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Course: ECON 3320 Asia-Pacific Economies

Name: CHOI, Shek Hong SID: 1155033199 Major / Year: Economics / 3 Finalized Date: 19/04/2015 Investigated Region / Issue:

Taiwan / Strength and Opportunities of

Tourism Industries

“SWOT” Analysis on Taiwan Tourism Industry:

Strength and Opportunities

Shek Hong, CHOI

Abstract

With a strong increasing trend of foreign tourists visiting Taiwan in the past decade, the great

potential of Taiwan Tourism has been demonstrated (Executive Information System, 2015). This

paper explores a manipulation of SWOT analysis tool, in which “S” for Strength and “O” for

Opportunities would be focused, to determine the qualities that Taiwan possessed to develop

her tourism industry. Using academic theories and empirical approaches can address a

comprehensive investigation on the reasons of success of Taiwan Tourism in recent years.

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1.Introduction

Due to the weak local demand in Taiwan, foreign demand, i.e. export of goods and services, performs as

an increasingly important role of reinforcing Taiwan economic growth in recent years. (總統府, 2011) In

2009, Taiwan Government selected industries as “Six Major Rising Industries” to promote and invest, in

which Biotechnology, Green Energy, High-end Agriculture, Travel and Tourism, Medical Care and

Cultural and Creative Enterprises are included, (Executive Yuan National Development Fund, 2011) in

the other words, these industries have the imperative potentials to provide new sources of power to

boost up Taiwan economy.

Among “Six Major Rising Industries”, Travel & Tourism has obtained a remarkable growth in the past

decade. The competiveness index of Taiwan achieve persistent improvement of her rank from 43rd in

2009 to 33rd in 2013 in The Travel & Tourism Competitiveness Report 2013(World Economic Forum,

2013). According to Executive Information System (2015), Taiwan experienced a persistent expansion of

number of tourists visiting Taiwan, increased by 193%, while the foreign income generated by tourism

industry increased by 173% in the past ten years. Apart from foreign income and number of tourists, the

rate of Travel and Tourism’s Direct Contribution to Employment in Taiwan, show in Figure0 , is growing,

from 5.9% in 2013 providing over 643,000 jobs to 6.2% in 2014 providing over 680,000 jobs, and 7.6% in

2024 providing 814,000 jobs as predicted (World Travel Tourism Council, 2014). Travel & Tourism in

Taiwan has generated direct and indirect effects to boost up Taiwan economy.

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Figure 0

In order to find out and analyze the reasons behind the success, this paper conducts “SWOT” analysis on

Taiwan’ Travel and Tourism Industry, “S” Strength and “O” Opportunities selected as the concentration

areas (Wikipedia, n.d.). Moreover, a number of statistics and reports would be reviewed and integrated

with tourism and economics theories, such as Film-Inducted Tourism and international trade model, to

discuss how the qualities of Taiwan or Taiwan policies boost up the development of this industry.

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2. SWOT Analysis : Strength and Opportunites

2.1. Strength

2.1.1.Geographical Location

Figure 1

According to Figure 1 (Taroko National Park, n.d.), Taiwan located at the center of Asia Pacific Region,

the distances between Taipei Airport and many Asia Cities within 1,600 miles(the longest distance is

Singapore) provide a convenience for tourists from a numerous countries to travel, especially for

Japanese and Chinese tourists. In fact, the composition of the nation of the tourists visiting Taiwan is

related with the national distance. (Executive Information System, 2015) The nearest countries are

China, Japan, Hong Kong & Macau and Mid-East Asia Countries respectively, in which their percentage

shares are the highest, over 40%, 15%, 13% and 14% respectively. In the other words, the distance is co-

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related with the numbers of tourists from their own countries to travelling Taiwan. Hence, located at the

center of Asia Pacific Region constitutes a favorable environment for Taiwan to promote her tourism to

other East Asia countries.

Figure2

According to Project Vanguard for Excellence in Tourism(2009), Tourism Bureau outlined the new

tourism development plan. In the project, Taiwan has not only advocated the new vision to make a use

of geographical advantages to act as East Asia Gateway and Major International Travel Destination, but

also chosen ”The Heart of Asia” as the slogan on the home page of website of Tourism Bureau(2015).

