26 Jun, 2003

Aussies Report No Post-SARS Price Pressure at ATE

Imtiaz Muqbil

Some doing-business issues were expected to surface big-time during the Eastern Hemisphere section of the ATE. They didn’t, at least not to any great extent.

– From the Australian Tourism Exchange 2003 in Melbourne

In this dispatch:

1. ISSUES OF MASS DISAPPEARANCE (1,559 words): Some doing-business issues were expected to surface big-time during the Eastern Hemisphere section of the ATE. They didn’t, at least not to any great extent.

2. NEW TV CAMPAIGN IN JAPAN (595 words): The Australian tourism product is back on expensive Japanese TV screens after five years.

3. ATC TARGETS KOREAN HONEYMOONERS (192 words): Korean honeymooners to Australia are on the rise. The ATC is going after more.

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1. ISSUES OF MASS DISAPPEARANCE

Every travel & tourism crisis is historically followed by an orgy of price-cutting to get the ‘resilient’ industry moving again. Crises also leave behind financially ailing companies and unpaid bills. Hence, bill-collection issues and demands for discounts were widely expected to dominate the Asian hemisphere section of the Australian Tourism Exchange 2003.

Like those elusive weapons of mass destruction, both proved to be issues of mass disappearance (IMD).

“That was a pleasant surprise,” said Richard Beere, the Australian Tourist Commission’s Executive General Manager for the Eastern Hemisphere. “I think everybody understands that everybody has been affected, so perhaps there is a sense of mutual respect — that we’re not going to go down that path.”

He admitted that it had been a big issue over the last two months. “We had received feedback about requests for payment terms being extended. Some people were (telling the Australian sellers) we will pay you early but we want a discount. Some were using it as a negotiating tactic to get even more extensions of payment terms.”

However, he received reports of only a few isolated incidents at the ATE. “In fact, pricing has not been an issue at all. There was no price squeezing or gouging.” Instead, he was told that buyers were seeking value-added services or distressed inventory rather than straight discounts. As for price-cuts due to the strengthening of the Aussie dollar, Mr Beere said, “I’d say the response has been — ‘where were you when the shoe was on the other foot’?”

The ATC’s Kuala Lumpur-based General Manager for South Asia, Maggie White, indicated that it could also be that strong Australian domestic travel over the last 10 months has helped offset the fall in international business and staved off pressure on sellers to dump prices. Some buyers felt that airlines are already being quite generous with pricing. Moreover, because Southeast Asian destinations are dumping rates, it was felt that Australia had an opportunity to position itself differently as a higher-priced premium product.

Mr. Beere said there had been some nervousness among Australian sellers about outstanding payments if agencies and operators were to start collapsing in Asia. This, too, turned out to be an anti-climax. For one thing, the number of collapses has not been as bad as anticipated. At the same time, Mr Beere says Asian buyers appear to be better managing their cash flow and Australian sellers, their credit terms.

“Most of them (Asian buyers) have learnt from the past experience,” he said. “They have realised that they need cash reserves, and that it’s not such good idea to invest their money in (speculative high-risk gambles like) property and the stock market in anticipation of making a killing if prices go up.” He also felt that some of the low-interest loans and bailout packages offered to travel agents and tour operators by various Asian governments could be helping.

However, some bill collection has had to be done, and the ATC is trying to help. In China, for example, ATC’s Hong Kong-based General Manager for North Asia Johnny Nee, says a phone call from the ATC can move things along. “Nobody wants to lose face,” he says, noting that defaulting Chinese buyers also don’t want to risk losing out from invitations to future trade shows or other events like fam trips and Aussie specialist training programmes.

Mr. Beere said he would shed no tears if any of the operators handling shopping commission-based tours out of China collapsed, at least one of which he knew about. “All those working on small margins will be more affected,” he said. Operators handling the zero-cost Chinese tours work on volume of business and charge rates as low as A$20 per person per day, making up the difference with shopping commission tours.

However, Mr Beere noted that there was a difference. “Shopping is an integral part of the Asian person’s holiday. So it’s not about shopping. But when pricing is done is such a way that you have to get a return (from shopping tours) to pay for the cost of the operation, then you are fundamentally not in tourism.”

