Increase in tourism costs in Southeast Asia

As tourism in Southeast Asia begins to recover after long border closures caused by Covid-19, new government guidelines are expected to increase travellers’ spending.

“Sell Premium. The more expensive, the more customers. Otherwise Louis Vuitton would have no sales.”

In July, Thailand’s Deputy Prime Minister Anutin Charnvirakul recommended the country’s tourism industry to move from mass-market discounts to “quality prices.”

A similar view was shared by Uzaidi Udanis, president of Malaysia’s Inbound Tourism Association, who urged members to “develop premium products that we can use to attract high-quality tourists.”

As international travel gets back on track, airports like Kuala Lumpur International Airport (pictured) are seeing a surge in tourist numbers.

Aligning hotel rooms and airplane seats with designer handbags might be overstating the point, but the current debate across Southeast Asia is about how to generate more revenue from tourism. Essentially, how to find new ways for travelers to make additional payments.

The search for quality tourism

After the devastating two years of economic impact of closed borders Southeast Asian governments are putting tourism at the heart of their stimulus plans. New Philippine President Ferdinand Marcos Jr. wants tourism to become a “main pillar” of the national economy, and Indonesia is developing new strategies to improve “tourism resilience”.

At regional level, the debate focuses on how to recover lost tourism revenues during Covid-19. Meanwhile, governments are looking to attract new investors to diversify their visitor economies.

These goals steer the discussion in the direction of “quality tourism”

Different interpretations are offered by political leaders. These include high-quality tourism (Indonesia), high-yield tourists (Malaysia), high-end tourists (Cambodia), and low-impact high-quality tourism (Thailand). The goal is the same, to increase average visitor spend.

With tourists returning, many Southeast Asian nations are looking for ways to increase visitor spending after years of limited tourism spending.

The result of this ongoing drive to monetize inbound tourism will be an increase in the overall cost of travel in Southeast Asia. This will affect international and domestic tourists.

Taxation of tourists in Thailand and beyond

Two different strategies are being discussed in Thailand to increase tourism revenue.

In January, Thailand’s Ministry of Tourism and Sports announced it would introduce a tourism tax of THB300 (approx. Although a start date is unconfirmed, the tax is scheduled to take effect in 2022. The government says the fees will be used for a new national medical fund treatment of foreign tourists, which was a widely recognized financial drain on Thailand prior to the pandemic.

In addition, Thailand’s government wants to dictate double hotel pricing. This would result in different room rates for international and domestic tourists. The argument is that if international travel returns, it would protect domestic tourists – who have kept the travel industry afloat during the Covid-19 lockdown – from a sharp rise in hotel prices. The travel industry counters that dynamic online pricing would make enforcing such price differentials difficult and costly.

Tourism taxes are not new and are introduced for various reasons.

In September 2017, Malaysia introduced a flat rate hotel tax of RM10 (approx. NZD 3.50) per night for foreign guests. This is in addition to a “City Tax” levied on hotel guests in destinations such as Penang and Melaka. The hotel tax was hotly debated. The Malaysian hotel industry has campaigned against having to collect the fee from guests on behalf of Customs & Excise. As a result, implementation was repeatedly delayed.

Earlier this year, Thailand’s Ministry of Tourism and Sports announced it would introduce a tourism tax of THB 300 (approx. Photo from engine akyurt on Unsplash

Two years later, in July 2019, New Zealand began collecting an International Visitor Conservation and Tourism Levy of NZ$35. This is part of an ongoing national debate about the future of tourism and environmental protection. Tax revenues are invested in initiatives that restore natural landscapes and species and improve environmental resilience.

Tourism fees also come in subtle forms. In July, Indonesia increased the passenger service fee at 19 airports across the country. The new fees are tiered differently for international and domestic flights, but increase the cost of airline tickets.

Entrance fee hike in Borobudur

This brings us to another problem of tourism prices that is causing trouble in Indonesia.

Last year, Indonesia’s Coordinating Investment Minister Luhut Pandjaitan said, “We don’t want backpackers to come so Bali stays clean where the people who come are of quality.” Though the comment was later retracted, is the direction the government wants to steer travel , clear. It wants to increase average visitor spend.

In June, Mr. Pandjaitan put forward plans to increase the entrance fee to the ancient ruins of Borobudur Temple in Central Java. A proposed double-entry pricing model would charge international tourists IDR 1.4 million (about NZD 150) and Indonesian tourists IDR 750,000 (about NZD 80).

The fee for foreign travelers has been criticized by tourism professionals as excessive and potentially unaffordable. It would certainly rule out most backpackers.

The proposal also raised concerns that Indonesian tourists would be disadvantaged when visiting a valuable national heritage site. The government counters that a UNESCO study recommends limiting Borobudur’s visitor numbers to 1,200 per day and the fees would help preserve the magnificent ruins, which show visible pressures from overtourism.

Premium Prices for Komodo Island

A three and a half hour flight west of Yogyakarta (the closest city to Borobudur) brings travelers to Labuan Bajo, the gateway to Komodo National Park. Before the pandemic, tourists flocked here to see the Komodo dragons, the world’s largest species of lizard, in their natural habitat.

These remarkable reptiles are also embroiled in a price controversy.

In the past two years, new tourist facilities have been built in Komodo National Park, including a viewing platform and boat dock. The scale of the development was criticized by UNESCO for damaging a designated nature reserve.

Developers are on their way, and Indonesia is looking to limit visitor numbers to Komodo Island. The chosen mechanism increases the starting price from IDR 150,000 (around NZD 16) to IDR 3.75 million (around NZD 400).

Officials at Indonesia’s Komodo National Park faced outrage earlier this year when they proposed increasing the park’s admission price by about 25 times its current admission price. Photo of altraz on Unsplash

The new ticket price for visiting Komodo Island and nearby Padar Island started on August 1st. It is valid for multiple visits over a 12 month period and is justified as a contribution to the maintenance costs on the two islands.

Controversy broke out. The new fee does not apply to nearby Rinca Island, which is also inhabited by Komodo dragons. During a visit by President Joko Widodo, it became clear that Rinca will remain a mass tourism destination, attracting up to 1.5 million visitors annually. Komodo and Padar will be reserved for well-paying tourists only.

Local communities say they have not been consulted and fear the price hike will discourage people from visiting Komodo Island and hurt small businesses such as hotels and restaurants. To underline their position, tourism workers began a month-long strike in early August.

The stalemate was quickly dissipated. The local authorities have agreed to keep the previous participation fee of IDR 150,000 until the end of 2022.

Whether this will be a short-term way out or a long-term pricing solution remains uncertain.

Banner image by Milada Vigerova on Unsplash

– Asia Media Center

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