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Daily convention report from ITB Asia

Written by editor

Asia a Major Growth Source for TUI

According to a leading European leisure travel company, Asia and Russia offers a huge growth opportunity for the future.

Asia a Major Growth Source for TUI

According to a leading European leisure travel company, Asia and Russia offers a huge growth opportunity for the future.

Mr. Peter Long, CEO of TUI Travel PLC, speaking at the ITB Asia Convention in Singapore on October 23 said, “We expect to see another 600 to 700 million people traveling from and within Asia over the next five years – and mainly to other Asian destinations.”

TUI Travel, part of one of the world’s leading leisure groups – and the result of the merger between Germany-based TUI AG and the British First Choice – operates primarily in markets at a mature stage of development, such as Europe and Canada. But it sees its future growth coming largely from emerging markets, which it why it is now focusing on Asia and Russia.

“We already have a strong presence in the Asia region,” said Mr. Long, “with brands such as Pacific World, HotelBeds, AsiaRooms, Turismo Asia, TUI China, Aitken Spence, and Le Passage to India.

“Our planned expansion will use these established platforms,” he said. However, TUI also expects online sales to be significant – a segment in which the group has become a market leader in the last few years, despite intense competition from online intermediaries. ”

According to Mr. Long, TUI has an enviable product range (some 200 brands ranging from mass market programs to luxury holidays averaging US$55,000 a head) and market position (it holds number one or two positions in all countries in which it operates).

Mr. Long said TUI also had the advantage of strong vertical integration with tour operations, retail distribution (3,500 travel agencies), accommodation, and seven airlines, with a total fleet of 160 aircraft.

The attraction to customers of a big brand which attracts some 30 million customers a year is that it offers financial protection – “something that has become even more important since the collapse of the UK’s third biggest tour operator, XL” – together with quality assurance, ease of booking, and in-resort support.

Mr. Long said that he expects Asian markets to show different demand patterns from its European sources – there will not be the same interest in mass-market products, for example. The fact that TUI believes most of the demand will be for intraregional destinations also explains why the group has invested so heavily in developing infrastructure in the region.

The TUI boss admitted that the operating environment could be tough in the short term. “The situation is clearly challenging,” he said. “But I have had equally challenging times in the past.” What remains unknown, noted Mr. Long, is how much consumer demand will weaken. He said this uncertainty requires a more flexible approach together with careful planning.

“Fundamentally, I believe that customers do not want to forego their annual holidays,” said Mr. Long, “although they may cut out that [extra] short break.”

As far as European markets are concerned, Mr. Long said that high airfares are currently having an impact on demand for longhaul travel, “But I also think that, in the medium term, Europeans will want to travel to longhaul destinations.”

And that’s where TUI Travel expects to have a strong advantage over its competitors as the group has orders for a number of Boeing 787s, which will operate with 20% less fuel burn. Longer distances will become more feasible and cost-effective to operate, he said.

Positive Digital Storm Brewing

A “positive digital storm” is being created that will bring unprecedented opportunities and power to online travel companies.

That was the assessment delivered by Mr. Philip Wolf, president & CEO of PhoCusWright, a US-based travel industry research company. He told delegates at the ITB Asia Convention in Singapore October 23, that unlike a “perfect storm” which had negative connotations, the imminent “positive digital storm” would allow companies to solve big problems for customers, exploit fantastic advances in technology, and avoid skills-focused decision making and business model preservation.

“Excellent leadership in our industry is defined by those who fuel the storm, and their own cause, by aligning their businesses with the contributing forces,” Mr. Wolf said. “New types of intermediaries are bringing every stage of the travel value chain online, attracting travelers with tools and services they can use before, during, and after their trips.”

In the session entitled “The Global Online Picture,” Mr. Wolf told ITB Asia delegates that the last 12 or so years have not been kind to travel agents. The meteoric rise of online travel coupled with a debilitating erosion of supplier commissions had all the ingredients of a classic recipe for disintermediation.

The number of agency locations has declined and their market share has slipped. Facing significant upheaval in their industry, many in the agency community have had to respond strategically, tactically and – most of all – aggressively, to adapt, survive, and succeed.

Mr. Wolf said that the growth of advert- and referral-based revenue is challenging the dominance of traditional bookings-driven business models. Hybrid business models are appearing, with suppliers and intermediaries alike mixing and matching their offerings to assume new roles in the search-shop-buy process.

“These new ways of searching, shopping, and buying in turn spawn significant shifts in monetization. The transaction itself is no longer the whole story, as innovation in search and shopping tools have made these once-minimized parts of the process much more influential, especially in an uncertain economy,” he said.

Mr. Wolf said that the term “perfect storm” was based on the assessment that the global travel distribution landscape is a free-for-all like never before. Strategies now have to be recalibrated to account for a complete makeover of roles on the industry’s value chain, said the CEO of PhoCusWright, which since 1994 has tracked and analyzed the ways travelers, suppliers, and intermediaries connect around the world.

