Raising the cost of tourism in South East Asia

As tourism in South East Asia begins to recover after long Covid-19 border closures, new government policies are designed to increase traveller spending.

"Sell premium. The more expensive, the more customers. Otherwise, Louis Vuitton wouldn't have any sales." 

In July, Thailand’s Deputy Prime Minister Anutin Charnvirakul advised the nation’s tourism industry to transition away from mass market discounting towards “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 international travel getting back on track, airports like Kuala Lumpur International Airport (pictured) have been seeing increases in tourist numbers. 

Aligning hotel rooms and airline seats with designer handbags perhaps over-scores the point, but the current debate across South East Asia is about how to leverage more revenue from tourism. In essence, how to find new ways for travellers to pay extra. 

The Quest for Quality Tourism 

After the devastating two-year-long economic impact of closed borders, South East Asian governments are placing tourism at the centre of their recovery plans. New Philippines’ 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.” 

Regionally, the debate centres on how to retrieve lost tourism revenue during Covid-19. Meanwhile, governments want to attract new investors to diversify their visitor economies. 

These objectives are directing the discussion is towards “quality tourism” 

Various interpretations are voiced 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 augment average visitor spend. 

With the return of tourists, many South East Asian nations are looking for ways to increase visitor spend after years of limited tourism spend. 

The result of this ongoing quest to monetise inbound tourism will be an increase in the overall cost of travel in South East Asia. This will impact international and domestic tourists. 

Taxing Tourists in Thailand and Beyond 

In Thailand, two distinctive policies are being discussed to bolster tourism revenues.

In January, Thailand’s Ministry of Tourism & Sports announced it will collect a THB300 (around $NZD13) Tourism Tax from all non-Thai arrivals to the country. Although a start date is unconfirmed, the tax should enter into force in 2022. The government says the fees will be used for a new national fund to provide medical treatment for foreign tourists, which was a widely acknowledged financial burden for Thailand before the pandemic. 

In addition, Thailand’s government wants to mandate dual hotel pricing. This would create different room rates for international and domestic tourists. The argument is that it would shield domestic tourists – who kept the travel industry afloat during Covid-19 lockdowns – from sharp hotel rate rises as international travel returns. The travel industry counters that dynamic online pricing would make enforcing such rate differentials difficult and costly. 

Tourism taxes are not new, and they are implemented for various reasons. 

In September 2017, Malaysia introduced a flat-rate RM10 (around $NZD3.50) per-night hotel tax for foreign guests. This is in addition to a ‘city tax’ levied on hotel guests in destinations like Penang and Melaka. The hotel tax was hotly debated. Malaysia’s hotel industry lobbied against being required to collect the fee from guests on behalf of Customs & Excise. Consequently, implementation was repeatedly delayed. 

Earlier this year, Thailand’s Ministry of Tourism & Sports announced it would collect a THB300 (around $NZD13) Tourism Tax from all non-Thai arrivals to the country. Photo by engin akyurt (https://unsplash.com/@enginakyurt?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText) on Unsplash (https://unsplash.com/s/photos/tourism-tax?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText)

Two years later, in July 2019, New Zealand began collecting a $NZD35 International Visitor Conservation and Tourism Levy. This forms part of an ongoing national debate about the future of tourism and environmental protection. The tax revenue is invested into initiatives that restore natural landscapes and species and improve environmental resilience. 

Tourism charges also appear in subtle forms. In July, Indonesia increased the passenger service charge at 19 airports nationwide. The new fees are graded differently for international and domestic flights, but will increase the cost of air tickets. 

Entry Fee Hike at Borobudur 

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

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

In June, Mr Pandjaitan floated plans to increase the entry fee at the ancient Borobudur temple ruins in Central Java. A proposed dual entry pricing model would charge international tourists IDR1.4 million (around $NZD150), and Indonesian tourists IDR750,000 (around $NZD80). 

The fee for foreign travellers was criticised by tourism professionals for being excessive, and potentially prohibitive. It would certainly exclude most backpackers. 

Borobudur temple ruins in central Java, Indonesia. Photo by Steffen B. (https://unsplash.com/@steffen_b?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText) on Unsplash (https://unsplash.com/s/photos/borobudur?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText)

The proposal also raised concerns that Indonesian tourists would be priced out of visiting a prized site of national cultural heritage. The government counters that a UNESCO study recommends restricting visitors to Borobudur to 1,200 per day, and the fees will help maintain the magnificent ruins, which are showing visible strains of over-tourism. 

Premium Pricing for Komodo Island 

A three-and-a-half-hour flight east from Yogyakarta (the nearest city to Borobudur) delivers travellers to Labuan Bajo, gateway to Komodo National Park. Before the pandemic, tourists flocked here to observe the Komodo Dragons, the world’s largest lizard species, 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 include a viewing platform and boat dock. The scale of development was criticised by UNESCO for damaging a dedicated conservation area. 

Developers ploughed ahead, and Indonesia wants to limit visitor numbers to Komodo Island. The mechanism it chose is raising the entry price, from IDR150,000 (around $NZD16) to IDR3.75 million (around $NZD400). 

Officials at Indonesia's Komodo National Park faced outrage earlier this year with a proposal to increase the park's entrance fee by roughly 25 times its current fee. Photo by altraz (https://unsplash.com/@altraz?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText) on Unsplash (https://unsplash.com/s/photos/komodo-national-park?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText)

The new ticket price for visiting Komodo Island, and nearby Padar Island, started on 1 August. It is valid for multiple visits across a period of 12 months, and is rationalized as contributing to the cost of conservation on the two islands. 

Controversy erupted. The new fee does not apply for nearby Rinca Island, which is also inhabited by Komodo Dragons. During a visit by President Joko Widodo, it became apparent that Rinca will remain a mass tourism site, targeting up to 1.5 million visitors annually. Komodo and Padar will be exclusively reserved for high-paying tourists. 

Local communities say they were not consulted and fear the price rise will deter people from visiting Komodo Island and harm small businesses like hotels and restaurants. To emphasise their point,  tourism workers began a one-month strike in early August. 

The stand-off was quickly diffused. Local authorities agreed to retain the previous IDR150,000 entry fee until the end of 2022. 

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

Banner image by Milada Vigerova on Unsplash

- Asia Media Centre