The amazing ROI on tourism

Michael Alan Hamlin

Posted on January 6, 2011

There’s a debate going on as to whether and how to market the Philippines as a competitive tourist destination compared to neighbors such as Hong Kong, Malaysia, and Thailand. One side argues that the Philippines must fix its infrastructure before it can market itself as a destination at par with its more successful neighbors. This line of thinking suggests that tourists familiar with the region will be dismayed with the Philippines if they are persuaded to visit.

As a result, these unhappy visitors will not just resolve never to visit again; more importantly, they will criticize the Philippines to their friends, on social networks, and in their blogs. As a result, the Philippine brand will be further tarnished. The other side rejects that argument, saying that the Philippines must repair its image by proactively generating visibility now because the country already offers a unique value proposition. (Exactly what the Philippines’ distinctive value proposition and branding should be is a subject I’ve discussed before, and will again.)

It’s useful to look to Thailand for insight into resolving this argument. Last year, Thailand’s brand reputation as a center for exotic tourism was badly tarnished during April and May when violent protests in the capital’s central business district left almost 100 people dead. Networks broadcast the chaos and carnage nightly, showing Bangkok set ablaze by withdrawing protestors when the military-backed government had had enough.

But Thailand is used to bouncing back from calamity, including frequent uprisings, natural disasters, and financial crises. This year is no different. In the first 11 months of 2010, visitor arrivals rose 12.6% to 14 million. Government projects almost 16 million visitors for the entire year, generating an estimated $19.3 billion in revenues. That’s about $1,200 in spending per visitor.

This year, Thailand will spend about $160 million to generate those revenues, representing a return of about 12,000% in revenue! That mind-boggling ROI suggests to me that it’s almost criminal not to be promoting the Philippines and generating visibility in key Asian and Western markets. Sadly, that’s not the case-aside from the argument above, naysayers ague that there are insufficient hotel rooms to house guests, demonstrating that no matter what, there’s always a good reason to sit on your hands.

The Thai government also works closely with the private sector to keep costs down for tourists. The government-controlled Thai Airways offers a $740 round-trip fare between Bangkok and Southern Europe. Internet access is as common as a bathroom sink in hotels, and comes free, as it does in restaurants and clubs so that tourists can immediately post photos to Facebook to augment the country’s marketing budget. Low-cost bed-and-breakfasts and boutique hotels that offer rooms from less than $30 a night abound.

By comparison, the Philippines is making a paltry investment in its own visibility. Even if that investment provides a similar ROI, in hard cash terms it will also be paltry, and a fraction of what is possible. For the year, the Department of Tourism expects 3.3 million tourist arrivals. As of October, total arrivals stood at 2.84 million, a roughly 16% increase over the previous year. If each visitor spends $1,200 here, that would amount to $3.4 billion, or about 18% of Thailand’s revenue from tourism.

The rest of the region understands this math, investing a significant yet entirely reasonable budget on brand visibility and in return reaping significant results. Tiny Hong Kong says visitor arrivals increased 15%, ex-Mainland China, to more than 12 million arrivals in the first 11 months of 2010. Mainland China accounted for another 20 million arrivals, boosting total arrivals to more than 32 million, a more than 22.5% increase over the previous year. (Data provided by the Hong Kong Tourism Board.)

Malaysia-despite political and economic uncertainty-demonstrates a similar picture. It expects 24 million tourists to visit “Asia, Truly Asia” this year, up from 22 million in 2009. As of July, more than 14 million visitors had already arrived in Malaysia, a 5.5% increase from the previous year. If they spend at the same levels as Thailand’s visitors-an entirely reasonable proposition-tourism will generate almost $26 billion. Based on reports I’ve seen, Malaysia probably invests between $200 and $250 million marketing its brand annually.

There’s one more thing about arrivals in the Philippines. A disproportionate number of arrivals are balikbayans, overseas Filipinos returning for a visit. They spend about one fourth what visitors to Thailand, Hong Kong, and Malaysia spend. In the previous administration, the logic was these visitors are the easiest to convince to come for a visit. Well, low-hanging fruit is, at the end-of-the-day, exactly that. It’s not enough to market the brand, it’s imperative to market smart.

For decades the Philippines has ignored the amazing ROI on tourism. Hopefully, that will be different under this administration.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand . Write him at mahamlin@teamasia.com and follow him on Twitter, Facebook and LinkedIn.). Copyright © 2010 Michael Alan Hamlin. All Rights Reserved.)

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