He said that the temporary decline in arrivals from China could have a positive spin-off by cleaning out the system. “Without the volume, how do you support the process?” The ATC is also working with the private sector in Australia on a range of ways to improve the situation, including codes of conduct, accreditation schemes, pro-forma invoicing schemes and checking of itineraries to ensure that the clients get what is promised.

Cleaning up the system is important because China remains a hugely important future market for Australia. At the ATE, Chinese buyer delegates totalled 62 from 46 companies, way ahead of those from Japan (32 from 26 companies). Representation from other important markets like Singapore included 36 delegates from 27 companies and Malaysia, 28 delegates from 25 companies. Three other markets that usually send a high number of delegates were on the low side this year, mainly because of the SARS crisis: Taiwan only 14 delegates from 12 companies, South Korea 13:11 and Hong Kong 15:12.

Ms White said that at the height of the SARS crisis, the ATC had begun detecting perceptions that Australia’s strict quarantine rules might create problems for buyers upon arrival. She said the ATC coordinated with Australian health authorities and began communicating to the Asian travel industry well before the ATE. No, the invited buyers were told, neither they nor their clients would face any intrusive discrimination, nor would anybody be quarantined (unless they were suspected SARS cases).

That is exactly what happened. When the delegates arrived, they only had to fill out a form and provide details of whether they were coming from or had recently been to a SARS-affected country. There was no other hassle. The fact that several buyers from the SARS-affected countries did show up quite certainly saved what could have been an even more embarrassing fallout in attendance.

Ms White says it has been “very emotional” to see the state of the Asian travel industry during these times. “It was really sad,” she said. “It got to the point where they (the agents) were just fearing the phone ring because each time it did, it brought another cancellation. They went from a busy dynamic environment to no business overnight. It was just gone. Everything just changed. It’s difficult to understand it unless you were there experiencing it.”

The results of this are showing up on the arrivals roster. Latest available figures for April 2003, when the SARS crisis was just beginning, show an 11pc decline overall in arrivals, led by huge declines from Taiwan (-50pc), China (-37pc), Malaysia (-35pc), Singapore (-29pc) and Thailand (-39pc).

The figures for May and June are expected to be as bad, if not worse. Ms White says that Australia lost the peak outbound market, mainly the group market that flows with the summer school-holiday season. By the time the ATE was held, the school-holiday period was over in Thailand, Singapore, Malaysia and South India. However, Australia was trying to salvage some business from holidays still due in full or part in Indonesia, North India and Hong Kong.

Ms White said the ATC is now targeting the next holidays in Sept/Oct, especially the big Diwali outbound season from India in late October. Attention is also being turned to attracting incentives, especially from Singapore, Thailand and India, and niche-markets like young singles and the double-income-no-kids (dinks) who have the advantage of travelling without children.

Ms White says there is no discernible backlash against Australia as a result of the country’s involvement in the Iraq war. Australian authorities have made no changes in their visa procedures. Over the last two years, two events called “Celebrate Australia” have been held in Singapore and Malaysia in cooperation with the Australian immigration authorities, education and export promotion bodies. Both were considered well worth the time and effort invested. The event in Singapore was held in March of both 2002 and 2003, and in Malaysia, October 2002. It may be relocated from Malaysia this October which is expected to be a busy month for the country, with the retirement of Prime Minister Mahathir Mohammed and the hosting of the Islamic summit.

Overall, the prognosis is that things can only get better for Asian outbound. The SARS crisis has effectively ended, airline capacity is being gradually reinstated and travel agents are looking to get business moving again. Mr. Beere says Japanese who previously were heading for China in droves now appear to be diverting to Australia due to the SARS fears, the lifting of the health warnings notwithstanding.

In addition to the Asian marketing campaigns to be launched by the ATC, much work is being done to help Australian sellers retool their product to meet changes in Asian preferences. For example, Mr Beere says, Korean travellers no longer appear to want their packages all rigidly fixed up. They want more optionals.

New markets are emerging, and being watched. Student travel from Vietnam is rising, especially for English studies. The Royal Melbourne Institute of Technology has just opened a campus in Ho Chi Minh City. But numbers are still too small and the ATC is not putting any money into Vietnam. “We’ve also got some immigration problems,” she admits. “The over-stay rate has been rather high.”

