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For many Asian destinations, particularly those in Southeast Asia, domestic travel has always played second fiddle to inbound tourism, although hotels have given it more respect through the years as rising middle class and low-cost carriers create bigger volumes of local travelers.
Enter Covid-19, and the domestic market is no longer just a weekend business for hotels but “the one.” There isn’t another, as regional and international tourism recovery remains a long haul.
Two in three respondents from TripAdvisor’s survey said they will travel domestically within the next six months. More than 40 percent said their next international trip will be more than a year from now; 31 percent somewhere between seven and 12 months, said Jane Lim, TripAdvisor’s vice president of global markets.
As all data leads to domestic demand, big hotel chains and online travel agencies have swooped in fast. Agoda has launched GoLocal, its biggest integrated campaign to stimulate domestic tourism across Asia-Pacific. Klook has optimized its platform’s user interface to highlight domestic activities, which include many new hyper local ones.
Hotelbeds is in a drive to add 10,000 new properties by yearend in domestic destinations globally, including China, Thailand, Australia and New Zealand. InterContinental Hotels Group’s 30 hotels in Thailand are offering up to 50 percent off rates. Asian countries like Thailand and Japan are throwing money at locals to holiday at home.
This, is a seminal moment for the Asia’s domestic market. With exceptions such as Japan and China, domestic has always been less coveted than inbound. It’s not that it isn’t a huge market (except for cities such as Singapore or Hong Kong); it’s the spend.
Krungsri Bank research estimates that around 160 million domestic trips were made in Thailand in 2017, but they constituted only 35 percent of tourism receipts due to shorter stays and lower spending compared with inbound.
The Australian Tourism Export Council put it more bluntly: “Australians are being urged to holiday at home, but will they spend $5,211 a trip? It’s just not feasible to think most Australians would spend that amount of money on a domestic holiday in order to make up for a $45 billion shortfall.”
The council’s survey shows 48 percent of tourism businesses derive 60 to 100 percent of their revenue from international visitors. More than a third said the return of domestic tourism would make no difference to the desperate state of their viability.
“Let’s put it this way,” said Agoda’s vice president of corporate development Timothy Hughes when asked how profitable the domestic business is, “for the travel industry to be whole and to be at 2019 level again, we need domestic and international.”
But in the absence of international, “if you are trying to work your way out of this crisis, you have to be planning for it to be a domestic business,” Hughes said.
What will be the spin-offs from a coronavirus-enforced migration to domestic travel in Asia?
One of the most fascinating outcomes will be a wider breadth and depth of domestic offerings as online players, who before had to divide priorities among inbound, outbound and domestic markets, can now focus on local tourism.
This will benefit not only domestic travelers now but future regional and international tourists who have been clamoring for unique local experiences and who want their travel dollars to go back into local communities (68 percent of all global travelers surveyed by Booking.com in March).
“Travelers will be looking to support communities and cities through local tours, experiences and local accommodation providers, especially second-city travel, to also reduce overtourism,” said Angel Llull Mancas, Booking.com’s vice president & managing director for Asia-Pacific.
The most authentic domestic products and places are those that locals themselves would buy, which is why the current hyper-localization of offerings by online players is the best answer to-date to meet overseas travelers’ demand for authenticity.
“How locals view their own market is vastly different from how international travelers view the same destination. For example, an international traveler would associate Taiwan with shopping and food, whereas locals would think of Taiwan’s trekking routes and mountain scenery,” said Marcus Yong, Klook’s vice president of marketing for Asia-Pacific. “Covid-19 presents an opportunity for us to widen our offerings. We were aware of the potential, but we had other priorities.”
Before the pandemic, Klook’s priorities were geared towards offerings such as major theme parks and attractions that would do well in multiple markets. “As a result, we centralized these efforts for efficiency. However, a decentralized approach now enables us to capture changing local user behaviors and rapidly launch products that are most appealing to local users,” said Yong.
Digital platforms are able to move fast as they work with data to find out what customers want. When data in April showed 80 percent of searches in Taiwan were related to local outdoor experiences, Klook created products such as oyster picking in Tainan and yacht sailing in Kenting.
