3 Feb, 2020

Market overexposure overtakes overtourism as lead industry challenge

Imtiaz Muqbil

Bangkok – One welcome casualty of the corona virus crisis will be all further discussion of “overtourism”. This dreadfully humdrum topic has been overtaken by the much more serious threat of overexposure to any single market as a source of business. Virtually overnight, the pendulum has swung from one extreme to another.

Although it had a nice ring to it, the tag “overtourism” was merely a reference to a temporary state of over-crowding in a handful of destinations which became over-popular thanks to the cycle of over-marketing, over-investment and over-capacity. That, accompanied by under-development of infrastructure to manage it, led to over-congestion, especially during the good-weather, high-season periods.

Overexposure, however, is a far more severe and complex issue. In a world of increasing volatility, uncertainty and insecurity, to quote UN Secretary General António Guterres, such overexposure is an economic health hazard, as the corona virus crisis is proving.

For sure, no-one is complaining about having “too many Chinese tourists” now. The “quality vs quantity” debate is dead, as is crowing about “competitive advantage”. Having too much business is clearly much better than too little. Its true value appreciates most when it collapses.

For both the public and private sectors, the current consequences of overexposure reinforce the value of maintaining a good balance. Like any other gold rush, tourism is driven by commercialism and short-term thinking. Long-term sustainability is all well and good, but unattainable without short-term profitability.

Despite repeated crises over many decades, the growth-obsessed tourism industry has paid zero attention to the concept of balance. Thailand’s Chinese gold rush offers a perfect example.

Thailand was the first to get Approved Destination Status after China opened its doors to outbound travel in the 1990s. Visa approval processes were relaxed. Tour operators expanded the Thailand content in their brochures. Chinese restaurants were widely available, and Chinese culture widely understood. Thailand was a great destination, especially for many landlocked cities like Wuhan where many had never seen the sea, and travelling to a domestic coastal Chinese city was less attractive, and more expensive, than a holiday in Thailand.

The 2012 Chinese movie “Lost in Thailand” gave the country a mega-marketing boost. As airport infrastructure in both China and Thailand was upgraded, low-cost airlines swooped in, and the trickle became a deluge. Chinese visitors to Thailand almost doubled in just five years. So did their spending.

In July 2018, the Phuket boat accident, which claimed the lives of 46 Chinese tourists, provided the first early warning. Like elsewhere, Chinese visitors are susceptible to safety and security fears, especially in the wake of the 2014 Malaysian Airlines MH370 aircraft disaster.

Chinese visitors fell significantly. But it was a one-off, manageable crisis. Realising that their easygoing, relaxed “Thainess” can also be a liability, especially in the realm of safety and security, the Thais went overboard to plug the deficiencies. The corrective actions were accompanied by vigorous outreach and communications targeted at the Chinese public and travel trade.

People have short memories. A few months later, the Chinese goose resumed laying its golden eggs.

A milder crisis played out in 2019, the economic slowdown in China as a result of the trade war with the U.S.. To some extent, this benefitted Thailand by stimulating demand for short-haul, less pricey destinations.

The coronavirus crisis is very different. It has laid bare Thailand’s heavy overexposure to the Chinese market, and indeed, all its top ten source markets. Of the 39.8 million total arrivals last year, 63% came from these 10 countries.

Visitor Arrivals to Thailand: Top Ten Source Markets 2019
	Total arrivals	% share
China	10,994,721	27.63%
Malaysia	4,166,868	4.64%
India	1,995,516	5.01%
Korea	1,887,853	4.74%
Laos	1,845,375	4.64%
Japan	1,806,340	4.54%
Russia	1,483,453	3.73%
USA	1,167,845	2.93%
Vietnam	1,047,629	2.63%
Singapore	1,056,836	2.66%
Total	27,452,436	63.15%
Note: Preliminary figures. Source: Ministry of Tourism and Sports

 

By expenditure, the overexposure is worse still.