This promotion strategy further explains the potential of this advantages being developed to become

the strength of Taiwan tourism.

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2.1.2.Popularity of Taiwan Pop Culture

In the past decade, Taiwan Pop Culture has become one of the leaders in Asia Pacific Region. Since 2008

Film “Capo No.7”, the development of film industry has initiated the new golden era. (Shi & Chen, 2012)

“Capo No.7” in 2008, “Monga” in 2010, “You are the apple of my eyes” and “Seediq Bale” in 2011

achieved a remarkable results and broke the traditional monopoly of US Films in Asia Market, over 100

Million Box Office in Taiwan and other cities and countries among Asia Pacific region, such as “You are

the apple of my eyes” ranked as The Highest Box Office Income of Chinese Language Film in Hong

Kong(Wikipedia, n.d.), the reputation of Taiwan Film has been promoted and enriched among Asia

Pacific region. Meanwhile, 80% market share of Taiwan Pop Music in Global Chinese Language Music

Market (Bureau of Audiovisual and Music Industry Development, n.d.), numerous famous worldwide

Taiwan Pop singers, such as Jay Chou selected as “1995-2005 World Top Ten devil’s music” in 2005 and

the main character on the cover page of US magazine “Times” Asia Edition in 2003 ensuring his

achievement as well as the leader role of Taiwan Pop Music (Baidu, n.d.), reflect the influence of Taiwan

Pop Music.

Rewtrakunphaiboon (2009) conducted a research about Film-induced Tourism, i.e. how the success of a

Film promotes the tourism of her own region. She revealed the subsequent impacts of famous films on

the tourism development of filmed destinations, for examples, Film “Harry Potter” raised 50% number

of tourists visiting filmed location; Film “Mission Impossible 2” increased the number of tourists by 200%

in 2000. With a strong increasing trend of popularity of Taiwan Films and Pop Music, Taiwan Pop culture

provides a substantial power to promote her tourism.

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Project Vanguard for Excellence in Tourism (Tourism Bureau, 2011) mentioned how Tourism Board

manipulated her pop culture to establish the promotion strategy of Taiwan in Asia countries and cities.

Taiwan divided Asia Pacific Region into Japan & Korea, Hong Kong & Singapore & Macau, different idols

not only assigned to each segment acting as tourism ambassador, such as Jolin Tsai in Hong Kong and

Fahreheit in Japan, but also organized Stars Visiting Tours and participated in Tourism Promotion

Exhibitions to promote Taiwan Tourism, such as Fahreheit International Concern in 2009 generating

over 100 Million revenue in Taiwan’ currency (Tourism Bureau, 2011). This promotion strategy receives

considerable outcomes and implies Taiwan Government deems pop culture as her strength to promote

her tourism among different markets in Asia Pacific Region.

2.1.3. Comprehensive Infrastructure and Safety

According to The Travel & Tourism Competitiveness Report 2013(World Economic Forum), Safety and

Business Environment & Infrastructure of Taiwan ranked as 17 and 34 among 140 countries respectively,

which implies Taiwan achieved a good standard in these two areas that facilitate the development of

tourism.

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Comprehensiveness of infrastructure, such as ICT and Transportation infrastructure, provides an ideal

foundation and environment for tourists to travel and for Taiwan government to promote her tourism.

Excellence in Tourism developed a group of integrated and planned travelling routes, in which make a

heavy use of her railway and transportation networking, the effectiveness of this scheme would be

further discussed in the session ”Opportunities ”. (Executive Information System, 2002) Furthermore,

100 Taiwan Scheme provide electronic supports for tourists, included interactive information website

facilitating the pre-trip planning and GPS & QR code services in travelling destination. (Tourism Bureau,

2009)

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2.2. Opportunities

2.2.1. Excellence in Tourism

Project Vanguard for Excellence in Tourism revamped 17 existing packaged tour routes, for instances,

North Coast , Alishan, Sun Moon Lake, Hengchun Peninsula and Hualian –Taitung (Tourism Bureau,

2008). This scheme achieved noteworthy outcomes, number of tourists increased by 76.14% in 2008

generated revenue 74.5 Billion in Taiwan currency , compared with 2003 before the scheme.

