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Fuelling growth in travel and tourism through investment

The sixth part of Travel Daily Asia's series exploring the growth of Asian travel, in association with the STB's TravelRave 2013

Investors are flocking to Asia looking for opportunities and its little wonder why when you consider the numbers behind the region’s growth. The Asian Development Bank projects that Asia will account for half of global GDP by 2050, while studies conducted by banks such as DBS have projected that Asia-10’s GDP will be US$22.4 trillion by 2020, US$11.5 trillion larger that it is today.

And when you consider that Asian capital markets have grown so much in depth and size that its aggregate market capitalisation now rivals that of the US and Europe, an incredibly positive picture emerges.

Aside from the economic growth, better airline connectivity and a growing middle-class are contributing to a boom in tourism investments in Asia. According to the Travel & Tourism’s Economic Impact Research, global travel and tourism contribution to direct GDP in 2013 is forecast to grow by 3.1%. Longer-term prospects are even more positive with annual growth forecast to be 4.4% over the next ten years to 2022.

Jones Lang LaSalle’s (JLL) Hotels & Hospitality Group’s Asia Hotel Investment (H12013) report notes that hotel transaction volumes within Asia exceeded market expectations in the first half of 2013 and reached $1.3 billion, representing an 85% year-on-year increase over 2012, or the strongest first half since H1, 2008.

The surge in sales activity is indicative of positive market sentiment and Asia’s share of global travel and tourism investment has been growing rapidly in importance.

The World Travel & Tourism Council (WTTC) forecasts that by 2021, China will overtake the USA to invest more in travel and tourism annually than any other country (a 19% share of global investment).

In turn, India is expected to have overtaken Japan to become the third highest global travel and tourism investor (with a 5% share), while Singapore is also set to rise strongly from 13th to sixth position in the global league table ranking.

President and CEO of the WTTC and TravelRave attendee, David Scowsill, says Asia is already on top.

“A global comparison reveals that the growth of Travel & Tourism’s contribution to GDP in 2013 will be the highest in Asia, exceeding the world average of 4.4% and outpacing even other fast-growing markets like Latin America and the Middle East,” he asserts.

A burgeoning middle-class and higher disposable incomes in Asia

It is widely recognised that a burgeoning middle class population and higher disposable incomes have contributed to the growth of domestic and regional travel in the Asia Pacific.

At the by-invitation Asia Travel Leaders Summit (ATLS) 2012, a joint-study by STB, The Boston Consulting Group (BCG) and Visa revealed that by 2020, Chinese, Indian and Indonesian middle and affluent class (MAC) travellers alone will contribute US$300 billion in outbound travel spend.

Certainly Southeast Asian economies are increasingly garnering investor attention with their growth opportunities generated by the rise of the middle-class alone.

At the recent Vietnam-Singapore Business Forum (VSBF) held in April to promote TravelRave, ATLS attendee Tran Trong Kien, chairman & CEO, Thien Minh Group revealed that his company has been investing in emerging Southeast Asian markets such as Cambodia, Laos and Thailand for the past six years.

Infrastructure as a catalyst for tourism development

Since investment decisions are largely dependent on infrastructure readiness, it is welcome news that prominent tourism destinations in Asia have begun billion-dollar investments in the development of tourism infrastructure and concepts to ensure that their infrastructure offers a user-friendly and efficient gateway for visitors.

Singapore is currently undertaking various government investments including the Downtown MRT rail line, which will be opened in stages from 2013 – 2017; the Singapore Sports Hub which will be ready in 2014; and Changi Terminal 4, due to be operational by 2017.

Planning is also underway for a new Terminal 5, which will double Changi Airport’s current capacity by the mid-2020s.

Infrastructure investment is especially vital for emerging markets which face rapid urbanisation. For instance, China announced in November 2012, that it is expected to spend an extra US$127 billion on infrastructure, including subway lines in Shanghai, the central city of Taiyuan and the southern business centre of Guangzhou.

The projects are expected to have an average construction time of 4.6 years, with local governments providing 40% of the funding. This is in addition to the $650 billion invested in infrastructure since 2008.

