Stronger Recovery Will Come to Asia-Pacific in Second Half

While the pandemic continues, the International Olympic Committee and Japanese government intend to host the Tokyo Summer Olympics—postponed last year for the first time in history—this summer. Thousands of athletes, coaches and journalists are expected to attend and will be subject to venue requirements. Whether spectators will be allowed is still being hashed out as Japan proceeds with vaccination efforts amid a new infection wave. Resumption and planning of such a large international event amid a pandemic in flux and ongoing national efforts to contain it, however, exemplifies the confidence of recovery in the Asia-Pacific in the second half of 2021.

“The rest of the world is looking at this [region] from a recovery perspective but also how do we get this return to travel to happen,” said Jo Sully, American Express Global Business Travel VP and general manager for Asia-Pacific. 

As the starting point of the Covid-19 outbreak, Asia-Pacific was the first region to see its travel industry decimated in the wake of the pandemic. Of the 22 cities in Asia-Pacific tracked in BTN’s Corporate Travel Index, more than half saw double digit declines in their average corporate hotel rates between the first quarter and second quarter.

Compared to North America and Western Europe on a full-year basis, however, Asia-Pacific’s business travel industry has not been as devastated. For the full-year 2020, business travel dropped 44 percent compared to 60 percent and 58 percent drops in North America and Western Europe, respectively, according to the Global Business Travel Association’s Business Travel Index. 

Tackling the Covid Situation

Crossborder air travel to Asia-Pacific decreased 80.3 percent year over year for the full-year 2020, according to the International Air Transport Association. For the majority of the region’s key international routes, crossborder restrictions remain in place. 

The restrictions range from quarantines to Covid test requirements to bans on nonessential travel. 

“First, many countries now are demanding PCR tests at least 72 hours before travel. Without that, you can’t fly,” said International SOS Asia regional medical director Dr. David Teo. “Second, there are a lot of restrictions in place now where even a PCR test may not allow you to travel unless you have visa or an entry permit. Third, many countries are increasingly now banning [travel from] countries after announcements of new variants,” he said. 

In Asia, most countries are imposing quarantines lasting 10 to 14 days, with China requiring 21 days. Many also all require travelers to complete PCR tests over their quarantine time.

How countries are handling virus containment and vaccination efforts can be placed in three groups, according to Teo. India, Indonesia, Philippines and Bangladesh are dealing with the first wave of Covid-19. Compared to six months ago, their case numbers have improved but haven’t “calmed down” enough to exit the initial infection surge. Only India and Indonesia have started their vaccination programs, according to Teo. 

Hong Kong, Japan and South Korea all are dealing with a third or fourth wave of cases. Each country, however, is seeing case numbers decline. Hong Kong and Japan are currently implementing their vaccination programs, while South Korea has just started, according to Teo.

China and Singapore have controlled their caseloads and are implementing vaccination programs. China, however, is “not in a hurry to push [vaccination] because their stats are quite good,” according to Teo. That hasn’t stopped China from pushing vaccines to other countries. These soft-power moves could prove interesting in shaping how travel corridors begin to open in the region and even beyond.

While crossborder travel is depressed, domestic travel has improved somewhat in countries where the virus is under control. “We’ve seen an increase in domestic travel in countries like China, Thailand, and Vietnam where the pandemic is under control,” said BCD Travel Asia/Pacific CFO Neeraj Singhal. “Japan also remained quite active in their domestic sectors almost through the end of third quarter 2020,” he said. “Even India is slowly showing improvement in domestic traffic.” 

A lot of what is driving domestic recovery is essential business travel, particularly in distribution, government, entertainment and life sciences, Singhal said. In Australia, travelers in mining and energy are still traveling, with an upsurge in the last two months, according to Sully. Luxury brands and financial services in China have maintained steady travel volumes. 

Tracking Costs

Most of the major cities in Asia-Pacific experienced a year-over-year drop in per diems between 2019 and 2020, according to BTN’s Corporate Travel Index. Shanghai had the biggest drop, falling from $314.31 to $264.35, driven by declines in hotel rates and the cost of taxi rides to the city center. Guangzhou, Bangkok, Hanoi, Seoul, Taipei, Melbourne, Sydney, Shenzhen, Mumbai, Auckland, Kuala Lumpur and New Delhi experienced per diem declines that range from 1 percent to 20 percent.

Per diems in Manila, Tianjin, Beijing, Singapore, Hong Kong and Jakarta increased year over year. Tokyo had the biggest rise in its per diem, up $59.91 to $652.38 compared to 2019. In this city, the hotel rate decline offset the rise in meal costs and a taxi ride from the airport to the Tokyo city center. Osaka-Kobe, Japan, came in second, with its per diems rising from $326.85 to $396.47, thanks to rising meal and taxi costs and likely exacerbated by increasingly unfavorable exchange rates for U.S. dollars against the yen. Singhal noted there has been soaring demand for car rentals and train travel in Japan, China and India. 

Regional Outlook

China will lead the region’s return to travel but will be below 2019 levels, according to Sully and Singhal. “Based on our data, we predict that domestic business travel in China will reach close to pre-COVID levels by Q3 of 2021,” Singhal said. “We’ve started to see more in-person meetings and events in China’s domestic market.” China’s hotel occupancy levels are high, according to Sully. Just as before the pandemic, Beijing, Guangzhou and Shanghai remain the most popular business travel destinations.

“In markets like Australia, India, and Japan, we expect an increase in domestic travel over the course of the second quarter continuing into the third quarter,” Singhal said. “Business travel for in-person sales, supply chain matters and client meetings will return first in China, India, Australia, and Japan,” Singhal said. Hong Kong, Singapore and other island nations, which have no domestic markets, will be largely dependent on international travel resuming, according to BCD Travel Asia supplier relations VP Emanuel Tzafaris.

The scheduling of annual regional events could point to more in-person activities occurring after the first quarter. For example, The Asian Hockey Federation and both the Men’s Asian Champions Trophy Dhaka and Women’s Donghae Asian Champions Trophy are now scheduled for October this year, after originally postponing them last year to January 2021. The organization cited travel restrictions, athlete safety and Covid-19 variants as risks.

Regardless of when business travel resumes, it will likely be weighed down by a strengthened corporate focus on sustainability, which can now be buttressed by new habits built around virtual meetings. “Employers and industry leads will increasingly factor a trip’s impact on our climate into their travel decisions. Some ‘not so important’ trips will be eliminated for this reason alone and internal meetings will be replaced by virtual meetings,” Singhal said. “The last 12 months have been an accelerator for virtual capabilities and the acceptance of virtual collaboration tools among leaders and staff alike.”

Restarting the Travel Engine

Meanwhile, Australia, Hong Kong, Japan, China and Singapore have provided financial relief to their domestic travel industries through loans, direct subsidies, tax breaks and incentives or job training programs.

“The biggest challenge we have as an industry is ensuring and convincing the governments to work together,” Sully said. If governments don’t cooperate and coordinate with each other and industry players, recovery efforts will stall. In Australia, amid the recent Australian Open, Victoria had a case outbreak followed by a five-day lockdown. New South Wales didn’t shut its borders, but Queensland and South Australia did. 

Throughout Asia-Pacific, the industry is lobbying for and helping build a business travel infrastructure that will support traveler confidence. “There will be a lot of testing in this region for certain protocols—not only for ourselves but for our customers who are going to start traveling in this region first,” Sully said. The travel industry is pushing rapid testing protocols for international travel to avoid quarantines, travel corridors between major cities and countries with similarly low Covid-19 and standardized hygiene and health protocols, according to Singhal.