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2. NEW TV CAMPAIGN IN JAPAN

Australia tourism advertising has returned to Japanese TV screens for the first time in five years with a new campaign launched by Japan Airlines to kick-start overseas travel from the country. Japan Airlines has chosen just two destinations for its recovery campaign (Australia and Hawaii) with Australia as the major partner.

Travel from Japan to Australia has been severely hit by recent events. The Tourism Forecasting Council (TFC) expects Australian arrivals from Japan to decrease by 6.9 per cent in 2003 compared to 2002. In 2002 Japan was the second largest market with 715,500 visitor arrivals.

Australian Tourist Commission Managing Director Ken Boundy said the cost of TV advertising had prevented any campaigns from being launched for the last five years. “This ad will have broad appeal among the Japanese public and will play a key role in rebuilding travel from Australia’s second largest travel market,” he said.

The TV commercial will air on prime time television for three months and feature a new song by Japan’s version of the Rolling Stones, Kuwatta. “The use of celebrities in Japan is very important and this will also help to build the publicity and interest in the new TV ad,” Mr Boundy said.

The new TV ad is being supported by the ATC’s recovery campaign, also with Japan Airlines, launched in May, as well as a new magazine and newspaper advertising blitz featuring Australian Tourism Ambassador, the Olympics 2000 swimming star Ian Thorpe.

Mr Boundy said that the ATC would also be maximising the publicity of Disney’s latest animated film, Finding Nemo in Japan, with the release later in 2003. Finding Nemo features a number of Australia icons including the Great Barrier Reef and Sydney Harbour.

“Finding Nemo has been a box office hit in the US ù and the hype surrounding the film is already starting to build in Japan,” he said. The ATC will be launching a new campaign targeting the family market with key travel agents in Tokyo and Osaka promoting “Finding Nemo” family holiday packages.” This is ideal timing, with the summer holiday period approaching and families will now be looking for the ideal destination to take their holiday in July and August.

The ATC is also planning a similar marketing push across Asia with promotions to run over several months promoting Australia as a friendly and welcoming destination. Using the slogan, Australia ù You’re Welcome, the campaign is designed to help rebuild consumer confidence in the travel market, giving people ‘peace of mind’ in holidaying overseas, as well as establishing Australia as the ideal destination to take a needed break.

Funded by a new $10 million allocation by the Federal Government, the campaign will be rolled out across Singapore, Hong Kong, Korea, Malaysia, Taiwan and Japan. Ads in newspapers and magazines, as well as TV and radio commercials, will be supported by consumer competitions, media promotions and an extensive visiting journalist programme. The ATC says recovery in Asian tourism will not be uniform and will occur in stages, as consumers firstly need to regain confidence in travel, and then move to the next phase as consumers look to travel overseas and respond to travel promotions.

Said Mr Boundy, “Competition over the next six months will be fierce with many countries in the Asia region, such as Singapore and Hong Kong also embarking on major tourism drives and promoting intra-regional travel. However, it is expected that there will be significant pent-up demand for travel over coming months and we want to ensure that Australia receives an increased share of outbound travel from this important region.”

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3. ATC TARGETS KOREAN HONEYMOONERS

In Korea, a new ATC ad campaign is targeting honeymooners to boost Australia’s popularity as a destination for romantic holidays. Korean couples make up one-third of all Korean visitors to Australia. The number of Korean couples honeymooning in Australia has jumped from 30,000 couples in 1999 to 57,000 in 2002.

In the new campaign, Australia is being positioned as a highly desirable destination for the Korean honeymooner, with all the right elements of beaches, city life and exceptional accommodation. Being run in conjunction with industry partners Hanwha Tourmall and Tourism Queensland, it targets honeymooners by promoting six-day holiday packages to Sydney and the Gold Coast. This is part of a larger campaign, Feel Free in Australia which also targets families and golfers.

Total arrivals from Korea are expected to grow by 15.1 per cent in 2004 and return to pre-Asian financial crisis figures experienced in 1997. The Korean campaign is a follow-on from similar campaigns that have been conducted in Japan. A new push for the honeymoon market was made in 2002 in the United States to reposition Australia as a romantic holiday destination ù a position usually held by the South Pacific.

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