Real Money's Alex Frew McMillan is meandering across Southeast Asia, a sun-dappled, balmy region dotted with tens of thousands of islands, mile upon mile of beaches, home to stylish villa resorts.
“As a scuba diver, I have spent many happy hours in silent meditation drifting across reefs that explode with fireworks of soft-coral color, a marine sky dashed by flashes of reef fish,” McMillan wrote recently in Real Money. “The Coral Triangle has the world's greatest marine biodiversity.”
With COVID largely in check, island life has reverted to traditional rhythms, fishing and rice farming.
“The industrial zones around the region's capital cities hum with factories that are back in action,” McMillan noted. “But millions of travelers remain absent, robbing these tourism-heavy countries of a key source of income. While Southeast Asian nations are in quick step opening to international travel here at the end of the year, recovery is perilously slow.”
Part of the problem derives from a simple concept -- time.
“Locking down borders happened quickly last year,” McMillan said. “Opening them back up comes in stages. But the resumption of travel takes planning and time, a lot of time, meaning Southeast Asian airlines, airports, hotel chains, convention centers, casinos, restaurants and all the supply chains that support them will remain depressed.”
That means trouble for regional currencies.
“The Thai baht, Malaysian ringgit, Indonesian rupiah, Philippines peso and Singapore dollar will face sustained pressure, causing problems for any company trying to service offshore debt,” McMillan added.
Now there's now a bit of a race between Southeast Asian nations to open back up to foreign travel.
Thailand has been an early mover, with almost total opening of its borders as of Nov. 1, and no surprise.
“It got 18% of its entire economy from tourism in 2019, according to Statista, an enormous share. Households that lose an entire fifth of their income would end in penury,” McMillan said. “Thailand's tourism share plunged to 6.8% in 2020, and I'm surprised it hit that, to be frank.”
Despite its almost-full reopening, Thailand will hit only 4.9% of normal travel conditions by the end of this year, based on the TRIPTracker.
“Singapore fares a little better, back to 6.3% of normal travel numbers by year-end,” he added. “Malaysia will likely see only 1.9% of normal visitation by the end of this month as it starts a pilot test for vacation travel to the resort island of Langkawi and opens full air travel with Singapore.”
Thailand's leadership at first stated that they wanted to see a 70% vaccination rate before they opened the borders,” McMillan said. “But they scrapped that idea when it proved hard to achieve, and Prime Minister Prayuth Chan-o-cha said the country would forge ahead regardless because it didn't want to be left behind by competing travel destinations in Asia. The United States is one of the 63 nations it now approves.”
Right now, tourism-linked business owners will take any visitor they can get.
“It will be well into 2022 and perhaps 2023 before significant numbers of travelers return,” McMillan noted. “Three years is a very long time for a travel-linked business to survive on little to no income. So when international visitors return, it will be a very different Southeast Asia those arrivals see.”