• This report was undertaken to assist the Australian tourism industry better understand some of Australia's increasingly important Asian inbound markets.

• The report provides essential and up-to-date background information and data on five Asian countries: Indonesia, Thailand, Taiwan, Korea and Japan. I undertook field research in these countries in late 1995.

• I would like to acknowledge the support of The University of New South Wales, Allders Duty Free and I.D. Tours South Pacific for partly funding this research.

• Different Asian peoples tend to concentrate in different destinations within Australia, often for reasons quite separate from the inherent appeal of those destinations. Air routes and the concentration of racial groups in particular cities (e.g., Koreans in Sydney) are two such reasons.

• Travel patterns within Australia differ, sometimes markedly, in such things as usage of hotels vs other types of accommodation, holiday vs VFR travel, seasonality, spending patterns and desired experience in Australia.

• Factors affecting outbound travel include the degree of overseas travel experience, the outbound travel distribution system, degree of independence desired while travelling, and government policy.

• Consumer preferences vary. Indonesians place far less emphasis on luxury accommodation than Thais, though both want to experience western lifestyles; Thais outdo even the Japanese as luxury-brand shoppers, while Taiwanese are much more interested in local goods; Koreans are far more adventurous and independent than Japanese.

• Outbound travel markets in Asia are growing quickly, fuelled by rapid economic growth and an expanding middle class. The Australian Tourist Commission has been successful in generating high awareness among consumers in all five markets examined, as measured by 'most preferred destination' surveys. However, as seen in the case of Japan, transforming preference into intention is immensely difficult.

• Australia's competitive position in key Asian markets can be measured by its market share compared to other major western destinations. In Japan, Australia has lost market share over the past three years, but so too have most of our western competitors. Market shares in Korea, Taiwan and Thailand have all risen during the 1990s.

• Australia is by far the most active Western country promoting itself in Asia. In contrast, North America and Europe, have shown little interest to date. This situation will change once these two regions wake up to the potential of the Asian holiday traveller. When they do, Australia is in danger of losing market share.

• The Indonesian, Thai and Japanese markets are dominated by a small number of large outbound agents; Taiwan and Korea are more fragmented. Many Indonesian, Thai and Taiwanese outbound agents tend to use Chinese-owned inbound operators in Australia.
  Korean wholesalers use only Korean inbound operators.

• Indonesia has enormous potential as a major inbound market for Australia for three reasons: its fast-growing middle class in a population of 195 million; its proximity to Australia; and the synergy that exists between student travel to Australia and flow-on VFR and holiday traffic (Australia is now the No.1 destination for Indonesians wishing to study abroad).

• The market environment differs significantly across the outbound travel markets. Indonesian outbound is trade driven and Chinese dominated. The Taiwanese and Korean markets are price driven with consumers having little understanding of product quality. The Japanese market is increasingly consumer driven.

MA will, of course, differ according to the circumstances of each individual tourism enterprise and organisation. These circumstances include, among other things, financial capability, geographical location, type of business, scale of business, and access to critical market information.

The dimensions listed can be regarded as one approach to evaluating the attractiveness of particular markets for specific participants in the inbound tourism industry. They are presented here for the purpose of stimulating debate into the most useful means of assessing the profitability and accessibility of different inbound markets. (Only the three largest markets investigated are included in this discussion.)

The size, orderly distribution structure and product-quality consciousness of its consumers continues to make the Japanese market one of Australia's most commercially attractive inbound markets. Though Australia's market share out of Japan has slipped in recent years, Australia has achieved a special place in the minds of the travelling Japanese public as an attractive and safe destination. Arguably the biggest hindrance to continuing high growth from Japan is the high cost of airfares. Until, or unless, prices come down, Australia will fail to be price-competitive with most other destinations competing for the Japanese traveller.

Changes in the structure of Japan's outbound industry and in the consumer needs of its overseas travellers have created new opportunities for Australian suppliers to enter the Japanese market. Gone is the traditional outbound market dominated by a few large wholesalers holding enormous bargaining power. The environment is now intensely competitive; traditional mega-wholesalers carrying bloated staff levels and other massive overheads such as Kinki Nippon Tourist (KNT) and Nippon Ryoko (NTA) are facing hard times.

