1 Feb, 2014
Every year since 2010, MasterCard issues a report ranking the number of international visitors arriving to the globe’s ‘top destination cities’. In 2013, for the first time, Bangkok was number one on that list. With Bangkok scratching out Paris, New York and London from the number one spots, Asia effectively nominates it’s top city for travellers. This is the first time that an Asian city has taken this position, but as a number of other reports measuring other indicators show, Asian cities are climbing quickly.
For cities further to the south, tapping into the tourist spending frenzy that is Bangkok is an essential order of business if these cities wish to see their territories draw more tourists. Attractiveness, indicates Aliverni et al, is only part of what makes good tourism. Physical accessibility is also important. (The other factors are level of economic development of the territory and the promotional efforts of the relevant agencies). Thankfully for smaller cities, of which Thailand has many, low-cost carriers (LCCs) are radically facilitating this.
Secondary cities committed to tourism
Three of major southern cities, Hat Yai, Trang and Krabi are all pulling more and more tourists through their airports, largely thanks to dedicated municipalities aligning their economic policy to tourist industry requirements.
The economic policy section of Hat Yai’s strategic plan is emblematic in this regard. It consists of seven goals, three or which are tourism related. Firstly, Hat Yai seeks to promote and support the popularity of Hat Yai as a domestic and international tourist destination, and is focused on drawing tourists from Malaysia, Singapore and Indonesia. Secondly, Hat Yai wishes to support the development of specific tourist attractions. Thirdly, Hat Yai wants to diversify its offer in terms of tourist activities, including festivals and capacity of local operators.
It appears to be working. Tourist numbers in all three cities are climbing, facilitated by the flood of LCCs now serving them. Hat Yai has only 160,000 residents in the city (800,000 in the metro area) but its international airport processed over a million travellers (or ‘movements’ as the airport’s statistician’s call them) in 2011. Between 2000-2010, Trang doubled its annual movements and coastal Krabi, which stands as an increasingly popular alternative to Phuket’s swollen tourist scene, is climbing even faster. In 2000, the town brought in 60,000 tourists, which rose to 145,000 in 2005, and leapt to over half a million in 2011: an increase of almost 300 per cent (46 per cent year-on-year).
Municipal level commitment is framed within a broader national fixation, led by the Tourism Authority of Thailand, which is currently seeking to stimulate secondary locations. In effect a question of portfolio diversification, the authority recognizes the established status of some ten destinations across the Kingdom of Thailand, but wanting to further boost tourist numbers is calling for the development of additional destinations. Krabi, is one of those sites favored by the Tourist Authority, and so, needing to escape the bustle of Bangkok anyway, I took a LCC flight and paid the town a visit.
From the tourist’s perspective
Krabi, thanks to promotional frenzy, is an AirAsia town. The LCC’s red and white insignia has been stamped across everything. The long-tail boats which cruise the bays bear the low-cost carrier’s logo on their roofs, the buses and tuk-tuks announce cheap fares from their sides, and shopfronts and billboards advertise new destinations.
In Krabi I spoke with international and national tourists making the most of these cheap flights: Swedes flying in from Kuala Lumpur, Chinese coming in from Singapore and numerous Thai flying in from Bangkok and Chiang Mai to revel in the good weather and the clear waters of the Andaman coast. Chen, a Chinese national who lives in Shanghai, said that he would have flown elsewhere if it wasn’t for AirAsia. ‘I have 10 days off and I can’t loose two of them in transport getting here. The bus or the train from Bangkok just takes too long. If there were no flights to Krabi I don’t know where I would have gone… somewhere else I guess,’ he said.
Time, they say, is the only real luxury. Alesandro and Davide are in their late thirties, natives of Milan and a few days after Christmas are hanging around outside a tailors in Krabi waiting for their suits. ‘We flew here on Air Asia from Bangkok.’ says Davide. ‘We wouldn’t have come to Krabi if there wasn’t a cheap flight,’ they say. ‘We only have two weeks and the train takes 16 hours, and then you have to get a mini-van for a few hours to get here.’ I ask them if they had thought about a bus from Bangkok. ‘It’s the same thing, it’s like 15 hours from Bangkok by bus. Its too long!’ When I ask where they would have gone if there was no cheap flight to Krabi, and they propose Phuket. ‘Or maybe Viet Nam,’ says Alessandro.
AirAsia is not the only low-cost carrier to be serving these southern cities. Nok Air and Thai Smile are similar budget carriers which run numerous flights. Nok Air, for example, sends 56 flights per week to Hat Yai, the company’s most popular destination. That’s eight flights per day, everyday. Across Asia this is the case: new cheap carriers are popping up everywhere. Every few months, it seems, I read of a new low-cost airline launching in India. And part of the reason for their effervescence, is their business model.
A nice new model: Opportunities for secondary cities
LCCs run on business model which differs completely from the tradition full service carriers. These latter run what the industry calls a ‘hub-and-spoke’ model: flights to secondary cities (spokes) pass through a the capital (the hub). LCCs in a fit of market-driven innovation and thanks to increasingly liberal aviation policy, pursue a different game. They operate on a model of direct flights between cities preferring to fly from secondary city to secondary city, partly because the ‘hub’ cities’ airports are crowded and costly to fly to (cost of refueling, landing fees, cleaning etc.).
This model carried obvious and important implications for secondary cities, which, despite the fairly straightforward nature of the observation, has hardly been studied (the academics prefer to study the LCCs themselves, largely overlooking their effect on local urban affairs).