Due to government acting as the main coordinator( seller) to re-package the travelling routes , to

explain how this scheme generated a successful outcomes, the assumption of the market as Monopoly

would be made. In the following model, y-axis, P, is the cost of travelling Taiwan different destinations,

x-axis, Q, is the number of destinations.

Figure3

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In order to promote her tourism, Taiwan tourism revamped the existing famous destinations as a

number of new travelling routes to provide new options for foreign and local tourists to choose. By

travelling routes, tourists enjoy a lower average cost of travelling for each destination, compared with

travelling the destinations separately. In the other words, the average price of travelling routes, P2, is

lower than the original price, P1, instead of decreasing the price, the second level of price discrimination

enabled the consumers to choose, according to their preferences. (Feenstra and Taylor, 2014) For the

original group of consumers, their quantity demanded and price remains unchanged, and the new group

of consumers generated, at P2, the quantity transacted is Q2. The total revenue of Taiwan tourism

increased, other things being constant.

The results of Project Vanguard for Excellence in Tourism are consistent with the theory. Other things

being constant, the increase in revenue 74.5 Billion in Taiwan currency is the area (P1-P2) X (Q2-Q1),

labelled “+” on the Figure 3, and the quantity increase from Q1, 211.6 Million, to Q2, 352.7 Million,

therefore, average cost of each destination is decreased by (P1-P2), 527.99 in Taiwan currency.

(Tourism Bureau, 2008) This strategy creates opportunities for Taiwan to develop her tourism in the

future.

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2.2.2. Closer Relationship with Mainland China

The agreement of Direct Cross-Strait Links (Three Links) in 2008 enabled direct flight between Taiwan

and China implies that Taiwan Tourism opened the Mainland China market and the establishment of

Individual Visit Scheme in 2011 fostered the expansion of Taiwan’ tourism in China Market, increased by

123% of Chinese tourists within four years (Wikipedia, n.d.). The policies have contributed a significant

number of tourists and foreign income to Taiwan tourism industry and economy (Executive Yuan, 2015).

In Figure 2, Chinese tourists not only have a strong increasing trend in her number, increased by over

1100% from 2008 to 2014, but also become the largest group of tourists. Undeniably, the opening of

China Market generated a great potential and opportunity for the development of Taiwan tourism.

Furthermore, Taiwan government is eager to strive for closer co-operation and relationship in tourism.

(Executive Yuan, 2015) The number of cities in China that open for individual visit increased from 3 in

2008 to 36 in 2014, while the daily application quota for individual visitors increased from 500 in 2008 to

4000 in 2014 with a relaxing restriction on numbers of travel for each visa. To explain the situation and

predict future opportunities generated by this scheme, international trade model would be introduced.

Taiwan population is 23.49 Million and her GDP is USD$ 535 billion, while China’s population is 1.367

billon and her GDP is US$ 9.24 trillion in 2015 (Wikipedia, n.d.), (Taiwan Business, 2015), (World bank,

2015). It would be reasonable to concluded Taiwan as a small economy and China as a large economy

(Sheng, 2002). Feenstra and Taylor(n.d.) introduced a number of international trade models to analyze

on how government policies affect International trade market and the welfare of economies in different

types of market. As all the Chinese tourists visiting Taiwan need to apply for the visa, in which the visa

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provider is Ministry of Public Security of the People’s Republic of China (Wikipedia, n.d.), the nature of

this market would be assumed as monopoly.

In the following model, as Tourism is a kind of export, i.e. export of services (United Nations Statistics

Division, 2010), the x-axis, Q, would be a number of Chinese tourists travelling Taiwan and China, and

the y-axis, P, is the cost for Chinese Tourists travelling Taiwan and China, i.e. monetary and non-

monetary cost (such as difficulties and time cost of getting visa).