Visitor Expenditures: Top Ten Countries for Thailand 2019
	Expenditure (million baht)	% Share
China	543,707.33	28.12
Malaysia	106,728.72	5.52
Russia	103,784.23	5.37
Japan	89,807.95	4.65
India	86,372.01	4.47
USA	83,276.12	4.31
Korea	74,367.38	3.85
United Kingdom	74,164.38	3.84
Australia	56,227.85	2.91
Laos	54,881.26	2.84
Total	1,273,317.23	65.86
Unit: Million baht
Note: Preliminary figures. Source: Ministry of Tourism and Sports

 

The Tourism Authority of Thailand is projecting a drop of two million Chinese tourists between now and April, blowing an estimated 95 billion baht hole in the economy. Thousands of tourism industry players have been devastated, especially small and medium sized enterprises. Several companies have shut down and temporarily suspended staff. Budgeting for this year is down the tubes.

No wonders Thailand is in heavy-duty detox mode. Suvarnabhumi and Don Mueang airports, the country’s two main aviation gateways, are a sea of face-masks. Immigration counters are being cleaned and sanitised. Aircraft are being fumigated. Toilets are immaculately clean. Ditto in hotels, department stores, tour coaches and any other point of contact.

The Thais know when normalcy returns, every global destination will resume knocking on Chinese doors peddling discounts and deals. Their challenge will be to learn from this crisis and avoid reverting to such a high level of dependence on the Chinese market, or on any other market.

Establishing a balanced market mix is easier said than done. For the tax-paying private sector, keeping the cash registers jingling trumps economic theories or national interests any day. The public sector, too, has to constantly promote investments and economic growth. When capacity increases, the government then has to create the policy and regulatory environment to help the private sector fill it.

The cycle keeps turning, ceaselessly, until the bottom falls out.

Looking around, what new source-markets are available?

The populous and productive markets of Russia and India may seem to be likely contenders, but both are showing high-risk signs of looming internal political strife. Becoming over-exposed to them, too, would be perilous.

The best opportunity lies within the ASEAN countries. Promoting intra-ASEAN travel is one of the priority policies of the regional integration agenda. Now is time to walk the talk.

All the land-border countries are edging up, particularly the supposedly poor countries of Laos and Cambodia. Vietnam has entered the Top-Ten arrivals. Not far behind is Indonesia, with its large population and a large middle class.

The TAT has an office in Jakarta, as against five in China. and bilateral flights are way below those to China or India. In 2019, Indonesian arrivals to Thailand totalled 709,613, a fractional 1.78% of total arrivals but showing good potential with 10.07% growth over 2018.

A lot more demographic and customer-centric balancing will be required, such as between domestic and foreign tourists, short- and long-haul tourists, short- and long-stay tourists. This will have to be in addition to the geographical redistribution of visitor arrivals within Thailand, as per the national strategy to more evenly spread the fruits of tourism.

The good news is that it can be done. The rebalancing of Thailand’s male:female visitor arrivals ratio from 30:70 in the 1980s to about 50:50 today is one of the world’s most remarkable tourism success stories. It took the TAT nearly a decade to reposition Thailand’s image away from being a largely male destination. But they did it.

The rebalancing effort will not bear fruit without a realistic and comprehensive risk analysis of global geopolitical, economic, technological and environmental threats. The corona virus crisis has rendered obsolete every SWOT analysis of Thai and global tourism. A complete re-write is required.

For sure, the “overtourism” era is over. Also worth trashing is that bogus debate over “quality vs quantity” tourism. Both terms categorise visitors, somewhat offensively, by their spending power. Now, the so-called “low-quality” tourists will no longer be treated as “low-value” tourists. Comprising the majority of visitors, they create more grassroots jobs and income by eating at street stalls and shopping at flea-markets. Doesn’t that gel with the national economic agenda?

Another textbook prescription worth dropping is the pursuit of “competitive advantage”. This rankings-driven beauty contest is designed to drive business by playing off one destination against another. Thailand would be better off exiting this rat-race and competing with itself. Others may get ahead, but that will only last until the next crisis hits.

How the Thais manage this rebalancing and transition will be closely watched worldwide. History has shown the Thais to be an extremely resilient, flexible people who can reinvent themselves when required.

As exemplified by the Chinese overtourism gold rush, their over-arching weakness is an inability to learn from past mistakes. That is one mistake they can no longer afford to repeat.