Mr. Wolf concluded, “Each element in the search-shop-buy triumvirate is undergoing, or poised to undergo, a period of intense innovation, making each increasingly significant, yet interdependent. In fact, searching, shopping, and buying – once distinct terms describing different behaviors – are blurring at a furious pace.”

How Has ITB Asia Been for You?

“I feel very positive about the show overall. We’ve met a lot of new people – the kind of people we haven’t seen before. They’re not really the big boys, but it’s good to see smaller operators and meeting planners. For us, as a new group, it’s all about raising brand awareness and, although I won’t mention any names, I find the quality better than at some other shows.”
– Mohd K Rafin, senior vice president, Park Hotel Group, Singapore

“We felt we had to come and exhibit at ITB Asia because it’s a growing market for us – or several markets. I like the fair because it’s very focused – it’s a real B2B show. So all in all, we have a lot of good first impressions.”
– Mateja Susnik, head of overseas department, KOMPAS, Ljubljana, Slovenia

“We’re a government-owned group representing all Moscow hotels. Our job is to promote them – to create awareness of Moscow in the Asian region – and to invite buyers to come and see for themselves. There might be more opportunities for Russian tour operators, but we are happy given that it’s the first show – it takes time to make an impact.”
– Abesalom Shalutashvili, marketing manager, GAO Moskva, Moscow, Russia

“There’s a pretty good spread of buyers and trade visitors here at the show, as well as a good mix from the corporate travel, incentive, and leisure segments. We exhibit at ITB Berlin, which tends to be very focused towards Western markets. So we were interested in ITB Asia to look at new Asian markets. There are lots of Indians, which is an important source, but not so many Chinese. Yesterday was a very good day and, if today and tomorrow go as well, I am sure we will be back next year.”
– Martin Chua, regional director of sales, Meritus Hotels & Resorts, Singapore

“We are seeing a greater level of interest in Malaysian MICE products and facilities at ITB Asia than at other regional shows in the recent past. I am impressed with the quality of buyers who have shown genuine interest in what Malaysia has to offer. It is a great opportunity for us to display our services and activities – not only to visitors, but to other exhibitors, too.
– Mohd Rosly Selamat, director, Malaysia Convention & Visitor Bureau

“I came from Munich to Singapore just today to attend ITB Asia as trade visitor. I am not surprised that ITB Asia is perfectly organized, and I am very impressed by the show. Kempinski is strongly considering participating next year as a new exhibitor.”
– Christian L Renz, vice president global sales, Kempinski Hotels

Lufthansa Positions Itself as Europe’s Top Carrier in Asia

German national carrier Lufthansa continues to consider Asia as a strong market. “It would be wrong to say that Asia will not be affected by the ongoing financial crisis. The region does not yet feel the full impact of it,” said Mr. Uwe H.W. Mueller, vice president Asia & Pacific Lufthansa. The German national carrier remains the largest European carrier in the region and continues to add new destinations every year. Earlier this year, Lufthansa started new flights to Nanjing and Shenyang in China and Pune in India. “We are the only European carrier serving these destinations, as well as Pusan in South Korea,” said Mr. Mueller.

Lufthansa is also adding more frequencies, looking at serving Asia’s largest cities with double-daily flights. Mr. Mueller pointed out that Lufthansa has been adding a second daily flight, from both Munich and Frankfurt. The most recent addition to Munich’s network has been Singapore. “It gives our customers more flexibility and choice,” Lufthansa’s Asia Pacific boss said.

The airline has built up Munich to be the second-largest hub after Frankfurt. With more European destinations served out of Munich than Frankfurt, he described Munich as an “excellent choice” for Asian travelers visiting Europe. The recently added Munich-Singapore flight also allows European travelers to connect quickly to SIA’s network to Australia, Indonesia, Malaysia, and other Asia Pacific cities.

Lufthansa today serves seven destinations in India, six destinations in China (including Hong Kong), three in Japan, and two in South Korea. In Southeast Asia, the German carrier flies non-stop to Bangkok and Singapore. It also serves Ho Chi Minh City, Jakarta, and Kuala Lumpur.

“Our capacity is very well-adapted to market needs in Southeast Asia,” said Mr. Mueller. “We do not plan to add more frequencies or destinations in the near future to the region.” Lufthansa may, however, boost its capacity to Hong Kong by next year by using a larger aircraft.

The airline is also looking at Japan. “Enhanced air movement at both Tokyo Haneda and Narita airports from 2010 will certainly translate into new opportunities for us,” predicted Mr. Mueller.

Asia’s Hotel Leaders React to Financial Crisis

Six hotel CEOs, senior executives, and owners at the ITB Asia Convention affirmed that it is not all doom and gloom in times of crisis, but that there is room for reasonable optimism.

