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THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH. SEE PAGE 150 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS. Co. Reg No: 198700034E MAY 2019 Blue Skies, But Keep Your Seatbelts Fastened Sadiq Curimmbhoy, Regional Head of Research With greater growth in ASEAN Tourism comes Understanding your Value Build it and They will Come? greater investment in the infrastructure. Singapore Proposition & Spending to and Thailand have clear value propositions that they Other ASEAN countries are still trying to continue to invest in. Others are embarking on Maintain it establish their visitor value proposition and are building new capacity in the hopes of attracting therefore more “emerging”. And there are regional and global travelers. We reckon the region is Both Singapore and Thailand have invested some encouraging trends. While Vietnam’s set for significant upside in the sector, but much still greatly in establishing their value proposition as national campaign has arguably not been as needs to be done. a travel and tourist destination. In the region, effective, individual provinces have instead Singapore ranks the highest in the latest World taken the initiative, resulting in arrival gains The Growth Economic Forum’s Travel & Tourism from over 20% to 70%. There is an airport Competitiveness Index, reflecting its investment building boom, not just in Vietnam but as a regional business hub and urban getaway, ASEAN visitor arrivals have been growing at 8% CAGR elsewhere in the region too, further with best-in-class safety and infrastructure. But since 2010. And tourism receipts are a sizeable encouraging arrivals. Singapore also invests to maintain this: from the contributor to the economy in many of its markets. latest Changi Jewel to a SGD9b upgrade to the Yet despite this growth in recent years, the sector In the Philippines, significant infrastructure two integrated resorts. still holds significant potential to expand further. The spending will be needed, and is being planned, to reach the target of 12m visitors in 2022, from cost of travel is falling, driven by fast growing low- With over 38m visitor arrivals, a value cost carrier fleets and apps that permit price 7.1m last year. In Indonesia, the plan is to build proposition from its coastline to the mountains 10 new Bali’s, with the objective of reducing the discovery from hospitality to shopping. International to medical facilities, Thailand is the greatest travel is less and less a luxury good. country’s dependence on the island. This is no attractor of tourists in the region. And, while the easy feat. The investment is set to exceed recent elections have created doubt in some The diversity of ASEAN is also seen in the wide USD20b, excluding the latest proposals to move economic policies, all parties see tourism as a the capital away from Jakarta. variation within the tourism data. The Greater key driver of economic activity. This is important Mekong Sub-region, comprising Thailand, Vietnam, as capacity constraints, from pollution to Laos, Cambodia and Myanmar is where visitor Finally, like any new destination, there will also infrastructure, are beginning to bite. The be a need to invest in training to provide quality growth is the greatest: double digit CAGR over the estimated investment exceeds USD83b in past 10 years. But this is compared to the much visitor services. In short, building a tourism infrastructure alone over the medium term to culture can take time. And given the breadth of slower 3.4% CAGR in Malaysia and the Philippines. attract 50m guests. Looking at tourism receipts as a share of GDP, in the investments needed, and in some cases regulatory changes to attract foreign Thailand, Vietnam and Cambodia, these exceed 10%, while they are much lower at 2.1% in the Philippines participation, a critical mass may be required and 1.4% in Indonesia. before sustainable returns can be achieved. 2019 ASEAN TOURISM: BLUE SKIES, BUT KEEP YOUR SEATBELTS FASTENED 2 The Over-reliance risk: China and Emerging Trends As infrastructure is being built out, gaps are appearing. One is the lack of quality hotels in Casinos We are starting to see increasing eco-tourism and Vietnam, which has the highest hotel rooms more nature-driven attractions through much of per 1000 tourists in the region, but only 20% of Despite the slowdown in Chinese arrivals in recent the region. And this potential could be significant rooms are 3-5 star rated. We were puzzled by months, they have been a significant driver of in the coming years. Similarly, Thailand leads why average tourist spending in Vietnam is ASEAN tourism growth over the years. In part, as medical tourism and there are few signs that this dropping and we can’t help but think that some countries allowed the building of casinos to is slowing. Indonesia and Malaysia are also seeing there are not enough higher-quality services to attract these tourists, sensing the “low hanging growth in Halal tourism, where both