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Asia-Pacific tourism starts to buckle under pressure: Deloitte

The impact of the current global economic crisis has reached Asia-Pacific and the tourism industry is starting to feel the pressure as growth starts to slow. New analysis by Deloitte, the professional services firm, shows that although hotels have reported positive growth for the year-to-August 2008, with revenue per available room (revPAR) up 13.2 per cent, on closer inspection, hoteliers have started to feel the strain over the last few months. Until May 2008, revPAR growth across Asia-Pacific was reporting double-digit growth each month, with average room rates driving this. However, since then, revPAR growth has fallen back, with June and July reporting increases of 7.5 per cent and 7.4 per cent respectively. Although August bucked this trend, with revPAR posting double-digit growth once more, up 15.2 per cent, this was no doubt impacted by the excellent results Beijing reported after hosting the Beijing 2008 Olympic and Paralympic Games.

This trend is echoed in India, which was achieving over 20 per cent revPAR growth at the beginning of the year. RevPAR has dropped progressively each month and is currently in negative territory, down 3.4 per cent during the month of August 2008. On the flip side, Indonesia is one of the only countries bucking this trend achieving double-digit growth each month this year as it continues to recover from the terrorist attacks in Bali during the first half of this decade.

Across the globe, a decline in consumer confidence has meant many people are tightening their purse strings as they have less disposable income to spend on travel and leisure. According to the MasterCard MasterIndex of Consumer Confidence, consumer confidence in Asia-Pacific for Quarter Two 2008 was reported at 56.0, compared to 69.3 for the previous period. While these results still show some consumer optimism, the marked downturn will only get worse as the events over the past couple of weeks take their toll. A heady cocktail of the financial crisis, falling equity markets, high oil prices and the threat of inflation is taking its toll on corporate travel budgets. This will translate into challenging corporate rate agreements for 2009, which are typically finalised in November. There will inevitably be pressure to reduce room rates. The International Air Transport Association (IATA) reported that in the month of August 2008 alone, airlines in Asia Pacific saw a 3.1 per cent contraction in the number of international passengers, off the back of a 0.5 per cent drop the previous month. These results, coupled with the deceleration in hotel performance across the region, make it clear that economies in Asia Pacific are starting to feel the impact of the wider economic meltdown across the globe.

Commenting on the current situation, Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality and Leisure, Deloitte said, “Asia-Pacific is by no means decoupled from the uncertain and volatile economic environment in the US and Europe, and although the backlash for the Asia region has been delayed, it was inevitable. The collapse of the Asian stock markets this month will inevitability lead to the same pressures the hotel industry is facing in the USA and Europe where revPAR growth has slowed year-to-August 2008 to one per cent and 12.6 per cent compared to the same period last year.”

”Looking ahead, the coming months may prove to be a challenging time for hoteliers across Asia-Pacific as the economic crisis unfolds. Hoteliers will need to consider how they will respond if occupancy levels fall further. The inclination in tough times is to respond by cutting prices as was the case during the SARS crisis. At that time, like now, the emphasis is on cost reduction while continuing to meet guest expectations,” added Kyriakidis.

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