“There is an emotional reaction to the ongoing financial turmoil and the crisis. I expect that it will soon resolve itself,” said a confident Mr. Apo Demirtas, chief sales and marketing office of the Jumeirah Group.

He and other hotel industry leaders were addressing the Hotel Leaders Forum during the ITB Asia Convention in Singapore, October 23.

The sentiment among the executives was that all hoteliers have to evaluate precisely the impact of the crisis on their businesses, show flexibility and adapt. “There has been a lot of overheating in the real estate and current adjustment was probably necessary,” said Ms. Jennie Chua, president and CEO of the Ascott Group.

All the hoteliers in the panel recognized that times of crisis often present new opportunities. For Mr. Loh Lik Peng, owner of both New Majestic and 1929 hotels in Singapore, as well as for Mr. Yenn Wong, owner of the JIA Boutique Hotel in Hong Kong, Asia’s previous financial crisis in 1997/98 allowed them to venture into the hotel business thanks to the collapse in the real estate market.

According to both Ms. Chua and Mr. Michael Issenberg, chairman Accor Asia Pacific, it is probably a good time for Asian-based companies to look at developments in the US and European markets.

However, they warned fellow hoteliers to expect consolidation in the industry. “There are too many players,” said Mr. Miguel Ko, president of Starwood Hotels & Resorts Asia Pacific. “The financial meltdown will help us to reshuffle our business with six or seven big players emerging afterwards. However, do not get mistaken. It is not necessarily the strongest hospitality companies today which will still be the strongest tomorrow.”

In the current economic climate consumers and business travelers will seek savings. “People will become less ‘showy’ in their hotel choice. They will look for more value-for-money options,” predicted Ms. Chua, an opinion shared by both Mr. Issenberg and Mr. Ko.

Mr. Issenberg predicted that the corporate market will really look twice before booking “showy” hotels. Mr. Ko predicted a downward trend for all hotel segments, especially between the lower level of an upmarket hotel and the upper level of a middle-market hotel. “Nevertheless, all segments will be affected at various degrees” he said.

But the Middle East may be the exception. “We do not see any slowdown in our business in the Middle East,” said Mr. Dermitas. There is still a demand for luxury, and we continue to expand abroad to offer our guests the same level of service and luxury they are used to at our Jumeirah Group properties.”

Most of the panelists predicted a drop in travel lasting at least until the end of 2009. “It will be tough,” predicted Mr. Issenberg, the Accor boss. He noted that travel will contract at a time of room supply increase all around the region.

How could hoteliers then withstand the current storm? “Flexibility is, in my opinion, the best way,” said Mr. Loh of the boutique hotel property New Majestic/Hotel 1929. We must look at packaging our product with added value instead of looking only at lowering our prices.

Another boutique hotel operator, Mr. Yenn Wong of JIA Boutique Hotels, said that service individuality were core values that would help hotels survive.

The Starwood and Accor executives reminded the audience that the hotel business is all about people. “It will also be critical for us to look seriously at salaries,” said Starwood’s Mr. Ko. “We must improve salaries for higher efficiency and should give our staff more autonomy in satisfying customers,” he said.

Mr. Issenberg said there was still potential in certain markets. “Indonesia is a country to invest in as the hotel sector there still remains unexploited.” He added, “Despite some oversupply, Vietnam also remains a promising market.”

Going Mobile: Soon To Be a ‘Do or Die’ Decision for Travel Industry

Mobile phones are now the most pervasive form of technology in Asia and harnessing the new technology available for the mobile platform must be a central part of travel agents’ strategy for growth.

That was the assessment of Mr. Desmond Chong, director of business development and emerging business of Abacus International, a leading travel facilitator in Asia. He was addressing an audience of travel industry professionals during ITB Asia, October 23.

With some 1.5 billion mobile subscribers in Asia Pacific, the sheer penetration makes mobiles a powerful tool for interacting with consumers, said Mr. Chong. The top five countries for mobile subscribers – China, India, Japan, Indonesia, and Pakistan – account for 1.2 billion, or 80 percent, of mobile subscribers in Asia Pacific.

“Currently three billion people in the world have access to a mobile phone and only one billion to a computer,” said Mr. Chong. “With mobile phone users expected to rise to four billion by 2010, it is not difficult to imagine the mobile phone will become the world’s portal to the internet as well as the key to inter-personal communication.”

The development of advanced mobile technology is likely to have the greatest impact in Asia due to leapfrogging, which means developing countries can accelerate their development by skipping over inferior, costly technologies and adopt the most advanced ones. The growth of mobile in the region is a text-book example.

In the two biggest developing countries, China and India, it can be a struggle to find a fixed line phone connection, however many people have cell phones. On a per capita basis, computers are also scarce with fewer people having access to a home computer than wi-fi-capable handsets. In India, for example, many people get their first internet access on a mobile phone instead of a computer.