At the same time, there has been a profound shift in consumer sentiment in Japan toward value-for-money consumption. Travellers are also more experienced, resulting in a shift in demand away from all-inclusive packages toward FIT travel. This ostensibly opens up opportunities for Australian suppliers to capture more of the Japanese market.

The reality is different however. Wholesalers responded to the growth in FITs by creating so-called 'skeleton' packages (with air and hotel components only). The result is that there has been virtually no drop in the percentage of Japanese buying package product over the past three years, according to JTB figures. Further, in 1995, 72% of Japanese visiting Australia bought a holiday package while 13% bought a group tour through a wholesaler. In other words, 85% of all Japanese visitors bought their product through wholesalers. In short, the FIT market still falls within the control of the wholesalers and their inbound operators in Australia.

There has been a rise in the number of companies providing no-frills package tours and discount air fares aimed at Japan's rapidly expanding budget travel market. The most remarkable example is the exclusive outbound wholesaler/retailer, H.I.S., which ranked second in declared income in the 1995-96 financial year. Its tour programs are more creative, flexible and less expensive - and their marketing more innovative - than the traditional wholesalers such as JTB. Though their rapid rise affords new opportunities for suppliers to break into the Japanese market, the typical H.I.S. customer is FIT-oriented with little need for expensive add-ons in package programs.

Many Japanese travellers will still pay for a quality tourism product or experience. Demand for luxury-brand goods may also be on the rise following the purse-string tightening recession from 1991-1995.

Japanese wholesalers appear to be transferring more decision-making powers to their Australian inbound operators. This increases the importance for suppliers of developing solid relationships with local inbound operators, although many large-scale operators still need to visit Japan at least once a year to maintain contacts with heads and planners in wholesalers' Oceania divisions.

Japanese tourists continue to concentrate in NSW and Queensland. These two states have fought for the Japanese market share throughout the 1990s, with the other states "picking up the crumbs"; eighty-three percent of visitor nights in 1992 were spent in these two states compared to 80% in 1995. Sydney and Gold Coast accounted for 60% of Japanese visitor nights in 1992, the exact same figure as 1995.

KOREA

The good news is the remarkable volume being generated out of Korea. Australia's Korean market grew by a factor of twelve from 1990 to 1995 (14,000 to 168,000). Korean travellers and the Korean outbound industry are on a steeply rising learning curve about overseas travel; the outbound market was liberalised less than eight years ago. As a result, the Korean travel industry - and its trade customers in foreign destinations such as Australia - are experiencing growing pangs.

For many Australian operators volume may be the only good news about today’s Korean market. For mass-tourism operators such as Qantas, Sea World and others, volume may be enough. For the great bulk of tourism operators in Sydney, for example, the Korean market has been a financial minefield. Incidentally, this problem extends to Korean residents operating restaurants and shops frequented by Korean tourists. Many operators now will only accept Korean tourists if payment is received beforehand.

The two critical problems in this market are its price-driven nature and the outbound agents' total reliance on Korean-owned inbound operators, many of whom are 'fly-by-night'. Blame for the price-driven nature of the Korean market can be apportioned among three groups: the outbound agents, Korean-run inbound operators, and the travellers themselves. It is too simplistic to blame just one of these groups. For example, many Korean travellers are choosing an overseas trip based on price alone - the destination and the program contents are of secondary importance.

Korean outbound agents will deal only with Korean-run inbound operators overseas (with the possible exception of Canada). No one knows the exact number of Korean inbound agents in Sydney on any given day, but 30-40 would be a reasonable estimate. Most inbound operators must rely on commissions from shopping outlets to compensate for low- or under-priced land 'packages' quoted to outbound agents.

It should also be mentioned that the national characteristics of Koreans differ somewhat from that of their Asian neighbours'. Despite being physically alike and geographically adjacent, Koreans differ in many respects to Japanese. Korean shoppers, for example, are known for their aggressive behaviour.

