Mark Mobius: Investing in the travel revolution


With improved infrastructure and better access to reasonably priced flights, more travellers are now able to explore exotic locations they had previously only read about or seen on television. And it is not just those in developed markets seeing the sights. Many people living in emerging markets now have more discretionary income available to enjoy leisure travel too.

Traveling to and within emerging markets is easier and faster than ever before. In some places, gleaming airports and train stations rival, or even surpass, those of developed markets.

When I first started my research work in these areas over 40 years ago, air travel simply did not exist in many developing countries. There were few airports and far fewer airlines. Airplanes were also less efficient and could not travel the distances they do now. Infrastructure on the ground was similarly lacking, with poor roads and limited or no trains.

One research trip I took to Indonesia back then offers an example of how difficult it was to get from place to place. My aim was to study soap manufacturing, which required me to cover the entire country from the north of Sumatra down to the southern tip of Bali. There were few direct flights and travel involved small planes, buses, taxis, water ferries, motorcycles and even bicycles. The journey itself was exhausting before I even started my work.

Today, growing numbers of visitors from around the world are able to enjoy Indonesia’s many attractions and travel around far more easily than back then.

The government has prioritised tourism and it seems to be paying off, with the country jumping to 50th in 2015 from 70th in 2013 in the World Economic Forum’s Travel and Tourism Competitiveness Report. While more investment in infrastructure is still needed, air travel has widely expanded. I can now visit several Indonesian companies in a single day.

Tourism is as important for other countries in the Association of Southeast Asian Nations as it is for Indonesia.

For example, travel and tourism directly or indirectly accounted for almost 30 per cent of Cambodia’s GDP and more than 20 per cent of Thailand’s GDP in 2015.

Economists have found tourism has a great impact on a wide swath of the population through what they call the “multiplier effect”. That is, tourist dollars reach directly into the retail and hospitality parts of the economy where many people in the middle- and lower-income groups are working.

China’s story

Chinese tourists, in particular, are increasing in great numbers and make up a key part of tourism growth in both Asia and other parts of the world. In 2000, nearly 10 million Chinese tourists visited Asean countries but by 2015 that number had grown to 78 million. With this in mind, it is worth looking at some travel and leisure trends in China.

The expansion of the travel industry there is quite remarkable. During the National Day holiday in October 2016 (also referred to as Golden Week) more than 590 million domestic trips were made nationwide in China, up nearly 13 per cent from the same time in 2015.

Total tourism spending reached ¥421bn, up 14 per cent from the previous year, with a record amount of money spent on shopping and food during the week too.

And Chinese consumers are not only travelling domestically during their holidays. Morocco was cited as a hot destination during Golden Week last year and this year’s Lunar New Year saw them flock to other countries in Asia as well as to Europe and North America. Since 2004, China has seen double-digit growth in expenditure every year, leading the world in outbound travel.

Decades ago, leisure travel was unheard of for most Chinese citizens. Today, however, there is much more disposable income for such trips. In 2001, just 3 per cent of China’s population was considered middle income but by 2011 that figure rose to 18 per cent of the population. In absolute terms, that means more than 200 million people crossed the middle-income threshold.

Per-capita disposable income has been on the rise in urban households, up some 165 per cent from 2006 to 2015, reaching ¥31,195 (£3,710).

According to an Economist Intelligence Unit report, 35 per cent of China’s population (representing around 480 million consumers) is expected to meet its definitions of upper middle-income and high-income by 2030, with upper middle-income consumers having a disposable income of ¥67,000 to ¥200,000 (£7,965 to £23,780) and high-income consumers having a disposable income above ¥200,000.

Those with antiquated notions of China will be surprised to be greeted by fast, reliable bullet trains, gleaming shopping malls and impressive theatres, sports arenas and other tourist attractions. There is still plenty of need for more infrastructure development but if its consumer population continues to expand in numbers and purchasing power, there will no doubt be many more investment opportunities.

Mark Mobius is executive chairman at Templeton Emerging Markets Group



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