Increase in the cost of tourism in Southeast Asia

As tourism in Southeast Asia begins to recover from lengthy Covid-19 border closures, new government policies are designed to increase traveler spending.

“Selling premium. The more expensive it is, the more customers there are. Otherwise, Louis Vuitton would have no sales.”

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

A similar view was offered by Uzaidi Udanis, President of Malaysia’s Inbound Tourism Association, who urged members to “create premium products where we can attract quality tourists”.

With the resumption of international travel, airports such as Kuala Lumpur International Airport (pictured) have seen their tourist numbers increase.

Lining up hotel rooms and airplane seats with designer handbags may be beating the point, but the current debate across Southeast Asia is about how to get more out of the revenue from the tourism. Basically, how to find new ways for travelers to pay extra.

The quest for quality tourism

After the devastating economic impact of two years of border closures, Southeast Asian governments are putting tourism at the center of their recovery plans. The Philippines’ new president, Ferdinand Marcos Jr, wants tourism to be a “major pillar” of the national economy, and Indonesia is developing new policies to improve “tourism resilience”.

At the regional level, the debate is centered on how to recover tourism revenue lost during Covid-19. Meanwhile, governments want to attract new investors to diversify their visitor economies.

These objectives guide the discussion towards “quality tourism”

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

With the return of tourists, many Southeast Asian countries are looking for ways to boost visitor spending after years of limited tourism spending.

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

Taxing tourists in Thailand and beyond

In Thailand, two separate policies are being discussed to boost tourism revenue.

In January, Thailand’s Ministry of Tourism and Sports announced that it would levy a tourism tax of THB 300 (about NZD 13) on all non-Thai arrivals into the country. Although a start date is not confirmed, the tax is expected to come into force in 2022. The government says the fee will be used for a new national fund to provide medical care to foreign tourists, which was a financial burden widely recognized for Thailand before the pandemic.

In addition, the Thai government wants to impose double hotel pricing. This would create different room rates for international and domestic tourists. The argument is that it would protect domestic tourists – who have kept the travel industry afloat during the Covid-19 shutdowns – from steep hotel rate hikes as international travel returns. The travel industry counters that dynamic online pricing would make enforcing such fare differentials difficult and costly.

Tourist taxes are not new and they are put in place for various reasons.

In September 2017, Malaysia introduced a flat rate hotel tax of RM10 (approximately NZ$3.50) per night for foreign guests. This is in addition to a “tourist tax” levied on hotel guests in destinations like Penang and Melaka. The hotel tax was hotly debated. The Malaysian hospitality industry lobbied against the requirement to collect fees from customers on behalf of Customs and Excise. As a result, implementation has been repeatedly delayed.

Earlier this year, Thailand’s Ministry of Tourism and Sports announced that it would levy a tourism tax of THB 300 (about NZD 13) on all non-Thai arrivals into the country. Photo by engin akyurt on Unsplash

Two years later, in July 2019, New Zealand began collecting an international conservation and tourism tax of USD 35 for visitors. 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 appear in subtle forms. In July, Indonesia increased the passenger service charge at 19 airports across the country. The new fees are scaled differently for international and domestic flights, but will increase the cost of airfare.

Borobudur Entrance Fee Hike

This brings us to another tourism pricing issue causing ire in Indonesia.

Last year, Indonesia Coordination Investment Minister Luhut Pandjaitan said: “We don’t want backpackers to come, to keep Bali clean, where the people who come are of good quality. Although the comment was later retracted, the direction the government would like to take travel is clear. He wants to increase the average spend of visitors.

In June, Mr Pandjaitan announced plans to raise the price of admission to the ancient ruins of the Borobudur temple in central Java. A proposed dual-entry pricing model would charge international tourists IDR 1.4 million (about NZ$150) and Indonesian tourists IDR 750,000 (about NZ$80).

The fee for foreign travelers has been criticized by tourism professionals as excessive and potentially prohibitive. That would definitely rule out most backpackers.

The proposal also raised concerns that Indonesian tourists would not be paid to visit a prized national cultural heritage site. The government counters that a UNESCO study recommends limiting visitors to Borobudur to 1,200 per day, and the fees will help maintain the magnificent ruins, which show visible strains of over-tourism.

Premium price for Komodo Island

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

These remarkable reptiles are also embroiled in a pricing controversy.

Over the past two years, construction of new tourism facilities in Komodo National Park includes a viewing platform and a boat dock. The scale of the development has been criticized by UNESCO for damaging a dedicated conservation area.

The developers have moved on and Indonesia wants to limit the number of visitors to Komodo Island. The mechanism he has chosen is to raise the entry price, from IDR 150,000 (around NZ$16) to IDR 3.75 million (around NZ$400).

Officials at Indonesia’s Komodo National Park faced outrage earlier this year with a proposal to raise the park’s entry fee to around 25 times its current price. Photo by altraz on Unsplash

The new ticket price to visit Komodo Island and neighboring Padar Island started on August 1. It is valid for multiple visits over a 12 month period and is streamlined as contributing to the cost of conservation on both islands.

The controversy erupted. The new fees do not apply to neighboring Rinca Island, which is also inhabited by Komodo dragons. During a visit by President Joko Widodo, it became clear that Rinca will remain a site of mass tourism, targeting up to 1.5 million visitors a year. Komodo and Padar will be exclusively reserved for well-paid tourists.

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

The showdown was quickly broadcast. Local authorities have agreed to retain the old entrance fee of IDR 150,000 until the end of 2022.

Whether this is a short-term expedient or a long-term pricing fix remains unclear.

Banner image by Milada Vigerova on Unsplash

– Asia Media Center

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