Fitch: Omicron ‘clouds outlook’ for Asia-Pacific tourism revival

The return of quarantine and lockdowns in many countries, combined with the massive disruption in international air travel at the end of last year cloud the outlook for the beleaguered tourism industry, according to Fitch Ratings.

In their update on the sector in the fourth quarter of 2021 Head of Sovereign Ratings for Asia-Pacific Stephen Schwartz and Associate Director George Xu paint a gloomy picture as the Omicron variant spreads around the world.

“International travel remains subdued across the Asia-Pacific (APAC) as border restrictions are being reimposed amid the Omicron Covid-19 variant. APAC economies have been slower to ease cross-border travel restrictions than other regions, even before Omicron, due to local outbreaks and slow vaccination rollouts, especially in South Asia and ASEAN,” they said.

The Maldives was the first Asian nation to remove quarantine for vaccinated travellers, back in July 2020, Sri Lanka followed in January last year and in July Thailand began the ‘Phuket Sandbox’ scheme, which allowed vaccinated tourists to visit the island without quarantine. Singapore introduced a Vaccinated Travel Lane programme in September last year, extending it from two countries to 10 the following month and to 24 nations in November.

Indonesia opened the island resort of Bali to vaccinated visitors from 19 countries in October.

After the success of its sandbox scheme, Thailand reopened its borders to visitors from 63 countries in November. Also that month Vietnam removed quarantine for vaccinated visitors to Phu Quoc island and Malaysia reopened Langkawi to tourists from selected countries.

In Cambodia foreign travellers returned from November 15, with the end of the 14-day quarantine for fully-vaccinated visitors and the resumption of 30-day tourist visas.

Last month the Philippines joined the tourism revival, reopening to vaccinated visitors.

“The emergence of Omicron has upended reopening plans for the time being at some economies,” Fitch said. “Japan has prohibited foreign visitors since late November, while Thailand tightened quarantine-free entry applications for inbound travellers for a two-week period in mid-December, with the exemption of the ‘Phuket Sandbox’ scheme initiated in July 2021. Singapore has temporarily suspended flight ticket sales for the ‘vaccinated travel lane’ scheme. However, not all economies have shelved reopening plans. Australia extended its travel bubble scheme to Japan and Korea in mid-December, despite a short delay.”

International tourism will be slow to recover across the Asia-Pacific this year in spite of higher vaccinations and stronger reopening efforts, Fitch said.

“The evolving global epidemiological situation poses a high degree of uncertainty and a tourism recovery in destinations with low vaccination rates, such as the Philippines and Indonesia, will remain vulnerable to setbacks. Pent-up travel demand remains to be diverted domestically, as we believe it will take time to restore confidence in cross-border travel safety. We expect China to maintain its ‘zero-Covid’ policy through most of 2022, with quarantine-free travel corridors set up only for Macao and Hong Kong. China was a key source market for tourism-dependent economies, such as Thailand, pre-pandemic,” Xu and Schwartz said.

Fitch is the world’s third-biggest credit ratings company. It has a AAA/Stable sovereign rating on Singapore and Australia and an A+/Stable rating on China (Macao AA/Stable and Hong Kong AA-/Stable). Thailand and Malaysia are rated BBB+/Stable, BBB/Negative for the Philippines, BB/Positive for Vietnam and B-/Stable for the Maldives.

AAA is the highest credit quality with the lowest expectations of default in Fitch’s ratings system. The B rating is defined as ‘highly speculative’ with a material risk of default and a limited margin of safety. Fitch considers bonds rated BBB- or higher as investment grade.

Fitch does not assign a sovereign rating to Cambodia, which is listed as B2/Stable by Moody’s Investors Service, the world’s biggest credit ratings agency. Cambodia plans to issue a $300 million sovereign bond in the first quarter of this year.