Firstly, low-cost carriers operate a transportation model which strengthens direct travel to and between secondary cities in the same country, as well as secondary cities in different countries. This is quite a radical change in air transportation which reduces the dominance of the capital city on national and sub-regional air transportation. From Krabi for example, you can get a direct flight to Melbourne, Siem Reap, Guangzhou, Shanghai, Shenzhen, Hong Kong, Chennai and Penang (all important secondary cities at an international level), as well as about twenty destinations within Thailand itself.
Secondly, low-cost carriers are increasingly directly connecting secondary cities in one country with capital cities in other countries, again radically reducing the dominance of the first country’s capital – in this case Bangkok. Flights connect Krabi, for example, directly with capitals such as Singapore, Beijing and Kuala Lumpur, and further capital destinations are expected to be added.
Positive and negative impacts of LCCs on secondary cities
But what is the effect of all these extra tourists passing through these cities? I emailed and called the three destinations under discussion here, in an effort to speak with someone on this topic but they all declined to engage. Nevertheless, a good rummage through the local press turns up telling tales and offers suggestions as to how LCCs are impacting on the development of these secondary cities.
- Mixed fiscal and revenue opportunities Local governments have the opportunity to generate increased revenue through taxes and other levees. These are most closely related to the airports themselves, which, due to increased processing, generate higher returns (economies of scale). However, as far as I can tell, none of the municipalities directly own or operate their airports. Hat Yai is owned and operated by Airports of Thailand, and Krabi and Trang are owned and operated by the Department of Civil Aviation. In this way, direct benefit to the municipalities in terms of revenue from LCCs using the facilities is likely to be mixed – national government is receiving a decent cut.
- Increased tourist expenditure on local markets Where local governments can benefit most, is obviously through increased spending on local markets (hotels, restaurants, transport and tourist activities) thanks to increasing numbers of tourists. There are two components here: getting the tourists to the territory and finding things for them to spend money on. In this regard, attracting ‘quality’ tourists, who tend to spend more and on things like golfing, weddings, honeymooning and medical services is considered a priority. Krabi, in this regard, is considered to have been particularly successful. One of Krabi’s two golf courses is owned by the local electricity board (revenues to the municipality) and the other is privately held by Sofitel. But whether quality or not, tourists of all types spend. Thailand’s gross domestic product is usually about 7 per cent international tourism, of which the Andaman provinces in question contribute about 30 per cent — some USD 8 billion in 2012. Capturing the spending is a challenge (see below) and while the stats aren’t available for Trang, Hat Yai or Krabi, tourists tend to spend less the farther from the nearest LCC they go.
- Land-use and construction implications Catering to tourism warps land use and building. Quality tourism in Krabi for example is encouraging honeymoon packages for expansive budgets in rolling resorts (and yes quality tourists do fly LCC — I met honeymooning couples who had flown LCC because it offered the most convenient route and time). But beyond golfing, resorts and other large scale developments, LCCs are stimulating a boom in budget hotels (e.g. Ibis Budget etc.). Indeed, LCCs are sometimes directly responsible, with AirAsia’s CEO Tony Fernandes opening a spree of budget or ‘limited service’ hotels, one in Hat Yai currently but with more to come. Such a boom pushes up real estate, especially around key tourist locations, often driving locals out of the market.
- Increased opportunities In Trang, Happy Trips, a travel agency run by Jip, collects most of its earnings by arranging onward travel for tourists. ‘Most tourists come here for the islands, and only spend a night or less in Trang,’ Jip says. This means that Trang, not itself the destination, must work hard to capture the tourists which are passing through by investing in attractions which can delay tourists for a day or two, before heading to the ‘real’ destination. Trang’s botanic gardens do just that, but the city should think of a few more. Hat Yai is in a similar situation.
- Increased regulatory challenges Managing increasing numbers of foreign tourists in what are essentially small cities, however, comes with problems. Judicial challenges are arising in a number of more touristed secondary sites – Krabi being one. Infringements, corruption and consumer issues have escalated, and this has lead to the establishment of special tourist courts to manage the situation, and in the words of the Tourism Authority, ‘ensure that Thailand’s tourism image is improved.’ Krabi is likely to receive its special court over the next year or so. Similarly, ongoing degradation of natural tourists sites (such as islands, coral reefs, parks, etc.) may soon lead to losses in tourism trade, as tourists seek cleaner shores, or better maintained reefs.
- Overcrowding of transport modes Another negative effect is overcrowding, as LCCs displace both full service carriers and other transportation services like trains, buses and minivans – this latter being a very popular intercity travel mode in Thailand. For now, the effects of overcrowding may be confused with other factors. Thai Airways, for example, is blaming reduced passengers from China on Bangkok’s political instability over late 2013-2014. However, given that AirAsia is experiencing a boom in the Chinese market (a 97 per cent increase year on year 2012 to 2013!), Thai Airway’s troubles are likely to be linked to this. Similarly, bus stations around southern destinations where LCCs fly are also reporting reductions, most notably on the popular ‘long-haul’ bus routes, such as from Hat Yai or Krabi to Bangkok. I spoke with min-van drivers around Krabi who say that numbers have dropped, particularly on buses. Back in Trang, Jip is also feeling a pinch, saying that she is booking less international tourists on trains and buses for Bangkok. I ask if this is affecting her business. ‘We get a commission on every ticket we sell,’ she says. However, her business in short haul trips around the territory is thriving, thanks in great part to increasing numbers of tourists touching down on LCCs.
In this way, LCCs bring a range of implications which municipalities need to tackle. But above all they bring tourists. And as such, they allow southern secondary cities and their territories to tap Thailand’s status as one of the most visited countries in the world, and by far the most visited in Asia.
Banner photo by calflier001
Photo A by Kallerna
Photo B by Argenberg
Photo C Shared via CC-3.0