The global travel and tourism industry is expected to expand by more than 6 percent this year. The most important sector of growth for travel is in Asia. In the next couple of years, 2 out of 5 international travelers will be Asian. By 2023, China will overtake the United States to become the world’s largest travel and tourism economy.
Infrastructure is key to the growth. China is planning ahead by building more airports than any other country. Recently, Peter moderated a panel at the World Travel and Tourism Council’s The Asia Summit on “Growing Capacity Sustainably Through Infrastructure Developments.”
The panel focused on how business can put in place the right infrastructure to support the growing Asia market. Peter spoke with the leaders in development for hotels, airlines, airports, cruises and trains. Here is just a quick look at what they had to say:
James Mueller, Vice President for Atlantic & Pacific Sales at United Airlines, spoke to the challenges and growth opportunities for airlines in Asia and specifically China. Airlines remain challenged by fuel prices. When they first started, fuel was $20 a gallon, now it’s $110. Airlines must be conservative in choosing routes. However, United just announced nonstop services from San Francisco to Chengdu. Mueller noted:
This is the first nonstop service by a U.S. airline to a “secondary” Chinese city. But obviously, there is nothing secondary about it, the entire infrastructure about the city is remarkable.”
Mueller clearly see the chances the international markets. However, he is trying to find the right balance of growing with the market, without getting ahead of them, because that would be too expensive. In the future, we might be flying on alliances and not airlines.
“The Japanese partnership with ANA gets us to Kuala Lumpur, Jakarta, Burma. These are avenues to open up new dots on the map with them.”
The good news is that the balance is shifting away from outbound Western travelers and towards more travelers from Asia.
“If we look back at our history serving China 10 or 15 years ago, airplanes were full with 80 percent of Americans visiting China, and a very small number going in reverse, but that balance has clearly shifted back. At many times of the year, our customers on our flights between the U.S. and China are half Chinese.”
With 52 million annual visitors coming to Hong Kong, Ricco deBlank, Chief Executive Officer at SHKP Hotels–whose portfolio includes the Four Seasons Hotel Hong Kong, The Ritz-Carlton, Hong Kong, and the The Ritz-Carlton Shanghai, Pudong–prefers to invest wisely. He noted: “Hotels are more expensive and less profitable than the rest of SHKP development, but a hotel in the right location has the opportunity to achieve high occupancy.” SHKP Hotels recently purchased the last piece of centrally located land in Shanghai, almost a million square feet, for US$3.6 billion. But it’s not as simple as “if you build it, they will come.” Demand, airlift, roads, and labor force are just a few elements needed to keep a hotel running profitably.
“As an operator you have nothing to lose. The more hotels you get, the more fees you get, which Wall Street loves. As an owner, you don’t want to build a hotel and have it run at 50 or 60 percent, which means it’s very hard to break even in the short term.”
Citing an overall unawareness of the cruising industry within governments, Pier Luigi Foschi, Chairman & CEO at Carnival Asia & Chairman of the Board, Costa Crociere SPA, faces specific difficulties in the industry of cruise ships.
“It is not only ports, it is also destinations. There is this drive by certain governments in Asia that hopefully is contagious to others to integrate more. The growth we see is happening in China. Shanghai is fortunately geographically located to offer cruises all year around. There are some problems sailing from China to Thailand. We need to overcome political difficulties, there are a number of possibilities we are starting to look at, but we need the infrastructure, destination development, airlift capacity, roads integrates waters paces. Infrastructure is very important in terms of boats but it is not sufficient. What we need is integration with airports, railroads and roads and easy access to cruise terminals.”
Angela Gittens, Director and General at Airport’s Counsel International (ACI), represents airports on a global stage, advocating and pushing the
excellence of airports. Gittens points out that governments in Asia Pacific by large understand the importance of aviation and the need to adopt to growing capacities.
“Chinese airports have been best customers, they recognize those issues, they work with the community of airports, willing to help each other, they get benefit of being part of that community. They are aware of challenges of growth that they have and they are dealing with it. Beijing, for instance, will be doing a training for all employees before the winter season starts.”
She predicts that for London’s Heathrow airport for instance, things would have to get much worse and would possibly have to hurt commerce, before the government would understand the importance of opening a third runway.
“Until they are confronted with problems that effect them, they don’t connect the dots.”
Satoshi Seino, Chairman & Director at East Japan Railway Company, points out the problems the Japanese government needs to face before the Summer Olympics of 2020.
“Our biggest challenge is the capacity at our two airports. We have to expand the airspace over Tokyo, so more flights can come in, that is one of the challenges we face, because we are aware foreigners have difficulties at our airports. We try to resolve the current congestion we have today. We are also trying to connect railways with airport, we want to expand monorail so we can speed up transportation.”
By Cathrine Schermann and Lily J. Kosner for PeterGreenberg.com