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20 Oct, 2011

ITB Asia Edges PATA Mart As Region’s Leading Trade Show

SINGAPORE: When the ITB Asia opened on Oct 19, the largest delegation of sellers was from Indonesia and the largest delegation of buyers from India. Business was in full swing on the trade floor and the various side-events packed to capacity. Europe may be facing a huge debt crisis, the US economy is in dire straits, the Arab world may be in upheaval, but none of that seemed to matter here.

Analysis of the various presentations indicated that with the centre of global gravity now moving to the Asia-Pacific, the travel & tourism industry has become arguably a “teflon industry”, not just resilient but resistant to crisis. If some destinations are hit by floods, as Thailand has been this week, people simply move to another destination or to another part of the same destination. If source-market economies are down, people perhaps take a few less trips, or reduce their duration or trade-down to lower category of hotel. If some stop travelling entirely, other first-time travellers come up in their place.

With the world population now officially having crossed the seven billion mark as of this month, and the UNWTO saying that the total number of international travellers is just a little shy of one billion, there is still plenty of travel to come in the decades ahead. Indeed, the UNWTO’s latest study forecasts 1.8 billion international travellers by 2030.

In essence, short of a total economic collapse or a world war, the global travel & tourism industry, comprising of both its international and domestic components, has become too big to fail.

Reasons Easy to See

The reasons for this are easy to see. With its large population of nearly four billion people, including the dynamos of India, China and the ASEAN countries, the Asia-Pacific is now where the action is. Its economies are growing and its leaders are learning from past mistakes and adjusting to the new realities of a globalised world. Trillions of dollars are being invested in infrastructure regionwide, with transportation set to be a primary beneficiary. The massive growth in airports and airlines in the first decade of the 21st century is due to followed by equivalent growth in highways and railways in the second decade.

Improved telecommunications systems and increasing Internet penetration means that the ability to make bookings is taking a quantum leap forward. National tourism organisations are being showered with multi-million dollar marketing budgets. In just about every national, provincial or urban economy, travel & tourism is playing a role in generating income and creating jobs. Competition for the tourist dollar is making the products and services more creative. Accommodation is burgeoning, price-structures are adapting. Most important, demand for travel is soaring, be it for leisure, MICE, VFR, study, weekend breaks, religious, medical travel or voluntourism. The upcoming intra-Asia/Pacific free trade agreements will generate even more travel demand.

All this is coming to a head at the ITB Asia which, just four years after its 2008 launch, has edged out the PATA Travel Mart as the region’s leading trade show. As listed in the official show directly, Indonesia led the sellers contingent with 118 exhibitors, followed by Singapore (81), Thailand (79), India (49) and Malaysia (33). On the buyers side, India led the list with 54, followed by Australia (48) and UK (38). Surprisingly, only 13 buyers were listed from Germany. The rest were scattered from around the world, with new entrants from Russia, Africa, Latin America and Central Europe providing clear signs of where the future potential lies.

Chinese buyers and sellers were relatively few. That may be bad news at the moment but it is a harbinger of what’s coming. China, India and Indonesia are the region’s most populous countries but the aviation links between them are pathetic. Incredibly, there are no direct air-links between India and Indonesia, and the flights between both these countries and China border on the insignificant. Just rectifying this shortfall will probably add another 20 million travellers to the annual tourism tally.

This is the kind of future potential that was highlighted by UNWTO Secretary-General Dr Taleb Rifai, making his first visit to ITB Asia. Addressing the opening press conference, he noted that the global forecast is for travel & tourism to add 43 million people a year, especially when the potential of today’s young generation is factored in. The industry today accounts for one in 12 jobs globally and will do even better by 2030. The world is passing through a critical phase, Dr Rifai said. While economic sectors like manufacturing and heavy industry are showing great signs of fatigue, they are being replaced by a new wave of service sectors such as culture, sports and tourism with greater capability of creating jobs. The upheavals in the Arab world are affecting destinations like Egypt and Syria but the business is simply shifting to other destinations such as Turkey, Southern Europe and the Gulf countries.

Rising Tide Lifting Most Boats

As long as a rising tide continues to lift most of the boats, meeting the challenge of change is not altogether difficult. By closely monitoring and evaluating feedback, ITB Asia has tweaked the show to meet customer needs. Sometimes, however, it has done just the opposite.