Despite the serious problems in the Korean market, it would be foolish to ignore it completely. There are signs of change. The Korean traveller is spending more on shopping while in Australia (now third highest after the Japanese and Indonesians) and spending a greater percentage of time away from Sydney. Australia enjoys a reputation in Korea as a 'paradise': abundant natural attractions and open space are enormous drawcards. Some Korean wholesalers, perhaps modelling themselves on Japan's JTB, run highly professional organisations and claim to emphasise, wherever possible, quality in their offer of tourism product. As Koreans gain experience of overseas travel, it is likely that their willingness to pay for a better quality of tourism product will increase.

TAIWAN

Taiwanese are predominantly package and group purchasers. Though FIT growth is slow it will evolve over time; one large wholesaler believes English-speaking FITs presently prefer Hawaii, Phuket and the Maldives to Australia. The incentive market has good potential for Australia (Amway sent 1800 to Australia in 1995). Australia is viewed as attractive place for children's education or family migration.

The Taiwanese travel trade is loosely regulated with unique payment systems and many unlicensed travel agents outside of Taipei. Wholesalers rely heavily on their network of independent sub-agents for upward of 75% of business. Shopping commissions and incentives from airlines are the main revenue earners for wholesalers. The wholesalers are prepared to lose in the off-season in order to gain large seat allocations from airlines in peak seasons such as Chinese New Year. The larger retail travel agents enjoy strong market power in sharp contrast to retailers in Japan or Korea. A small number of Taiwanese wholesalers are linking into the Internet; some wholesalers and large retail agents are looking to contact suppliers directly through the Internet rather than rely on land operators.

The Taiwanese traveller appears to have little appreciation of product quality. Few would understand, or care about, the difference between a 4-star and 5-star hotel. Many nationals travelled to Hong Kong for their first overseas trip. Half of Taiwan's overseas travellers each year go to Hong Kong (many on their way to China) and this market is cut-throat. The Taiwanese traveller will also travel at the last moment; request for a week's leave a couple of days beforehand is reportedly not unusual. There have been complaints about the attitudes and behaviour of Taiwanese customers in hotels and shops in Australia.

Growth in Taiwanese travel to Australia has been slowing since mid-1995 and there are few signs of improvement. Taiwanese outbound agents appear to prefer Chinese-run land operators in Australia. Despite the fact that the Taiwanese outbound travel industry is already seventeen years old (having been liberalised in 1979), the existence of price-cutting and lack of consumer knowledge about product quality raises the question of how long it will take before the market matures. For that reason, the medium-term attractiveness and profitability of the Taiwanese market for the Australian tourism industry is questionable.

INDONESIA

Indonesia is expected to be Australia's second largest Asian market after Japan by 2002 (Tourism Forecasting Council projections). Indonesia has one of the fastest growing middle classes in Asia; some commentators suggest its annual growth approaches 50%.

The 1995 International Visitor Survey data released by the Bureau of Tourism Research (BTR) reveal some interesting features of the Indonesian market: repeat visitation is very high (52%); travel for education purposes is the highest among all our inbound markets (13%), Australia being the No.1 choice for Indonesians studying abroad; Indonesians rely more on information about Australia from friends & relatives than any other Asian market; only 12% of all visitor nights were spent in hotels; Indonesian package tourists spent more in Australia than any other tourists (including the Japanese) while non-package Indonesians spent the second largest amount (after Koreans); Indonesians spent 13% of all visitor nights in 1995 in country NSW; almost a third of Indonesians enter and leave Australia through Perth.

Indonesia’s outbound travel industry regards the Australian Embassy’s visa section in Jakarta as the most ‘customer-oriented’ of all embassies. The visa section’s contribution to travel to Australia has been recognised by the Australian Tourist Commission which gave the Embassy a special award in 1995 for ‘services to Australian tourism’. The outbound industry is dominated by Indonesian-Chinese, in terms of outbound agents and overseas travellers (reportedly more than 50% of Indonesians leaving Jakarta are ethnic Chinese). Seventy-percent of the outbound market is controlled by some ten large agents.

Indonesian travellers want to experience a western culture in Australia, escape the polluted and chaotic traffic atmosphere of Jakarta, and enjoy nature and clean air. They appear to place less emphasis on luxury hotels.