THE AUTHORITY ON WORLD TRAVEL & TOURISM

TRAVEL & TOURISM INVESTMENT IN ASEAN EXECUTIVE SUMMARYOCTOBER 2016

TRAVEL & TOURISM IN ASEAN IS GROWING FASTER THAN IN OTHER REGIONS OF THE WORLD

The Travel & Tourism sector makes a substantial contribution to the economies of Southeast Asia. Collectively, the ten countries that make up the ASEAN1 region are more dependent on Travel & Tourism to drive their economies than all other regions in the world.

In 2015 Travel & Tourism directly accounted for 5% of total economy GDP for the region, and a further 7.4% in indirect and induced GDP. Over 32 million jobs across the ten countries are supported directly or indirectly by Travel & Tourism. A favourable climate, proximity to large outbound markets like China, good infrastructure by the standards of emerging economies, connectivity to further afield origin markets, and price competitiveness by the standards of developed economies, make many countries within the ASEAN region highly attractive travel destinations.

Across the ASEAN region, there is wide variation in the total contribution of Travel & Tourism to GDP. Travel & Tourism makes a total GDP contribution of below 10% in Myanmar, Brunei and Indonesia, but over 20% in Thailand and almost 30% in Cambodia. Even in higher-income Singapore with a sophisticated and diverse economy, Travel & Tourism makes a substantively greater contribution to the economy than many other high-income economies in Europe or North America.

The sector’s growing GDP and jobs contribution depends on supportive infrastructure and investment. From air and ground transport and connectivity, health and hygiene improvements, safety and security developments, mobile phone penetration, reliable banking infrastructure as well as tourist accommodation and other infrastructure necessary for the sector to thrive. WTTC has forecast that there will be US$782 billion worth of Travel & Tourism investment made in the ASEAN economies over the next decade – nearly 10% of total global investment for the sector. However, with the sector forecast to achieve average annual Travel & Tourism GDP growth rates of 6.2% for each of the years to 2026, thanks in large part in its ability to tap into China’s spectacular growth in outbound travel, not only is there a divergence across the ASEAN economies with respect to their ability to deliver the infrastructure needed for the future Travel & Tourism demand, but there is also a challenge for all the countries to ensure that capacity volume and quality expands in line with visitor expectations.

Our research highlights this divergence in current infrastructure provision and future need across the ASEAN economies, and classifies the countries into different broad typologies related to the projected growth in Travel & Tourism demand and the current quality of related infrastructure. The categories range from those that are at risk of losing Travel & Tourism infrastructure competitiveness over the next decade, to those that are well-placed to benefit from forecasted investment spend.

IMPROVING INFRASTRUCTURE AND GROWTH PROSPECTSVietnam and Laos should significantly improve their Travel & Tourism infrastructure and catch up relative to other destinations over the coming decade, with forecast investment spending growth substantially outstripping robust demand growth. It is important that future investment is channelled and spent effectively and targeted at priority areas.

STARS OR OVER-INVESTORSSingapore has by some distance the best-rated Travel & Tourism infrastructure in the ASEAN region, and we expect this to be sustained given predicted strong growth in future investment. Indonesia’s Travel & Tourism infrastructure ranks more in line with the global average but tourism demand is forecast to grow very quickly. With strong forecast Travel & Tourism investment spending and tourism being identified as a high priority sector by the Indonesia government, Indonesia is well placed to become one of the region’s big improvers in terms of both Travel & Tourism infrastructure and activity.

BALANCED MARKETSMalaysia is currently well balanced in terms of its Travel & Tourism infrastructure. Investment spending is forecast to approximately double over the coming decade, slightly faster growth than expected in tourism demand. Similarly, in high-income Brunei a continued balance is likely, as spare capacity built up over the past decade will be offset over the next decade with forecast growth in Travel & Tourism demand and more modest increases in Travel & Tourism investment spending.