Figure4

As demonstrated in Figure4, before 2008, the restriction of Chinese Tourists travelling Taiwan imposed,

the quantity transacted was S0=D0 in the Tourism Market in China, in others words, China and Taiwan is

no-trade in tourism market, Chinese tourists travelled in China. After relaxing the restriction, the

demand faced by Taiwan increased to D-M2, where, D is the demand of Chinese tourists travelling

Taiwan and M2 is the total number of quota of visa for each period, say , per day, the equilibrium price

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is P1 and the quantity demand and supplied is D1 and S1 respectively. The imports volume, i.e. number

of Chinese people visiting Taiwan increased from 0 to (D1-S1), and the Chinese tourists local travelling

decreased from S0 to S1. The Chinese consumer surplus increased by area (P0ABP1). For Taiwan, the

total revenue of tourism increased by area (P1 X (D1-S1)).

Figure5

In the perspectives of International market on Taiwan Tourism, shown in Figure5, i.e. China and Taiwan,

the relaxation of restriction in 2008 increased the producer surplus of Taiwan tourism by the

area( P2WLV), as the quota rent, area(P1ZWP2) is collected by Ministry of Public Security of the People’s

Republic of China in China and National Immigration Agency in Taiwan as the administrative fees

(Executive Information System, 2015);(Wikipedia.n.d.). With the equilibrium quantity under free flow of

tourists, M4, Taiwan tourism can gains from trade, as well as a rise in producer surplus by relaxing more

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the restriction and increasing the number of quota of visa, the optimal point is free trade, which is M4,

the producer surplus is area (P2M4V).

The Statistics on Chinese Visitors visiting Taiwan

Year Opened Region in China for Taiwan

Travelling Tour / Daily quota for visa

Opened Region for Individual Visit Scheme / Daily quota for visa

Foreign Income Generated by

Mainland Tour Visitors( in terms of Taiwan’s currency)

Number of Chinese Tourists

2008 13 / 500 N.A. 3.5 billion 329,204

2009 25 / 500 N.A. 31.8 billion 972,123

2010 31 / 500 N.A. 59.5 billion 1,630,735

2011 31 / 4000 3 / 500 63 billion 1,784,485

2012 31 / 4000 20 / 1000 92.1 billion 2,586,428

2013 31 / 5000 26 / 2000 86.4 billion 2,874,702

2014 31 / 5000 36 / 4000 99.7 billion 3,987,152

2015 31 / 5000 47 / 4000 / / Source : (Executive Yuan, 2015); (Executive Information System, 2015)

Figure6

The past performance of Taiwan tourism is consistent with the above trade model. In the Figure6, with

an increasing number of quota of visa for Chinese tourists (the daily application quota for tour visitors

increased from 500 for 13 regions in 2008 to 5000 for 31 regions in 2014, and that for individual visitors

raised from 500 for 3 regions to 4000 for 47 regions in 2015), the limitation for Chinese people travelling

Taiwan have been devalued, and the number of tourists have been increased from 329,240 in 2008 to

3,987,152 in 2014, it is reasonable to believe that, relieving the limits are effective to attract more

Chinese tourists. Although Foreign Income Generated by Mainland Tour Visitors( in terms of Taiwan’s

currency) experienced a particular devaluation in 2013, it may related with the substitute effects of

relieved constraints of Individual Visit Scheme, because of an increase in number of opened regions and

daily quota for visa. These findings are consistent with the model, as Taiwan can expand the number of

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imports, Chinese tourists visiting Taiwan by increasing the quota. The potential of China Market provides

substantial opportunities for Taiwan to develop her tourism, i.e. Taiwan can further improve her welfare

by relaxing the limits between Taiwan and China.

3.Conclusion

We analyzed the strength and opportunities of Taiwan Tourism. Geographic Location, great and rising

reputation of Taiwan’s Music, Artists, Films, comprehensive and well-developed infrastructure not only

provide good “hardware” and “software” for the development of Taiwan Tourism, but also constitutes a

great atmosphere and environment to attract tourists from foreign countries, especially in Asia-Pacific

Region, such as China and Japan, travelling Taiwan, in fact, their tourists shares are the highest.

For the opportunities, changing environment and system of Taiwan tourism have created a great

development potential. Apart from integration with different existing destination attracting more

tourists with higher revenue, the open of China Tourism Market provide a huge market with a

considerable room for development.

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