countries spend on. As this changes in the coming years, fruit”. And many in the team think Chinese visitor have competitive advantages. we could see both higher tourist arrivals and growth will re-accelerate. And there are reasons to higher spending per tourist. believe this, including that only 9% of the Chinese Indian visitors account for only 3.3% of total population has a passport suggesting there is pent visitors to ASEAN. Given only 5% of Indian Throughout the report, the team has identified up demand for international travel. nationals have a passport, continued growth in where they see the best opportunities in the India could be another driver of a more diversified ASEAN-6. They have also identified what to However, three things concern us from a returns tourism sector. The number of Indian visitors to avoid, including areas where too much was perspective. One, while more Chinese tourists will Thailand doubled to over 2m in 2018 from less built and not enough people came. come to the region, it’s unclear if average spending than 1m in 2014. per visitor will increase as the incremental new May 2019 traveler may be a lot more price sensitive. Two, Chinese tourist activity can be correlated to The Ambition and Opportunity political relations with China and this can vary significantly. And last, casinos in ASEAN are facing Our economists remind us that there is an ASEAN greater competition from other countries and even Tourism Strategic Plan. And some of the value of Macau junkets themselves are entering the space. the “Tourism capital stock” is being unlocked Casino capacity is increasing fast. So, when the through both public sector infrastructure and Philippines data indicates that casinos now account private sector investments. for one-third of activities expenditure, the country needs to diversify, and do so fast. 2019 ASEAN TOURISM: BLUE SKIES, BUT KEEP YOUR SEATBELTS FASTENED 3 CONTENTS 2 Forewords 66 Vietnam 111 Malaysia 67 ONE OF THE FASTEST-GROWING 112 TOURISM DYNAMICS ARE 6 Macro TOURIST DESTINATIONS CHANGING 68 GROWING AFFLUENCE AND LOW- 118 OTHER INTERESTING 7 ASEAN: QUALITY TOURISM COST TRAVEL TOURISM NICHES DESTINATION OFFERING A UNIQUE, DIVERSE EXPERIENCE 69 MOST POPULAR AND UP-AND- 123 DOMESTIC IS FANTASTIC COMING TOURISM HOTSPOTS 17 ENHANCING AIRPORT INFRASTRUCTURE, OPENING NEW 70 EQUITY TOURISM PLAYERS FRONTIERS 23 EXPANDING TOURISM OFFERINGS 127 Aviation 128 ASEAN AIRLINES HAVE 82 Indonesia GROWN STRONGLY 34 Singapore 83 GROWING IMPORTANCE & 129 NOT ALL ARE MADE EQUAL GROWTH POTENTIAL 35 ON A WING AND A PRAYER 134 ASEANS HAVE EMBRACED 87 CREATING 10 NEW BALIS LCC WHOLEHEARTEDLY 36 THE NEED TO STAY ON ITS TOES 92 INVESTMENT OPPORTUNITIES 136 AVIATION AS AN 37 COMPANIES NOT ENTIRELY INVESTMENT SINGAPORE DEPENDENT 138 Gaming 44 Thailand 95 Philippines 139 CHINA THE KINGMAKER 45 AMAZING THAILAND – PAST 96 TOURISM, THE NEXT A NUMBERS GAME GROWTH DRIVER 142 MIND THE RETURNS GAP 48 AMAZING THAILAND – PRESENT 102 “IT’S MORE FUN IN THE 143 FROM FRIEND TO FOE? MONEY, MONEY, MONEY PHILIPPINES” 53 AMAZING THAILAND – FUTURE 105 MONETISING TOURISM MORE IS MORE POTENTIAL 144 Appendix 2019 ASEAN TOURISM: BLUE SKIES, BUT KEEP YOUR SEATBELTS FASTENED 4 HONG KONG USD25.0b LAOS USD0.6b Travel and Tourism THAILAND % of Total Economy in 2017 USD36.4b Highly Reliant More than 7.0% VIETNAM Reliant 5.0% - 7.0% CAMBODIA USD12.7b Less Reliant 2.0% - 5.0% USD2.4b PHILIPPINES USD12.5b MALAYSIA USD13.0b SINGAPORE USD13.9b INDONESIA USD28.2b 2019 ASEAN TOURISM: BLUE SKIES, BUT KEEP YOUR SEATBELTS FASTENED MACRO Chua Hak Bin (65) 6231 5834 [email protected] Lee Ju Ye (65) 6231 5844 [email protected] Linda Liu (65) 6231 5847 [email protected] ASEAN: QUALITY TOURISM DESTINATION OFFERING A UNIQUE, DIVERSE EXPERIENCE UNESCO W ORLD HERITAGE SITES IN ASEAN “By 2025, ASEAN will be a quality tourism destination offering a unique, diverse ASEAN experience, and will be committed to responsible, sustainable, inclusive and balanced tourism development, so as to contribute significantly to the socio-economic well-being of ASEAN people.” ASEAN Tourism Strategic Plan, 2016-2025 RICH AND DIVERSE NATURAL Malaysia Singapore Thailand & CULTURAL HERITAGE SITES Southeast Asia offers rich and diverse set of natural and cultural tourism heritage sites. The region boasts 11 natural and 17 cultural heritages sites in the UNESCO World Heritage List. PRIORITY UNDER ASEAN ECONOMIC COMMUNITY Tourism is a priority sector and is becoming an increasingly Indonesia Philippines Vietnam important component of the ASEAN economic bloc. Tourism accounts for more than 5% of the economy for Cambodia, Thailand, and Vietnam. 2019 ASEAN TOURISM: BLUE SKIES, BUT KEEP YOUR SEATBELTS FASTENED 6 MACRO BECOMING A QUALITY DESTINATION, DIVERSIFYING TO NEW MARKETS VISITOR ARRIVALS TO ASEAN CLIMBED TO 135 MILLION IN 2018 International Visitor Arrivals to ASEAN International visitor arrivals climbed to 135 million in 2018, 3.3 times the size in 2000 (41 million).

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