Go East

Meetings & Conventions: Go East - July 1998 Current Issue
July 1998
Go East

Asia's economic crisis has a silver lining: lower prices for groups

BY DAVID GHITELMAN

EAST ASIA has long enjoyed a reputation as a shopper's paradise. Now, for the first time in a great while, hotel rates and trans-Pacific airfares are among the available bargains. And meeting and incentive groups are starting to snap them up.

A little more than a year ago, the Asian economic miracle appeared nearly unstoppable. Countries that had only recently emerged from underdevelopment were building the world's tallest buildings, not to mention some of its most modern convention centers and efficient airports. Even the handover of Hong Kong from British to Chinese rule on July 1, 1997, an event some were convinced would seriously damage growth both in the former crown colony and in the region, produced hardly a ripple. But, as the world nervously watched a final display of post-imperial pomp at the newly expanded Hong Kong Convention and Exhibition Centre, a threat to regional prosperity was emerging several thousand miles away.

In Bangkok, the Thai government was desperately trying to prop up the national currency, the baht. On July 2, just one day after the handover, the Thais gave in, the baht began its free-fall on the world's currency exchanges, and in just a few months the fragility of the entire East Asian economy became painfully obvious. The financial woes that started in Thailand spread quickly to its Southeast Asian neighbors - Indonesia, Malaysia, Singapore - and then gradually northward, battering Hong Kong along with the mature, strong economies of Japan and Korea.

In Indonesia, the collapsing economy produced rapidly escalating political chaos until, early this past May, the U.S. State Department asked Americans to avoid "non-essential travel" to the strife-torn nation. Elsewhere in the region, however, the political systems appear to be more resilient than the economic ones. Many observers predict that the economic situation will not worsen, although few expect significant improvement before 2000.

For meeting and incentive planners, the result is top-notch destinations at bargain prices. Fueled largely by currency devaluations, the costs of hotel rooms, meeting space, food and beverage and, of course, extracurricular shopping have plummeted 30 to 45 percent in Thailand, Malaysia, Singapore, Korea and Japan. In Hong Kong, where the currency, pegged to the U.S. dollar, didn't weaken, hotels, restaurants and stores have cut prices on their own.

And the airlines, particularly Asia-based carriers, have sought to encourage business by cutting fares. Thai Airways International, for example, slashed prices 30 to 40 percent across the board.

Bargain Bazaar
Meeting and incentive groups are already responding to the better prices in East Asia, at a time when U.S. suppliers have been steadily increasing prices as occupancy rates climb to record levels. Client inquiries about East Asia are up about 20 percent this year, says Jane Schuldt, president of Minneapolis-based World Marketing Group, a meeting and incentive travel planning firm. The most popular destinations, she reports, are Singapore, Malaysia and Thailand.

Even Singapore, Asia's top convention destination, saw an 18 percent drop in visitor arrivals in the first quarter of 1998. The losses are from Asian business, which represents 70 percent of all visitors, says Yeo Khee Leng, chief executive of the Singapore Tourism Board. Earlier this year, before civil unrest escalated in Indonesia, business travel to Singapore actually increased by about 15 percent, he said.

Singapore, Malaysia and Thailand are also where Pan Pacific Hotels and Resorts is seeing "the first positive signs" of increased bookings from U.S. groups, observes Fred Leuthold, New York City-based regional director of sales for the Japanese-owned, Singapore-headquartered chain. "Some U.S. meeting planners are looking to go to more value-driven destinations," he says. For example, rates at Pan Pacific's 291-room Glenmarie Resort, 20 miles from the Malaysian capital of Kuala Lumpur, run $75 to $85.

Bangkok and Hong Kong are the East Asian cities that U.S. incentive groups are booking most heavily, according to Steven Goodling, the Los Angeles-based director of North American marketing for Shangri-La Hotels & Resorts. "You can get a five-star hotel room for under $130 a night in Bangkok," he says. "In Hong Kong, you can get a room with a harbor view in a five-star property for less than $250. That's a good deal." And the deals are being snapped up quickly. Goodling's office booked three major Bangkok-bound incentive movements in the first three months of 1998 - about equal to the Thai business he handled in all of 1997.

In Korea, room prices are down as much as 50 percent, with the flagship Seoul properties of such upscale local chains as the Shilla and Hotel Lotte charging between $120 to $140 a night. To make planners better aware of these bargains, the Korea National Tourism Organization is sponsoring more site inspections, says Fort Lee, N.J.-based public relations manager David Kim. Planners who want to pay their own way - and who are immune to jet lag - can take advantage of a package assembled by the tourism organization, Seoul-based Asiana Airlines and Lotte that for $699 offers roundtrip airfare and a one-night stay in Korea.

In Japan, where the economy had been stalled even before the collapse of the Thai baht, prices have come down 50 percent in the past three years, says Bruce Kafner, the New York City-based director of the Japan Convention Bureau. "Hotel prices are now comparable with hotel prices elsewhere in the world," he notes.

To make Japan still more attractive to the attendees of international conferences, Japan Airlines and Pacific Creative Services, a Tokyo-based ground operator, have put together a package - including roundtrip air, four nights accommodation, full daily breakfast and airport transfers - that starts at $1,330 from the U.S. West Coast and $1,550 from the East Coast. U.S. convention planners can also bargain with individual convention cities for price reductions on convention hall fees and coordinated citywide hotel discounts, advises Kafner. "Conventions take a long time to nurture," he says, "but we are seeing increased interest from association meeting planners." To heighten that interest, the Japan Convention Bureau will pay the way for qualified planners to attend early December's Japan Convention Mart in Tokyo.

Lingering Concerns
Not that booking in an economically troubled region is without its potential problems. The situation in Indonesia, where angry student riots have been met with violent government suppression followed by considerable rioting and looting, could scare aware U.S. planners. East Asia hospitality industry insiders say that it shouldn't. "What's happening in Indonesia is staying in Indonesia," comments Shangri-La's Goodling. "It is a sad thing that it is occurring, but it is not spilling over."

Another concern is that plummeting occupancy rates will force hotels to reduce their staffs and diminish the extraordinary service for which the region is famous. Hong Kong, for example, has already seen dramatic staff reductions at several premier properties. In May, the upscale, 889-room Excelsior Hotel, part of the Dutch-owned Golden Tulip chain, dismissed 80 of its 800 employees (despite an occupancy rate of 80 percent) and became the sixth major Hong Kong hotel to reduce its payroll.

World Marketing Group's Schuldt, however, believes most meeting planners and their attendees won't feel ill-served. "Service may suffer in East Asia as properties that are operating at lower occupancies have to let staff go, but that will only bring them down to the standard of the best hotels elsewhere in the world," she says. "The normal traveler won't notice any difference. Only those of us who have been spoiled by the high level of the past will be aware."