1 ASEAN includes the ten member states of ASEAN: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

THE AUTHORITY ON WORLD TRAVEL & TOURISM

INFRASTRUCTURE CONSTRAINEDMyanmar has by some distance the weakest Travel & Tourism infrastructure of ASEAN economies. Tourism demand has increased sharply over the past three to four years but without a corresponding equivalent increase in investment spending. It is not clear whether the projected acceleration in Travel & Tourism investment over the coming decade will be enough to cope with the forecast growth in demand. Cambodia has seen both demand and investment spending grow at a broadly comparable rate over the past decade but the quality of infrastructure is still regarded as some way short of most other ASEAN destinations. The Philippines has Travel & Tourism infrastructure closer to global average standards, but investment has failed to keep pace with demand for several years since the global financial crisis.

FUTURE FOCUS CRITICALThailand is the only ASEAN country considered where a review of its Travel & Tourism infrastructure needs is now critical. Investment spending is estimated to have fallen significantly since its peak in 2006-07, and is not due to recover to these levels until sometime in the next decade. Travel & Tourism demand meanwhile has grown sharply in recent years and is expected to continue to do so.

While Laos and Vietnam look on-course to achieve the investment their growth requires, there may be potential capacity constraints in Myanmar, Cambodia and the Philippines. And while Brunei Darussalam, Singapore, Indonesia and Malaysia all seem well-placed to continue building on infrastructure that compares positively by global standards, given the strong demand forecast. Thailand’s future Travel & Tourism infrastructure capacity needs to be critically reviewed in order to support its projected tourism demand.

Future investment in the ASEAN Travel & Tourism sector must be smart, sustainable and well-targeted. With such strong growth forecast for Travel & Tourism in the region, the ASEAN countries that exploit the opportunity of low interest rates to foster necessary infrastructure and investment opportunities will be best-placed to create quality jobs and tax revenues that will contribute strongly to their economies well into the future.

The full report: Travel & Tourism Investment in ASEAN, is available from www.wttc.org

SINGAPORESTAR OR OVER-INVESTOR?

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MYANMARINFRASTRUCTURE CONSTRAINED

2.5 7.6%9.8%

With weak existing infrastructure and a sharp increase in demand, it is not clear that forecast acceleration in T&T investment will be su�cient to cope with forecast demand growth.

THAILANDFUTURE FOCUS CRITICAL

4.4 6.7%6.6%

Relatively strong existing T&T infrastructure and future demand growth need to be supported by a continued investment focus.

CAMBODIAINFRASTRUCTURE CONSTRAINED

3.4 6.0%6.3%

Forecast investment growth not su�ciently faster than demand growth to ease potential capacity constraints and address existing infrastructure weaknesses.

MALAYSIABALANCED MARKET

4.8 4.5%7.0%

Current state of infrastructure is good, and with investment in line with forecast growth, supply and demand are expected to remain balanced.

VIETNAMIMPROVING INFRASTRUCTURE

3.8 7.2%6.5%

Investment growth forecast to outpace demand growth which should result in improved infrastructure as long as it is targeted appropriately.

BRUNEIBALANCED MARKET

n/a 7.5%1.6%

A high-income country, with modest growth in demand and investment forecast, infrastructure should remain balanced.

INDONESIASTAR OR OVER-INVESTOR?

3.9 5.3%6.9%

Prioritisation of T&T by government means good investment and tourism growth prospects, although infrastructure challenges from island geography remain.

LAOSIMPROVING INFRASTRUCTURE

3.4 5.7%5.5%

Investment growth forecast to outpace demand growth which should result in improved infrastructure as long as it is targeted appropriately.

PHILIPPINESINFRASTRUCTURE CONSTRAINED

3.5 5.3%5.5%

Shortfall in investment relative to demand growth is likely to widen, increasing the risk of capacity constraints.

5.6 3.5%5.3%

High quality infrastructure will be maintained by strong investment forecasts and lower demand growth due to maturity of the market.

T&T Infrastructure score (max 7) 10 year T&T Direct GDP growth (%pa)10 year growth T&T Investment (%pa)