• Asian destinations are still value-for-money for European travellers
• Pricey airfares and limited air capacity are the biggest obstacles for travellers
• China’s reopening may affect the rates and availability for the European travellers

Bookings to Asia are looking healthy for 2023, according to European tour operators, but air seat capacity remains the main concern for the market to reach pre-pandemic levels.

The continent has bucked gloomy predictions last year following the Ukraine war and its ensuing energy crisis. Wall Street bank Goldman Sachs expects the euro zone economy to grow 0.6 per cent this year, compared with its previous forecast of a contraction, thanks to a fall in natural gas prices and the reopening of China’s borders, according to a Reuters report.

“Bookings are back in full swing and this makes us feel rather confident for this year,” said Holger Baldus, managing director of Marco Polo Reisen.

“The yearly holidays are a very important part of the German lifestyle. After nearly three years of the pandemic, customers obviously don’t want to abstain from this highlight of their year,” he said.

Stephan Roemer, founder of Tourasia, a Swiss tour operating company which also operates in Germany and Poland through subsidiaries, is seeing “excellent figures” coming from the UK, France and Switzerland.

Flight demand is high
But getting more growth is difficult.

“All flights from Europe to Asia are packed to the fullest; there is simply no more capacity,” said Roemer, who is also CEO of Thailand-based Diethelm Travel Group.

“Germany appears to us a bit slower (than the UK, France and Switzerland), again because there aren’t enough flights and there might be a certain amount of reluctance because of inflation,” he said.

According to IATA, international bookings for air travel in the UK were back to 80 per cent of 2019 levels in 2022, and more than 70 per cent in Germany.

This was a significant step up from 50 per cent of 2019 level for 2021, and 42 per cent for 2020, said a Centre for Aviation (CAPA) report. CAPA conjectured in late October 2022 that a return to 2019 levels of capacity might not occur in Europe until 2024 or 2025, given “operational constraints and economic concerns”.

TUI Group also reports a “promising booking development” for winter and summer for Asia. Spokesperson Anja Braun, however, rued that flight limitations, which have shored up air fares, have “slightly” dented Asia’s competitiveness.

“Asia has attractive pricing for accommodation compared with other longhaul destinations, but longhaul flight prices are difficult to compensate,” she said.

Thailand is the number one Asian destination for Europeans. Europe, including Russia, accounted for 6.7 million tourists to the kingdom in 2019, Thailand’s National Statistical Office data shows. The pandemic shrunk the European market to Thailand to 2.1 million in 2020, and just 251,000 in 2021. Still, that 2021 preliminary figure represented nearly 60 per cent of all arrivals in Thailand in 2021, as travel restrictions prevented Asians and Chinese – the bulk of the kingdom’s arrivals – from travelling.

The top five European sources for Thailand are Russia (1.5 million in 2019), the UK (993,000), Germany (853,000), France (745,000) and Eastern Europe (559,000).

“Demand for Asia was pretty low until late summer 2022, mostly because of travel restrictions that were still present in Asia. Since then Asia has been coming back at full speed, however, flight availability continues to be the major problem,” said Marco Polo’s Baldus.

He added that most Asian destinations are price competitive “as long as we can secure flights at reasonable fares”.

“Asia is mainly competing with the Caribbean, for instance, the Dominican Republic. It lost significant market share to the Caribbean during the pandemic, as travelling there was much easier and less bureaucratic. Ever-changing rules in a number of Asian countries during the pandemic made travel agencies reroute demand to destinations that guaranteed their income and posed much less operational problems,” he said.

Popular destinations
As to which Asian destinations are popular now, based on forward bookings, TUI’s Braun said the Maldives is topping the sales chart, thanks to its “specials and offers”, while Thailand and Indonesia “are picking up now”.

Christiane Thoma-Ratnasiri, senior product and contracting manager for TUI and Airtours brands for India, Nepal, Indochina, Myanmar, Hong Kong, Greater China, Taiwan, South Korea and Japan, sees a trend for longer stays in Cambodia.

“Cambodia’s average length of stay was 3.2 stays but now we are seeing long stays of 10 to 14 days in Siem Reap, which are really good value bookings for our hotel partners. I believe Cambodia is benefiting from its move to be the first Indochina destination to reopen borders for tourists,” said Thoma-Ratnasiri.

On the other hand, Laos is still suffering from being the last to reopen.

“Laos is a niche product with low bookings, but now bookings have hardly returned and I think it will take a long time for it to get back to normal,” she said.

Vietnam is picking up day by day but figures are still behind pre-Covid levels.

For Marco Polo, Japan is on fire. “Since its re-opening in August/September, Japan has seen total recovery and will enjoy a boom in 2023 if flight capacity improves,” said Baldus.

And it seems that Europeans are not cutting back on spending.

“We are seeing higher average travel budgets than pre-Covid,” said Tourasia’s Roemer.

“Asia is extremely competitive, in particular Thailand, Indonesia and Sri Lanka. Hotels are still giving high discounts for early birds. Moreover, most Asian currencies have lost in value to the USD or CHF, which makes costs even cheaper,” he said.

Travellers from China dominate Asian market
But China’s faster-than-expected travel reopening from January 8 has raised the question whether a surge in demand in Asian destinations that are popular with Chinese travellers may put a squeeze on rooms availability and jack up rates in some of those places.

Thailand is the top Asian destination for Chinese travellers, welcoming 11 million of them in 2019. Japan, Vietnam, South Korea and Singapore are next.

“Demand of the Chinese market defines the availability for the EU,” said TUI’s Braun. This is particularly for the late buying market, which requires good availability until shortly before departure, she said.

European airlines will not reinstate their capacity as quickly as the Chinese counterparts, in part due to operational constraints posed by access to Russian airspace, said Mayur Patel, head of Asia, OAG Aviation.

“For those flights, this can add up to two hours’ additional flying time in each direction, which can increase operational costs due to higher fuel prices. In turn, Chinese carriers will have an upper hand given their access to Russian Airspace. This will increase demand to Europe for Chinese travellers as China resumes package tours,” he said.

Nevertheless, Patel said additional seat capacity growth from Europe to South-east Asia will continue, “given the high confidence level in longhaul travel from European markets and Asia’s wide variety of destinations and tourism product offerings”.

In short, the conversation in 2023 has shifted, from how to fill airline seats and rooms, to how to find them.

That, augurs well for the industry to return and even exceed pre-pandemic levels.