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Inbound Tourism Fuels Future-Ready Cities

Inbound Tourism Fuels Future-Ready Cities Across Southeast Asia

Auckland, New Zealand – November 23, 2018 – Mastercard, a leader in financial technology, has unveiled a report that demonstrates the transformative power of tourism in fueling the development of smarter cities and accelerating economic growth.

“The ASEAN Opportunity: How City Planners and Governments Can Make Cities Even Smarter by Increasing Investments in Inbound Tourism Growth” explores how cities can leverage public-private partnerships and data analytics to optimally allocate resources to grow inbound tourism. Specifically, the report demonstrates how cities can leverage insights from anonymised and aggregated Mastercard transaction data to better reach and attract key traveler segments. Such strategic investments in inbound tourism growth will in turn deliver a higher standard of living for residents, create greater financial inclusion and jump-start economic development.

Urban vibrancy creates opportunity and challenges

Urbanisation is gathering pace at unprecedented levels, with the UN predicting that nearly 70% of the world’s population will live in urban areas by 2050, and 90% of this increase in urban population will be in Asia and Africa.

With urbanisation comes many benefits, including a larger workforce, higher demand for goods and services as well as increases in tourism-related inbound income, which in turn leads to a rise in GDP, as seen in Vietnam, Malaysia, and others in the Asia Pacific region. At the same time, urbanisation brings new challenges. As cities reach critical mass, growing populations mean rising demand for jobs and resources and increased pressure on healthcare, education and transportation systems.

“No one entity can solve these challenges by themselves, and Mastercard believes strategic public-private partnerships can bring rapid improvements to quality of life, deliver efficient and seamless everyday experiences and create differentiation specifically in a high visibility and high growth area such as tourism,” said Rupert Naylor, Senior Vice President of Mastercard Advisors in Asia Pacific.

Framing the Southeast Asian travel opportunity

A key contributor to the impressive economic growth of Southeast Asia over the last decade is the even faster growth in inbound travel spend, driven both by major tourist destinations as well as by lesser-known locales.

For example, while Bangkok, Singapore and Kuala Lumpur continue to top the list for most international arrivals, Vietnamese cities Hanoi and Ho Chi Minh City have risen rapidly and cracked the top 10 list this year. Phuket, Pattaya, and Chiang Mai—destinations in Thailand—have also grown in popularity, suggesting travelers are becoming more experiential and open to trying new destinations.

This growing volume of visitors to lesser-known destinations reveals how governments can invest in up-and-coming destinations so as to more equitably spread the benefits (and strains) of tourism throughout the country. However, to realise the full potential of this strategy, investments in infrastructure for these lesser-known destinations will be critical, both in terms of connectivity to these locations, but also within the destinations themselves—including cleanup of public spaces, improved access to clean water, more efficient public transportation and greater financial inclusion for merchants in these cities.

One example of unsustainable development is in the Philippines. Boracay, a popular beach destination, was temporarily closed to tourists from April till October this year due to its inability to provide the infrastructure support needed to sustainably drive tourism growth, resulting in a loss of valuable inbound traveler expenditure.

While many leading destinations have already invested in such infrastructure, opportunities remain for ongoing innovation in areas such as crowd management and traveler experience to draw in new and repeat tourists. These initiatives help to create new jobs, improve standards of living for residents and ultimately drive economic growth.

Inbound tourism also has the potential to spur increased economic development for countries with lower GDP growth, bringing in revenue and generating employment. Countries where there is a particular opportunity to capitalise on inbound traveler expenditure to foster greater GDP growth include the Philippines, Singapore and Indonesia.

Growing areas of opportunity in travel

Business travel has been growing rapidly in several Southeast Asian countries, and has outperformed the overall travel market in the region over the past three years. The top 10 Southeast Asian cities that attract the most business travelers have all experienced double-digit growth in corporate expenditure, with Vietnamese cities Da Nang, Hanoi and Ho Chi Minh City occupying three of the top 10 spots.

Another key tourist segment for the region is students. While Singapore remains the region’s education hub, with more than triple the spend of the next destination, Hanoi, Khanh Hoa and Ho Chi Minh City logged the highest growth in inbound student expenditure in the past three years, in part due to Vietnam’s recent boom in online education.

This influx of inbound travelers driven by business and education presents an opportunity for Southeast Asian cities to diversify inbound spend beyond the leisure space.

Mastercard transaction insights further show that, beyond corporate and student travel, travelers to specific Southeast Asian destinations are purpose-driven. For example, Vietnam sees increased tourist spend in fine dining, and Myanmar and Laos see significant spend on tour packages.

Harnessing the power of insights

For both existing and potential tourist destinations, the critical dilemma facing governments and city planners is this: How can we make the most informed decision to allocate available resources that will drive maximum impact in order to attract new tourist segments and ultimately, drive tourism spend?

Inbound tourism spend insights help uncover granularity such as where tourist segments are coming from, where they travel, what the profiles of different segments look like and what different segments do in different locations. This granularity provides governments and city planners with the information they need to take action towards growing inbound tourism expenditure.

For example, by leveraging Mastercard transaction insights to identify in which categories spend is the highest, cities can create category-specific tourism campaigns. Similarly, better understanding travel “corridors”—such as travelers from Russia visiting beaches in Thailand, and Bali experiencing significant inflow from visitors from Australia and India—will enable city planners to tailor their offerings to align with the preferences and needs of specific tourist segments, including implementing language support initiatives for specific countries in popular destinations.

“Consumer spending in travel has a ripple effect on economies, creating jobs and opportunities for local businesses and communities. Through our deep data insights and analytics experience, Mastercard is working with governments and citiy planners to enable nimble, data-led decision-making and optimised planning and investment that can drive economic growth and financial inclusion. We are also building custom programmes that improve access and enhance the visitor experiences while co-creating solutions that address issues such as over-tourism and over-crowding in specific locations,” said Ruth Riviere, Mastercard Country Manager, New Zealand and Pacific Islands.

About Mastercard

Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. Our global payments processing network connects consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardAP, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

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