ITB Asia Executive Director Nino Grüttke says that the biggest complaint received from delegates last year was that “there was too much going on”, leaving them short of time to cover it all. Rather than treat that as a complaint, ITB Asia executives decided to take that as a compliment. This year, they increased the number of events and activities. The unproductive Press conferences were cut back to only two, and replaced with open-to-all sessions on niche-market topics such as luxury travel, boutique hotels and women leaders in the travel industry. Alongside, the Singapore Tourism Board has expanded its TravelRave events to include sessions on airlines and hotel investments. The popular Web in Travel technology event has grown to three days, including a bootcamp. Another new partner TTG Asia Media, has signed up and added a half-day session on the future of travel agents.

While these sessions are open to the public, the STB also takes the opportunity to harvest some private insights. A travel leaders summit was convened for the second year for 30 executives to meet on an invitation-only basis. So secretive is the event that the STB does not even identify who they are. It was only upon request that the STB provided information on what is being discussed. This year’s topics included the following:

A) Rise of the Asian Travel & Tourism Industry: A discussion of Asia as the main growth engine for the travel and tourism industry in coming years and the five most significant business opportunities embedded in this tremendous growth in the short and medium terms.

B) Understanding the Asian Middle Affluent Class (MAC) Segment: Growth in the Asian MAC segment is expected to have the greatest impact on the travel and tourism market. This session shared insights into the Asian MAC traveler’s behavioral references and how companies both in and outside the travel and tourism industry have recognized the enormous potential of the MAC segment and adapted their products accordingly.

C) Talent Crunch in the Asian Travel & Tourism Industry: Despite large populations, the talent crunch in Asia is a growing problem and this is the case for all industries and occupations. This session shared the magnitude of the talent crunch facing the industry and delved deeper into successful models of industry-level collaboration from within the industry and beyond.

All told, in just four years, ITB Asia and the STB have merged the doing-business and knowledge-base components of the show and converted it into a mini-ITB Berlin. For buyers who could not both do business and attend the sessions last year, ITB Asia has created a “partial buyer” category that allows them to do just that.

Better Days Ahead

Messe Berlin CEO Raimund Hosch sees better days ahead. ITB Berlin has more than 180 countries as exhibitors, he says, while ITB Asia has only 70. “So we are only one-third of the way there.” With this year’s show having been sold out four months in advance, and total area on one entire floor of Suntec City now almost saturated, the 2012 event is to expand to a lower floor, with another 20% projected increase in exhibitors. Efforts are to be made to grow the Chinese component. This year, new countries included Botswana, Finland, Croatia and even Iraq. The partner country, Japan, used the event to publicise its recovery from the Fukushima nuclear disaster last March. Now in the same dire straits as the United States, another once formidable economic power, Japan has also gained a better understanding of tourism can come to the rescue in saving jobs and income during crisis periods.

Changing times will also mean changing ways of doing business.

Keynote speaker Paul Brown, President of Global Brands and Commercial Services, Hilton Worldwide, says that changing demographics of travel will require the hotels and meeting planner to “collectively think differently” about how to market the MICE sector and the nature of services they offer – moving away from talking up the hardware such as the rooms and facilities and more towards emphasising the value of the software, such as the experience and value of holding meetings in specific facilities. Yes, video-conferencing and technology may affect the MICE business, he said, but there is no alternative to face-to-face meetings. Yes, the economic downturn is affecting both the size and duration of meetings but forward bookings overall are stable. And yes, the financial services sector has been hit but other sectors such as health, pharmaceuticals and manufacturing are up.

Changing demographics will also mean a turning of the tables in other areas. The economic crisis in Europe and the United States will inevitably mean travel agency and tour operator bankruptcies. This will require suppliers in Asia to protect themselves financially, either through insurance or more stringent credit and advance-payment facilities. Europeans who once used their consumer protection laws to force changes in the supply of products and services in Asia will now face some reverse accountability. At the moment, this issue does not even seem to be on radar screen. Raised by this editor at the ITB Asia Press conference, it got no coherent answers. However, two German marketing consultants hired by Messe Berlin to look at future issues related to European-Asian travel agreed that Asian travel companies deserved to be protected against future European bankruptcies, and were will within their rights to demand accountability. At the moment, very few small and medium-sized suppliers in Asia know how to protect themselves. It is a knowledge-gap well worth plugging in future, the consultants agreed.

It will be interesting to see what new rabbits are pulled out of the ITB Asia hat for 2012. One challenge it will face is costs. Sellers keep getting hit with higher costs of participation, and the increased attendance at ITB Asia means that hotel costs, too, go up. How the show continues to demonstrate value will remain an ongoing challenge. That same challenge will also be faced by the PATA Travel Mart, which will be held in the Philippines in 2012 under a new outsourcing arrangement. With PATA, too, now getting its act together, getting the price-value balance right should not be a problem. The Asia-Pacific region is big enough to accommodate two large trade events. Competition is a must to ensure that the eventual winner remains the industry at large.