Ukraine crisis clouds Southeast Asia’s fragile tourism recovery

Bali, Indonesia – Travel industry figures fear the war in Ukraine could derail the much-anticipated recovery of tourism-dependent economies in Southeast Asia just as COVID-19 travel restrictions are finally being lifted across the region.

The Philippines, Laos, Cambodia and Thailand are now open to vaccinated travellers, albeit with costly and cumbersome protocols. Indonesia recently announced it would restart quarantine-free travel in Bali by March 14, while Vietnam plans to reopen to tourists on March 15.

The most recent World Tourism Organization (UNWTO) Panel of Experts’ survey found nearly two-thirds of travel professionals expected their fortunes would improve this year on the back of easing border restrictions and positive data from 2021.

Global tourism receipts for 2021 reached $1.9 trillion, up 19 percent compared with the previous year, according to the UNWTO. Overall global passenger traffic improved eight percentage points, with demand down 58 percent compared with 2019, according to the International Air Transport Association – although the Asia Pacific’s recovery lagged other regions.

But the war in Ukraine, sanctions against Russia and airspace restrictions have dampened projections in a region where Russians became the largest and most spendthrift group of visitors for many top destinations during the pandemic, displacing Chinese unable to travel due to their country’s strict border controls.

The fallout is already being felt in popular destinations such as the Thai resort island of Phuket, where Russians account for 51,000 of the 278,000 foreigners who visited the island between November and February, according to the Tourism Authority of Thailand.

“We have been speaking to many hoteliers that are reporting a lot of cancellations because of reduced air traffic,” Bill Barnett, director of C9 Hotelworks, a consultancy in Phuket, told Al Jazeera.

Gary Bowerman, a travel analyst based in Kuala Lumpur, said Russian visitors have been a priority market for destinations including Thailand, Vietnam, and Indonesia’s Bali since the decline in Chinese tourists.

“So for sure the war will affect those countries’ re-openings,” Bowerman told Al Jazeera.

Russians have accounted for almost one-fifth of tourists in Bali during the pandemic [Courtesy of Ian Neubauer]

In Bali, Russia quickly overtook Australia as the largest source of tourists after Canberra banned its residents from travelling abroad, with 68,000 Russian nationals flying to the island in 2020, according to Statistics Indonesia.

Russians’ spending on food, accommodation, transport and tours has provided vital economic stimulus for the island, where tourism accounted for 60 per cent of gross domestic product before the pandemic.

But with the value of the rouble plunging to record lows, the number of Russians who can afford to travel overseas is set to shrink. Just getting there is likely to be a challenge.

Last month, Singapore Airlines, one of the few airlines offering regular international flights to Bali, announced an immediate and indefinite suspension of its service between its hub of Changi Airport and Moscow.

“Things are a total mess back home. Prices are skyrocketing, people will start losing their jobs and the bandwidth for withdrawing money is getting narrower,” Jaleel Mubarak, a Russian IT professional based in Bali who is preparing to fly home to be with his children, told Al Jazeera.

“Technically leaving Russia will become very challenging soon and I think Indonesia will also get in line with the Western world with sanctions,” said Mubarak, referring to Indonesian President Joko Widodo’s statement that the Russian invasion of Ukraine was “unacceptable”.

Rising oil prices

Tourists from Russia and Ukraine will not be alone in facing new challenges flying to Southeast Asia as a result of the conflict.

Russia accounts for about 10 percent of the world’s supply of crude oil, and markets are bracing for serious disruptions due to sanctions and possible retaliation by Moscow. On Wednesday, the global benchmark hit $115 per barrel just days after breaching the crucial $100 mark for the first time since 2014.

“If you look at the bigger picture, oil is now more than $100 a barrel and if it stays there or goes even higher, the price of jet fuel will go through the roof,” said Bowerman, the Kuala Lumpur-based analyst. “Normally after a lull like COVID, airlines would launch extra flights and discount fares to win back the market. But the price of jet fuel is going to make discounting impossible.”

Bowerman said airlines could struggle to obtain sufficient supplies of fuel.

“Long-haul airlines will be scrambling just to find it,” he said. “The potential for this to draw down global demand for air travel is significant.”

The banning of Russian planes from airspace over the United States, European Union, United Kingdom and Canada, along with retaliatory bans by Russia, puts a further dampener on the recovery.

Flying around Russia, the world’s largest country and a bridge between Europe and Asia, will add hours to flight time on some routes. Just one extra hour of flight time adds between $11,000 and  $20,000 to the cost of a journey, according to John Gradek, a lecturer of aviation management at McGill University.

Flights between Europe and East Asia will be most affected in the immediate term. Airlines including Finnair and JAL have already cancelled or rerouted flights to top destinations, including Tokyo, Seoul, Shanghai and London. But the bans lay another speed bump on the road to recovery for tourism-dependent economies in Southeast Asia.

“People are not going to say we won’t travel overseas because there is a war going on in Europe,” said Barnett, the Phuket-based consultant.

“But we have not yet seen the full financial impact of the war on oil prices and inflation. If the European market goes down and China doesn’t come back, it won’t be a good thing for an already volatile market.”

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