Issue: April 1999

1998 In Review: The Horror Year for Asia

The following paper reviews the tourism performance of major Asian and Australasian (defined as the Asia Pacific region) countries during 1998. A brief introduction focuses on the economic decline in Asia during 1998. This is followed by a review of the way in which regional travel generally fell with incomes. On the other hand countries with significantly lower currency values benefited from increased inbound travel. Visitor growth for each country is then broken into two components, mix and share, based on performance relative to the region as a whole. In addition to the overview, country reviews are provided for each of the following countries:

• Australia
• China
• Hong Kong
• Japan
• Korea
• New Zealand
• Singapore
• Taiwan
• Thailand

Economic Decline in Asia

July 2^nd 1997, the date the Thai baht was allowed to float, marked the beginning of an unexpected turning point for Asia.

Substantial falls in financial markets and then stock markets ultimately delivered recession to much of Asia. Political and social costs rose. Indonesia was the most dramatic example of the fallout.

This was new territory for governments, the business sector and the unions. Economic forecasts were progressively reduced but the economies themselves were in free-fall. A turning point had arrived and few recognised how quickly the tigers could turn.

The dramatic turnaround during 1998 and the forecasting response are illustrated in Figure 1. South Korea’s economy, for example, grew by 5.5% in 1997 (real growth in GDP). The likely outcome for 1998 is a fall of 5.5%. In December 1997 the International Monetary Fund (IMF) considered it likely that South Korea would experience a ‘soft landing’. By May 1998 the forecast had been lowered further to -0.8%. The outcome was much worse than expected. And this story was repeated for many of the countries in the region.

Figure 1: Annual Change (%) in GDP - 1997 Outcome and 1998 Forecasts

Source: IMF and Tourism Futures International

Figure 2 shows the change in the value of local currencies against the USD during 1998. Most local currencies fell in value during 1998. The most dramatic fall was the Indonesian rupiah with major falls too for Thailand, Korea, the Philippines and Malaysia. Few currencies in the region remained unscathed. With China and Hong Kong currencies pegged to the US dollar the impact upon their economies was a severe drop in competitiveness.

Figure 2: Annual Change (%) Currencies Against the USD, 1998.

Source: Various Banking Source, Tourism Futures International

Unemployment increased in many countries most of them without developed welfare systems. In Hong Kong unemployment increased to 4.7% during 1998 (up from 2.2% in 1997). Unemployment in Japan reached 4.1% during 1998 and is still rising. Malaysia’s 1998 unemployment was 7.5% and along with Korea (6.8%) was amongst the highest in the region. Indonesia’s unemployment levels were more than double these levels.

Regional Travel Generally Fell with Incomes.

In 1998 around 47 million visitors arrived in the countries TFI has included in the Asia Pacific region. This is some 1.8 million fewer visitors than in 1997 (a decline of 3.7%). As illustrated in Figure 3 and Table 1, visitor arrivals in 1998 were down from those countries hardest hit by the Asian economic crisis. Intra-regional travel from Southeast Asia and Northeast Asian countries was down 13.7% and 7.2% respectively when compared to 1997. However, the overall effect of these declines was mitigated by an increase in visitor arrivals from other regions of the world. Travel to the Asia Pacific region from Europe was up 2.4% and from the Americas by 3.3%.

Figure 3: Percentage Change of Visitor Arrivals to the Asia Pacific Region*

*Asia Pacific Region consists of: Australia, China, HK, Japan, Korea, New Zealand, Singapore, Taiwan and Thailand. Source: Statistical Collections of Governments and Tourism Futures International.

The major countries contributing to the regional decline were visitors from Korea (down 39.8% or 1,313,900 visitors), Indonesia (down 25.8% or 493,100 visitors), Thailand (down 19.7% or 183,000 visitors), Malaysia (down 16.3% or 433,700 visitors) and the Philippines (down 13.6% or 173,800 visitors). However visitor arrivals increased from Hong Kong (up 16.8% or 219,700 visitors), China (up 16.3% or 201,500 visitors) and Australia (up 12.6% or 210,300 visitors).

Table 1: Visitor Arrivals to the Asia Pacific Region* from the following countries

Seven of the top ten source markets for the Asia Pacific region in 1998 were Asian countries despite the economic downturn. As illustrated in Figure 4, over one quarter of visitor arrivals to the region came from Japan and Taiwan. Japan and Taiwan contributed 17.2% and 12.7% respectively of total visitor arrivals to the region, followed by the USA (8.7%) and the United Kingdom (5.3%). The top ten source markets provided 67% of visitor arrivals to the region during 1998.

Figure 4: 1998 Top Ten Source Markets and Percentage Share of Visitor Arrivals to the Asia Pacific Region

The USA and the UK increased their share of visitors to the region in 1998 when compared with 1997. As illustrated in Figure 5, the most significant loss of market share was recorded by Korea, down 2.5 percentage points from 6.8% in 1997 to 4.2% in 1998.

Figure 5: Number of Visitor Arrivals to the Asia Pacific Region from the Top Ten Source Markets and Percentage Share (1997 vs 1998)

Source: Statistical Collections of Governments and Tourism Futures International.