“Travel is by its very nature mobile, and travelers benefit from real-time information and increased simplicity in their travel arrangements,” Mr. Chong said. “Most business and leisure travelers currently view mobile as a method to receive real-time updates and information, such as flight delays, gate information, and directions.”

Mr. Chong highlighted some of the challenges of true mobility in Asia. Chief among these is market fragmentation which complicates payment and raises the cost of transactions. However, he believes that the travel industry has the opportunity to drive innovation in the mobile marketplace as consumer and corporate needs are very much aligned for the sector.

Investments in Online Asia-Pacific Now Paying Dividends

As bookings in Europe and USA begin to stall for online travel agencies, companies such as Expedia, Zuji/Travelocity,, and Priceline’s Agoda have found that their investments in Asia-Pacific markets are paying off.

“Asia-Pacific has become a huge part of the story for our group as a whole,” said Mr. Adrian Currie, CEO of, the Asian hotel reservation service acquired by “Bookings are growing fast, and they’re a significant piece of the pie now.”

Mr. Currie was one of four leaders of major online travel firms addressing an online “Ideas & Execution” session at the Web in Travel event at ITB Asia on October 23.

Speakers said that Asia-Pacific region includes online economies at opposite ends of the development spectrum. Australia, Japan, and South Korea have advanced digital infrastructures with mature e-commerce and online travel sectors. Countries such as Vietnam, Indonesia, and Malaysia are less developed but fast-growing. However, it is the massive travel markets of China and India that are driving regional growth.

“The Asia-Pacific market is in some ways more lucrative because travelers tend to book hotel rooms and airline tickets together,” said Mr. Scott Blume, CEO of Zuji, Asia Pacific’s leading online travel company. “Travel agencies can build higher profits into such sales by securing wholesale prices from hoteliers and airlines and marking up these vacation packages.”

Mr. Robbie Cooke, CEO and managing director of, said the online portal, which was launched in Australia in 2000, quickly became known as the online marketplace for hotels’ distressed inventory.

“We pioneered selling discounted accommodation based on hoteliers’ live and up-to-date inventory. By only selling a week ahead, and later 14 days ahead, we got great rates from the hotels.” Mr. Cooke added, “Our innovative way of displaying room rates gave travelers and the hotels an easy way to check all available prices, up-front.”

Mr. Jens Uwe Parkitny, managing director, distribution of Expedia Asia Pacific, which has been successful in building its foreign operation from the ground up, had a different approach.

“Expedia’s game plan was to put more supply teams and market managers in the market to provide consultancy services to hotels. Building supply relationships in the region is key to the consumer value we deliver, and it’s also important to match demand and supply,” said Parkitny.

New ITB/IPK World Travel Trends Report Due in November

TUI Travel’s CEO Peter Long says he is confident that the Asian region will generate hundreds of millions of new outbound travelers within the next five years. But for the time being, according to the respected IPK International, founders and producers of the World Travel Monitor, Asia accounts for a relatively modest 17% share of the total worldwide outbound trip volume of 640 million.

More significantly, growth so far in 2008 has been below expectations – especially from key source markets such as China, South Korea, and Japan, which recorded an outbound decline for the first eight months of the year.

An update of Asian and other outbound market trends will be released in November 2008 by ITB in the World Travel Trends Report, a joint publication from Messe Berlin and Munich-based IPK International. The update will be published after the annual World Travel Monitor Pisa Forum, November 6-7.

Last year’s World Travel Monitor suggested that of total Asian outbound trips in 2007, 75% were of four nights and longer, while 25% were short breaks of one to three nights in length.

Two thirds of all trips were holidays, with 24% being visits to friends or relations (VFR) and travel for other personal reasons, and 11% business and MICE trips.

The favorite types of holidays for Asian outbound travelers involve touring to different destinations (44% of the total), while 13% are city trips/breaks and 13% sun and beach holidays.

The World Travel Trends Report will be available to download during the week beginning November 17 from ITB Berlin’s website ( under “Press Services”.

About ITB Asia

ITB Asia is taking place for the first time at Suntec Singapore on October 22-24, 2008. It is organized by Messe Berlin (Singapore) Pte, Ltd. in conjunction with the Singapore Tourism Board. The event features more than 6,500 exhibiting companies from the Asia-Pacific region, Europe, the Americas, Africa, and the Middle East, covering not only the leisure market, but also corporate and MICE travel. It includes exhibition pavilions and tabletop presence for small- and medium-sized enterprises (SMEs) providing travel services. Exhibitors from every sector of the industry, including destinations, airlines and airports, hotels and resorts, theme parks and attractions, inbound tour operators, inbound DMCs, cruise lines, spas, venues, other meeting facilities, and travel technology companies are all attending.