Agoda’s GoLocal is also a sales and marketing response to what data is saying, which is travel at present is a domestic business. It tells suppliers that by slashing rates by up to 25 percent, they can capture more of the domestic market. It tells domestic travelers they are getting special deals only available only them. Agoda backed their discounting with investment on coordinated social media campaigns, digital brand activations, video content, PR activities and customer marketing to drive up excitement, said Hughes.
Online travel agencies actually have a high share of domestic bookings. At Booking.com, for example, historically global domestic hotel bookings account for 45 percent of business, said Angel Llull.
“Online travel agencies have always had a higher share than hotels of domestic bookers, except hotels that do proactive marketing and customer relationship campaigns in the local market,” said Chetan Patel, vice president digital & CRM of Onyx Hospitality Group Thailand. “Most do not have the know-how on using technology and marketing to reach customers and are content with OTAs (online travel agencies) driving business to them.”
This reliance is only going to increase — another outcome of players doubling down on domestic travel. For one, it’s because bookings are now coming mainly from digital channels. What’s more, the pandemic is accelerating scores of locked-down customers young and old to go digital. Agoda’s Hughes calls this period “a digitization bootcamp.”
About 79 percent of Agoda’s bookings are now via mobile, compared with 70 percent before. Sister Booking.com too sees an increase in mobile bookings and is focusing efforts on providing customers with “a great app experience,” said Angel Llull. In future, tourists will be using mobile to book every step from pre-trip to in-destination, added Klook’s Yong.
Mark Flower, IHG’s vice president commercial Southeast Asia & Korea, said bookings that are coming in from markets which have opened up such as Korea, Vietnam and Thailand are “absolutely mobile app, direct, loyalty and OTAs.” Forget wholesale and tour operators. “There’s not much business coming through leisure groups, central reservations offices, wholesale, GDS, MICE [meetings]. So relationships with the likes of [Agoda] are key,” said Flower at a recent online Thailand Tourism Forum.
Agoda is there to hold hotels’ hands in navigating the peculiarities of the domestic market. “We do have to sit with partners who are not as used to domestic business as inbound and work with them to figure out [areas such as] product, pricing and packaging,” Hughes told Skift. “The vast majority of luxury properties in the big destinations in say Thailand are used to inbound — think of the German market with its long lead time. We’ve got to help them manage a business that has ultra-short lead times, often one day.”
Hughes is also encouraging hotels to use this time to invest in technology such as cloud-based property management system, property communications technology and supply connectivity. “If you are a hotel owner who is seeing a quiet period, which certainly you are, it’s a chance to think of investments such as improving the connectivity to people like us. The more seamless the connectivity, the more we’re able to support ultra-short booking lead times and the more we’re able to integrate and monetize your F&B sales, spa treatments and the like,” said Hughes.
But a closer relationship between hotels and OTAs worries Onyx’s Patel. “Most hotels have gone into their save-money mode. The marketing budgets have been eliminated or reduced to a trickle. OTAs do not have this limitation as they work on effective ROI and are able to allocate their marketing where they are able to generate revenue.”
He said hotels are leaving too much to chance by not investing in their own marketing, instead paying based on performance to online travel agencies. “Demand will be low for the foreseeable future and OTAs will drive business to your competitors as well. A hotel investing in marketing with the right messaging and offers can take advantage of this lull and capture more business than their competitors,” said Patel.
“We have doubled down on customer relationship management, loyalty, personalization and marketing channels that are effective in domestic markets. There is a huge section of customers who have been burned by a lack of response, refunds and empathy by third parties. They are keen to build direct relationships with hotels.”
But is domestic travel just a short-term strategy or will coronavirus be the before and after marker of its real possibilities?
TripAdvisor’s Lim believes campaigns to stimulate domestic demand may have some lasting effects as travelers start to explore and discover the beauty of their own backyards. “Certain traveler types could find domestic trips just as rewarding as international ones,” she said.
Given that it’s a first in history that the travel business can count only on one market, it’s incomprehensible and regrettable if the domestic market is just transient. The industry could grow a lot bigger, and better, if both domestic and inbound were developed with equal passion.
It seems it’s time to lead domestic out of its shadow as a second fiddle.