South-East Asia: The tourists will return but at whose cost?

5th Jan 2005

As the death toll in the aftermath of the tragic earthquake continues to rise, another disaster unfolds in the form of lost tourism business which, for countries such as Sri Lanka, Indonesia, Thailand and Malaysia, drives anywhere from 6% to 20% of the local economy.While it is far too early to predict the impact of the Tsunami on tourism a review of hotel revenue per available room (revPAR) performance based on the HotelBenchmark Survey by Deloitte shows that, post September 11th, SARS and the Iraq wars, there was a sharp drop in demand but within 12 to 18 months, recovery had set in and, by early 2004 the industry as a whole was almost at pre-September 11th levels of revPAR. Over the medium to long term, the industry has proved to be fairly resilient to such shocks, as evidenced by the relatively stable 12 month rolling revPAR for each of the three regions of the world.”

According to Alex Kyriakidis, Global Managing Partner, Tourism Hospitality & Leisure, Deloitte, “A once in 50 years tragedy of this nature is unlike any of the events that have shaken the tourism industry since September 11th. The speed of recovery will critically depend on the restoration of infrastructure, clean water and sanitation as well as the re-building of shops, restaurants and services which are essential to support the tourism industry.

“Where Governments take assertive action to assist in the restoration process following major tragedies, experience has shown that tourists return. The role of Governments at this time in working with the industry, providing support in the form of grants and other incentives will be crucial to the recovery process. While the major hotel and tour operator groups may have appropriate levels of insurance in place for an event of this nature and can withstand the shock if not, it is almost certain that many of the SMEs which are vital to the tourism industry do not.”

Deloitte analysis shows that for every $1 spent in a hotel or resort, some $1.50 of economic activity is created outside the property (taxis, restaurants, cleaning) - a vital component of the industry. Without aid, the owners of these businesses will be unable to rebuild their business, replace and retrain personnel whose lives have been lost in the tragedy and once again put in place the intricate links that support the industry.

Alex Kyriakidis added, “The majority of travel in Asia Pacific is intra-regional. In the short term, we would expect bookings by regional travellers originally destined for the affected regions to be diverted to other parts of Asia Pacific. European tourists are likely to seek warm destinations in the Gulf, Caribbean and South America. However, history has shown that, once the “perception” that it is safe to travel returns, coupled with aggressive discounting by operators, the tourists will return. The question this time is, at whose cost?



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