Leaders throughout Southeast Asia have made it a priority to attract more Indian and Chinese travellers as a quick fix to boost their tourism and aviation recovery. What’s clear though, is that whilst air capacity between India and Southeast Asia is reaching towards pre-pandemic levels and beyond, China-Southeast Asia’s capacity is slow to gain momentum.  

When we look at air capacity from the two countries into Southeast Asia as of Q3 2023, China-Southeast Asia operated almost double the number of seats at 8 million vs India-Southeast Asia’s 3.8 million, whilst the recovery vs 2019 levels couldn’t be more different. China was -53% of 2019 levels, whilst India, by contrast, was just 7% down.  

Closer analysis of India and Southeast Asia capacity for Q3 2023 vs Q3 2019, pre-pandemic, reveals:

• Singapore reached +13% recovery with- 1.5 million scheduled seats.
• Indonesia recorded an enormous +1,465% growth, albeit with a much more modest 31k seats.
• Vietnam, has been aggressively opening new routes and bolstering capacity, particularly to India, creating an additional 345k seats which simply didn’t exist in 2019.
• Malaysia and Thailand meanwhile, lag behind at -32% and -29% respectively.

Analysis of China and Southeast Asia capacity shows that there are pockets of recovery in the region:

• Singapore, once more, is tracking best for recovery at just -23% of 2019 levels and 2.3 million seats.
• Thailand, formerly one of the top international destinations by capacity for China, languishes at -60%.
  
  

Key Leisure Destinations Still Lag Behind 

There is a noticeable lag in demand from China to purely leisure destinations, whilst demand for key capital cities, such as Jakarta and Hanoi, isa getting closer to pre-pandemic levels, 

•  Jakarta was just -2% down on 2019 levels, Bali was still at -71%. 
•  Hanoi was -7%, whilst Nha Trang was -86%.
•  Phnom Penh was at -48%, Sihanoukville was at a staggering -100%, with no carriers restarting flights to the city.   

However, analysis does highlight a key difference between Chinese and Indian air capacity to Southeast Asia: the connectivity to secondary and tertiary cities. 

China, despite the slower recovery to these destinations, has far more connections to leisure destinations in Southeast Asia, like Bali, Phuket, Phu Quoc, Kalibo (Boracay), Penang and Pattaya, whilst India has connections to Phuket and plans for Bali - but that’s it.

Making Entry Easier

Given the importance of Chinese tourism to Southeast Asia it makes sense that the Association of Southeast Asian Nations (ASEAN) and their respective governments are focusing their attention on China as the immediate ‘shot in the arm’ their tourism industry needs. India, on the other hand, will form part of their medium-term plan as connectivity grows. We have already seen action from some governments:

• Thailand: 13 September 2023 Thailand’s new Prime Minister Thavisin waived visas for Chinese nationals until 29 February 2024 with the hope of adding 700k international arrivals during Thailand’s year-end peak season.
• The Philippines: launched a pilot e-visa scheme for Chinese nationals on 24 August.

Will the same scheme be extended to Indian nationals? The Tourism Authority of Thailand (TAT) noted that it would monitor the results of the Chinese national visa waiver for two months before making a decision. However, local tourism association - the Association of Thai Travel Agents (Atta) - believes that the most critical obstacle to driving Indian arrivals is not the visa, but rather the bilateral air service agreement in place with India, which limits the number of seats.

Myanmar, keen to revive tourism and shake off perceptions about internal conflict, has opened up visas on arrival for both Chinese and Indian nationals, whilst Malaysia in its Budget 2024 strategy has set out vague plans to offer multiple entry visas for tourists from India and China.

To attract secondary and tertiary tier cities in both India and China, ASEAN tourism authorities like Tourism Malaysia have undertaken a charm offensive, with trade roadshows in destinations such as Changsha, Lanzhou and Xi’an in China, Amritsar, Lucknow, Nagpur, Pune, Goa and Cochin in India. Offbeat promotional strategies around Indian weddings, long seen as lucrative, have been devised, too - the TAT proposed a tax exemption on wedding jewellery being imported into the country.

Connectivity is Critical to Growth

For air capacity to continue growing to both India and China, increasing connectivity points across the region is a must. The Indian ambassador to Cambodia has promised that direct flights will soon start, Philippine Airlines and Cebu Pacific are said to be looking into the feasibility of opening up new routes to India, Bali is hoping for direct Indian flights, and the TAT are touting charter flights from China in Q1 2024 as a way to boost additional capacity in the market. For those markets that have seen an increase in Indian capacity, namely Indonesia and Vietnam, the push has been via the low-cost carriers, rather than mainline carriers - Vietjet for Vietnam, and IndiGo for Indonesia.

As for whether India and China need Southeast Asian tourists to the extent to which Southeast Asia needs them for tourism, the short answer is no. Whilst some ASEAN countries like Malaysia were in the top 10 arrivals in 2019 for India, and ASEAN countries into China in 2019 accounted for 25.9 million international arrivals, or around 18%, there is not the same urgency to see flights - and tourists - from the ASEAN region return.

The importance of India and China to ASEAN’s tourism industry will likely not diminish any time soon. Whilst China has the leading edge for arrivals currently and is therefore the golden source market all countries are aiming for, the more visionary tourism boards across the region are continuing to lay down solid promotional groundwork in tertiary cities within India, going beyond the major metropolises.

The fact that international arrivals into the region from India are nearing pre-pandemic levels is a clear indicator of its medium-term potential - and once flight capacity starts to ramp up beyond 2019 levels, as airlines plan, we could well see India joining China at the top of the table for tourism arrivals - an altogether much more robust future for the region than its previous over-reliance on the Chinese market.

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