Tourism investments in Asia

Internal investment is being supported by global investment in Asia, particularly in the hospitality sector. According to Jones Lang LaSalle, record-level visitor arrival is fuelling hotel investment in Vietnam, Cambodia and Myanmar.

The estate consultancy firm notes that these three Southeast Asian countries are attracting many investors through their flourishing tourism industries, which is partly a result of improved air transportation and infrastructure.

In 2012 alone, all three countries witnessed double-digit tourism growth. Myanmar saw its tourism industry grow an impressive 55% compared to 2011, while Cambodia’s and Vietnam’s surged by 25% and 15%, respectively.

Indeed, Myanmar’s tourism growth seems to be on the rise with the recent unveiling of a Tourism Master Plan.

Developed by the government of Myanmar, alongside the Asian Development Bank (ADB) and the government of Norway, the plan outlines 38 development projects valued at nearly US$500 million that will help increase Myanmar’s tourism competitiveness, protect environmentally important areas, and safeguard ethnic communities.

S Iswaran
Mr S Iswaran, Minister in the Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry, speaking at the opening of the Asia Pacific Tourism Destination Investment Conference 2012

International visitor arrivals are also forecast to rise as high as 7.5 million in 2020 – a seven-fold increase from current numbers – with corresponding tourism receipts worth US$10.1 billion.

It is asserted that under a high growth scenario, the tourism industry could provide up to 1.4 million jobs by 2020. An example of the combination of internal and international investment is Iskandar Malaysia, an economic development zone spanning 2,217km².

The area, which offers investors 10-year corporate tax exemptions, cheap land and low-cost labour, has pulled in MYR69.5 billion (US$21.54 billion) worth of investments from 2006 to 2010.

Furthermore, Malaysian Prime Minister Najib Razak has pledged to attract another MYR75.5 billion (US$23.4 billion) in investments to Iskandar from 2011 to 2015.

Some recent high-profile projects in the zone include the Legoland Malaysia amusement park and Pinewood Iskandar Malaysia Studios, a franchise of the UK-based company where James Bond films were made.

Another sector that is rapidly expanding the region is cruise tourism. Carnival Corporation, the biggest cruise company and one of the largest vacation companies in the world, has estimated that even with moderate penetration assumptions, total potential cruise guests could reach 3.7 million in 2017 and more than seven million by 2020. This would result in Asia representing more than 20% of the global cruise market by 2020.

In an effort to cater to this demand, Marina Bay Cruise Centre Singapore (MBCCS) was opened in 2012, the cruise centre doubled Singapore’s berth capacity, making it fully equipped to welcome new generation large vessels.

Investments such as this provide the region a much needed boost on the infrastructure front and are expected to act as a catalyst to unlock Asia’s potential as a major growth market for the cruise industry.

TravelRave: Unlocking invaluable opportunities and insight

It is clear that investors from within and outside Asia are gradually expanding their footprint in the world’s largest and most populous continent. Having a keen sense of the opportunities in Asia is crucial for businesses leaders who are looking to expand their reach and maintain their competitive edge.

Attendees can look forward to more of these regional opportunities at TravelRave 2013. With eight world class events covering topics that are distinctly Asian, delegates will get the chance to learn from industry experts as they share their experiences and brainstorm collectively on investment opportunities in Asia for hoteliers and tourism infrastructure developers and investors.

At Asia Pacific Tourism Destination Investment Conference, keynote speaker Rajiv Biswas, Senior Director and Asia-Pacific Chief Economist, IHS Global Insight will present on the global and regional economic outlook and investment implications for travel and tourism. Related topics on tourism investment will also be explored at events like ITB Asia.

These are just two of the events in an exciting line up of eight quality events under the TravelRave umbrella. TravelRave will take place from 21 to 25 October 2013 providing a dynamic platform for business leaders and industry professionals to share knowledge and insights, explore business opportunities, and celebrate Asian tourism at its best.

Find out more

Get connected with the best travel minds ahead of TravelRave 2013, the most influential travel trade festival in Asia. Follow us @TravelRaveSG or visit www.travelrave.sg for the latest industry updates.

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