America’s red-hot international tourism market is about to get a cold shower, compliments of the economic turmoil throughout Asia.
Travel experts from Guam to Hawaii to the U.S. mainland are warning of sharp declines in travel from South Korea, Thailand and Indonesia, while the annual double-digit growth of Japanese leisure travel to U.S. destinations could be a thing of the past.
“It’s creating some major havoc in Hawaii,” said Garrett Kojima, an analyst with international accounting and consulting firm PKF-Hawaii.
It’s not much better on the mainland.
“I lost a 700-person group from Indonesia,” said Gloria Lan, president of Tour America, a Los Angeles-based tour operator that arranges travel from Southeast Asia countries to the West and East Coasts. She said the group instead opted to travel to Hong Kong, where prices have plummeted.
Both coasts, particularly the New York and Washington areas on the East Coast and the Los Angeles, San Francisco and Las Vegas areas in the West, are major destinations for Asian travelers, according to Lan.
“We are losing a lot of that market because the value of our currency is rising compared to theirs. As a result, people can’t afford to travel to the U.S.,” said Lan. “Asian travel agents are in a panic.”
Economic upheaval accompanied by currency devaluations have swept the Asian countries since last fall. As the dollar has increased in value, it has become more expensive for travelers from those areas to come to the U.S. And once they get here, the visitors find that their money doesn’t buy as much as it used to.
A year ago, 100 Japanese yen were worth 86 cents. By Friday, 100 yen equaled just 76 cents.
South Korea’s won has plunged in value against the dollar, too. A year ago, 750 won were worth 89 cents; today, 750 won are equal to 41 cents.
The drop in the Indonesian rupiah’s value is even more dramatic. A year ago 2,000 rupiah were worth 85 cents; now, they’re worth less than a quarter.
The currency problems aren’t limited to just those three countries. The dollar has leaped 106 percent in value to Thailand’s baht; 68 percent in value to the Philippine peso; 26 percent in value to the Singapore dollar; and 24 percent to the Taiwan dollar.
At stake is more than $90 billion in annual spending in the U.S. as travelers from Japan, South Korea, Thailand, Indonesia and other Pacific Rim countries cope with the sudden drop in the purchasing power of their currencies.
“If (travel to the U.S.) isn’t made more affordable, then we will see a drop of several percentage points in the numbers of Japanese tourists coming here,” said Carlos Tello, head of the Japan Travel Bureau’s office in Las Vegas. The Tokyo-headquartered company helps coordinate travel for many Japanese tourists throughout the United States.
Steep drops in travel already are showing up, according to executives at UAL Corp.’s United Airlines.
United flights between Tokyo and Hawaii lost $15 million during the fourth quarter, compared to earning $10 million in 1996, according to Rono J. Dutta, senior vice president of planning for the Elk Grove Township-based airline.
The yen’s decline in value is at least partially at fault. A year ago, the Tokyo to Honolulu round trip cost 89,000 yen. This year that same flight costs 97,000 yen, or 8.9 percent more in Japanese currency.
The airline already has cut the number of flights between Japan and Hawaii in an effort to contain the losses.
The declines aren’t limited to Hawaii, according to Dutta. Travel between Japan and other Asian destinations on United dropped to $53 million during the quarter from $63 million in 1996, he said.
At Northwest Airlines, the other U.S. airline currently allowed to serve Japanese and Southeast Asia destinations, international travel flattened during 1997 as the currency crisis unfolded. The airline reported that in December, as the crisis was reaching a peak in South Korea, passenger loads dropped 0.5 percent, which translates to thousands of passengers.
The Japanese currency problems are especially worrisome to Las Vegas’ tourist industry. Since 1993, the number of Japanese tourists coming each year to Las Vegas has sextupled from 40,000 to 240,000 in 1997.
“Japan is our No. 2 overseas market,” said Rob Powers, a spokesman for the Las Vegas Convention and Visitors Authority. “One of the reasons is our proximity to the Grand Canyon, which has become increasingly popular among people in the Pacific Rim.”
Since 1993, Japanese leisure travel to the U.S. has grown by 18 to 20 percent a year, according to the Japan Travel Bureau Redbook.
But by this past New Year holiday, normally a big travel period, the bureau was projecting travel to the U.S. mainland would be up only 4 percent. The bureau also estimated severe cutbacks to other popular destinations for Japanese tourists: Hawaii would be up only 1 percent for the 10-day period; travel to Hong Kong would be down 60 percent; and travel to Guam and Saipan, two U.S. island territories in the western Pacific, would rise only 2 percent.
Guam, located 4,000 miles west of Hawaii, is in the eye of the economic storm, according to James Nelson, general manager of the Guam Visitors Bureau.
Visitors contribute $1.5 billion to the U.S. island territory’s economy, Nelson said. Guam is a popular short-hop vacation and shopping spot for many Asian travelers. But this year, Nelson said, surveys show that tourism “will be flat or only show a 1 percent increase.”
Travel from South Korea to the island already is down 33 percent, he said, even though vacation packages can be obtained for $220 for a round-trip flight and three nights in a hotel.
Japanese travel, which has been growing at a 10 percent a year clip, “is going to play a key part in the growth we’d like to see,” said Nelson. A falloff of Japanese travel similar to the South Korean fall would severely hurt island budgets, he said.
Japanese and other Asians have become heavy travelers in recent years because single-family homes and luxury products are frequently too expensive in their home economies, so they spend their discretionary income on travel and shopping elsewhere.
“Even though foreign currencies are getting weaker, our studies show (individuals) will keep overseas travel high on their list of things to do when they start budgeting their money,” said Nelson.
But that propensity for travel might not be enough to help Hawaii, which has seen hotel occupancy on Hawaii’s big island, Oahu, drop sharply during the past year.
While travelers from North America tend to favor Maui or one of the smaller islands, Asian travelers typically remain on Oahu.
“The currency problem has really affected occupancy rates on Oahu,” said Kojima. “We’ve had seven straight months of stagnancy in occupancy rates.”
Normally, Kojima said, tourism increases by about 1 percent a month, or 10 to 12 percent a year.
