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All eyes on Phuket sandbox, but questions remain over Asean tourism recovery

Annabeth Leow
Published Thu, Jul 8, 2021 · 06:44 PM

REGIONAL tourism players are keeping a close eye on Thailand's so-called "Phuket sandbox" - a testbed for quarantine-free leisure travel that kicked off this month.

The industry has high hopes for the expansion of the pilot to other parts of Thailand, as well as the potential for similar initiatives in other South-east Asian tourist markets.

But the timeline for a return of tourists from China - where outbound travel remains restricted - will be critical to the tourism recovery, said panellists at a recent investment webinar. That comes even as the success of the Phuket sandbox itself still remains to be seen.

"It's hard for us to think" of Asean without Chinese tourists, Tim Hughes, vice-president of corporate development at booking platform Agoda, said on Thursday.

Another panellist, Philippine Undersecretary for Tourism Development Benito C Bengzon Jr, added: "There's been a lot of discussion with respect to the shift towards the low-volume but high-value kind of tourists, but I think if you're looking at just sheer numbers, China will continue to be a major factor."

The remarks came on the same day that Citi cut its growth forecast for Thailand to 1.9 per cent in 2021, from 2.4 per cent before; and 3.8 per cent in 2022, from 4.7 per cent.

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Citi analyst Nalin Chutchotitham cited "the drag from weaker tourism" as one factor behind the downgrade. She called Thailand's third-quarter tourism targets plausible but challenging, but dubbed fourth-quarter projections "too optimistic in our view".

Ms Nalin projected Thai arrivals to gradually pick up to 30 million in 2025, which is still below the pre-pandemic headcount of 39.9 million visitors. Industry revenue is expected to return to US$54.0 billion by 2025, still lower than US$61.6 billion in 2019.

Phuket, which launched the sandbox on July 1, is banking on mandatory testing and high levels of local vaccination as it reopens to fully-vaccinated tourists.

Gunning for similar reopenings in other popular destinations such as Krabi, Koh Samui and Koh Tao, the Thai authorities now hope to draw some 100,000 tourists in Q3.

Mr Bengzon said that the Philippines is "keenly looking at the Phuket sandbox model" to see if it can be applied in the resort island of Boracay - even as the country is still focusing on domestic travel to sustain its tourism industry in the meantime.

"We continue to maintain very close contact with our partners abroad, particularly from the major source markets for the Philippines: Korea, China, Japan, the United States and Australia," he told the panel, which was an event in Maybank Kim Eng's Invest Asean 2021 series.

He flagged interest in travel corridors or bubbles, as well as "specialised packages" for travellers, while highlighting pent-up demand from "short-haul markets" in Asia.

Citi's Ms Nalin had warned in her report that China "might remain very cautious before relaxing quarantine requirements for returning residents", which would dampen demand.

"It might also take some time for hotel and restaurant operators to bounce back after a long hiatus. New hiring, training, and fresh loans might have to be organised, and a 'critical mass' would be needed to meet overhead costs," she added.

Yet Thailand's Central Plaza Hotel Group is already considering picking up some distressed assets and relaunching them, according to deputy chief executive Markland Blaiklock, who was also on the Maybank KE panel.

While "the prices being offered were not really being adjusted for the economic conditions" at the outset, Mr Blaiklock added that the group is now looking at "several" opportunities, as "we do have reserves we can fall back on, and even other parties or other areas within our group that could carry some investments".

Given the tough climate, Mr Bengzon stressed that "any kind of movement in South-east Asia and Asia, and around the world, is certainly welcome because eventually it will make it more cost-effective and more viable for the airlines to restart".

"We all have no doubt that travel will return. Every data point we have shows that demand," Agoda's Mr Hughes added. "But there is this multi-faceted, multi-speed element…

"We have to wait and see the longer lead time in the recovery of business travel, to understand the full price impact on leisure travel and business travel recovering at different rates."

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