivals and tourist receipts at home?

There are two basic requirements for good tourism marketing. First, understand the market concerned and more important perhaps, the key segments within that market. Second, stratify the marketing process. In the first area, it is important to know how outbound markets are evolving (they are never static) between, for example, group and individual travel, up-market and mid-market accommodation preferences, family beach holiday and for example, golfing holidays for groups of men or shopping/cultural trips for groups of women. Such categories simplify much greater complexities of course, but the key message is that tourism marketers need to keep up to date with the individuality of the main markets, the factors which influence them and the fashions which mould their behavior.

"Marketing stratification" simply means the process of recognizing that tourism is a competitive business. While it is clear that 1998's markets for Pacific Asia destinations look promising, there is still an important marketing job to be done - by tourism authorities as well as by sectoral interests in resorts, hotels, ground operators, attractions and so on - to ensure an adequate share of the cake. Effective tourism marketing in an increasingly knowledgeable, experienced and competitive world is a sine qua non for a destination's success. The availability of good market analysis and the dissemination of accurate data by multi-national organizations such as PATA can only assist in this process.

Pacific Asia Travel Association
Bill Hastings/Lyn Hikida
PATA Communications


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