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Currencies in Turmoil

Currency turmoil likely to affect Asia more than other continents

Luc Citrinot, eTN Staff Writer  Mar 26, 2009

A new event with potential devastating effect for tourism is affecting again tourism in Asia. Around the world, currency plunges in many important outbound markets could further undermine tourism authorities efforts in Asia to attract visitors already affected by the world recession. Although the total number of European travelers –Asia’s top long haul outbound market- increased last year by an estimated 2 percent, forecasts for 2009 now predict a decline. And other long haul markets such as Australia or the USA will hardly compensate for Europe’s losses.

The currency factor has been so far minimized but it starts to take its toll on tourism. Let’s just look at Japan, probably the first country to feel the pinch of a combination of a –once again-strong yen and weakening currencies from its main source markets. Korea and Taiwan represent 45 percent to 48 percent of all foreign arrivals to the country. The Korean won is down by 32 percent to the Yen compared to a year ago and the Taiwanese dollar by 14.5 percent.

In 2008, estimates from the Japan National Tourism Organization show a decline of 8.4 percent in total arrivals from Korea and 8.2 percent from Taiwan. However, over the last three months, Korean travelers literally collapsed with total arrivals down by over 45 percent in November and December and even 52 percent in January 2009. Taiwan was slightly most resilient with travelers down by “only” 10 percent to 23 percent in the last three months. In Hokkaido, the collapse of the Australian dollar by over 40 percent compared to the yen has translated into a 30 percent fall in bookings during the winter season in Northern Japan ski resorts.

Over the last six months, the value of currencies such as the Australian, Canadian and the New Zealand dollar, the Korean won, the British pound, the Swedish krona and the Russian rouble experienced sharp declines. In 2008, those currencies plunged on average by 20 percent to 25 percent. Since the beginning of the year, some of those currencies have slightly recovered or at least stabilized but their value still remains far below their 2008 exchange rates versus most Asian currencies. By taking for example the value of the Thai baht on March 23, 2009 compared to March 23, 2008 (reference:, the Korean won and the NZ dollar were still down by 20 percent compared to a year earlier, the British pound by 18 percent, the Swedish krona by 16 percent and the Australian dollar by 14 percent.

Unfortunately for Thailand, most of these countries are important sources of incoming travelers. At Thailand press conference during the ITB Berlin, TAT Chairman Weerasak Kosuwarat highlighted the fact that the kingdom represents an amazing value for money. “We are recognized as the best Best Country Brand for Value for Money by CBI Future Brands,” he said. However, the poll was conducted last year.

They are not so many solutions to resist turbulences in exchange markets. Some Asian countries have already allowed their own currencies to go down. This is the case for both Indonesia and Malaysia with their currencies down by 10 percent to 15 percent. The Vietnamese government allowed its currency to weaken by 6 percent to the US dollar last year with a further devaluation likely to take place by the middle of the year.

Despite the promise of most NTOs not to turn their destination into cheap value destinations, discounting prices at hotels and tourist services is the biggest temptation for most Asian countries. It might also be the most effective way to fill up rapidly rooms and support employment. In Thailand, some 4- or 5-star hotels have already reduced their rates by 40 percent to 60 percent for the summer season with perspectives to keep 2008 rates for the next three years. Promotions of packages, reductions in landing fees at Thailand’s major airports, free visas for all tourist travelers until the end of June should help to stimulate the demand, according to Weerasak. In Singapore, some tour operators offer packages at rates down by 50 percent compared to the previous year.

Fostering domestic or regional tourism is another option for many countries. “In this time of global economic crisis, intra-ASEAN travel is more likely going to be the sector that can help us counter the potential shortfall of tourists from other countries,” explained recently Malaysia Tourism Minister Datuk Seri Azalina Othman in an interview with Malaysian paper StarBizWeek.

Whatever the outcome in Asia this year, bargains are under way, a good opportunity to seize for travelers -even for the ones coming from countries with weak currencies. “Asia will generally continue to offer one of the best values for money in the world,” acknowledges Weerasak Kosuwarat at TAT.

However, this begs the question: will this be enough to stimulate demand?

Currency turmoil likely to affect Asia more than other continents

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