48 hours in Taiwan and man, what change is in the air

by Yeoh Siew Hoon

So I have just returned from Taipei where I was taking part in the Amadeus Travel Industry Forum.

It’s been so long since my last visit, possibly more than a decade ago – so I wasn’t sure what to expect.

I recall good food, crazy traffic and night markets and a travel industry that was just beginning to emerge as a key outbound market and struggling to grow its inbound business.

I recall hot springs, Sun Moon Lake and the Three Sisters – images etched in my mind from a brief trip I took outside Taipei.

This time, I stayed in Taipei, one of those fast-in, fast-out, single-purpose trips – which was to speak at the Amadeus event and get first-hand updates about the travel industry, in particular the online travel landscape.

So here’s what I learnt – Taiwan’s travel industry is on the brink of major change, driven by three main factors – the opening of direct cross-straits flights between China and Taiwan 15 months ago on July 4, 2008, the entry of low cost airlines such as AirAsia X and the increased use of the Internet by Taiwanese consumers.

Cross-straits flights have had a profound impact on both inbound and outbound travel patterns. In the first 12 months, Chinese tourists to Taiwan exceeded one million – possibly the biggest leap ever by a single market in such a short timeframe.

While demand is slowing down and passenger loads are no longer at 90% as during the first few months, travel agencies, previously more focused on outbound, are now setting their sights on getting a share of this new pie.

Outbound travel patterns have also shifted dramatically. Direct travel to China has resulted in drops in traffic to almost every destination that the Taiwanese used to favour.

An analysis done by Circos Brand Karma, based on Tourism Bureau statistics, showed that outbound departures from Jan-June 2009 (versus Jan-June 2008) dropped 24% to Hong Kong, 26% to Japan, 39% to Thailand and 29% to Macau.

And over the past five years, other than Australia which has seen a year-on-year increase, the US has seen a 33% year on year decline while Canada experienced a corresponding 40% drop. Looking towards Europe, while UK has seen a year on year increase of 51% in the past five years, Italy has dropped 61% and Netherlands 24%.

Circos Brand Karma’s CEO and co-founder, Morris Sim, who shared this analysis at the forum, also pointed out another trend based on Tourism Bureau statistics – a year-on-year decline in the 20-29 year-olds traveling out of Taiwan while the 50-59 age segment had grown steadily over the years.

So the young are staying at home while the baby boomers are still traveling

While I am always skeptical of reading too much into numbers – conclusions are only as good as the manner in which data is collected and measured – it could be a sign that Taiwan’s outbound players, dominated by traditional travel agents, may not be reaching out effectively to the younger consumer.

According to Sim, who spoke on “How to win the Gen X Gen Y traveller”, Taiwan’s youths are among the most web-savvy citizens of the world. There’s a 99% Internet penetration in the 13-19 age set and a 96% penetration among those born after 1980. Between 30 and 39, the penetration is 89% while for 40-49, it was 64%.

Clearly, the Internet is changing the way Taiwanese shop and buy travel. Traditional travel agents like Lion Travel are changing their business model to embrace the web while online pioneer Ez Travel has made huge strides in this channel. The fact that it was bought by Ctrip a few months ago is indicative of the market’s potential.

Ez Travel’s founder Jack Yu called it an exciting time for online players and said there were opportunities to create personalised products and diversified offerings but companies needed to invest in human resource development to make that shift.

According to Amadeus, in the past 12 months, an estimated 1.5 million air segments originated from the online channel, about 12.65% of Taiwan market’s GDS bookings. Up to 50% of these segments were booked online – ie originated online and booked online – while the rest were originated online but booked offline.

A poll conducted at the end of the forum showed that travel agents believed the online channel held great promise and most were keen to make the shift. And as with all markets in Asia, mobile and social media are also seen as holding promise but most remained unclear about how to engage with these platforms.

AirAsia X’s entry has also raised the stakes. When it launched Kuala Lumpur-Taiwan flights in July at an all-in price of RM129 (TWS1,290), it sold 20,000 tickets in the first 12 hours.

And even though the AirAsia group last week signed an agreement with Amadeus Asia which will give Amadeus subscribing travel agencies worldwide the ability to book flights on AirAsia and its subsidiaries, travel agents in Taiwan still appeared suspicious of low cost carriers and were skeptical they would have any lasting impact on the market.

In the poll, as many travel agents said they would “never” sell low cost carriers to their customers as the numbers who said they would.

And when asked that old chestnut about airline commissions, the majority said they were confident that airline commissions would always be part of the Taiwan travel agency landscape.

This, even though Charles Huang, director of Federal Transportation, a leading travel agency, called the agency model outdated as “we are stlll focused on selling tickets”. He said that five years from now, airlines would sell all their tickets directly and travel agents had to re-engineer themselves.

And here’s what I found interesting – Huang said that while technology could help an agent re-engineer itself, most companies were almost too focused on technology. “It has a lot of value but it also carries a lot of risks,” he said during a panel I moderated. “People solve problems, not technology.”

He called technology a non-sustainable competitive advantage and like Ez Travel’s Yu, said agents had to invest in people.

Yes, everyone knows that technology is only the means to an end and that end is always set by people. The important thing is to remember this even as we get carried away by new tools and sexy gadgets.

So here’s what I learnt about Taiwanese folk – they speak the same dialect as us in Penang and so we automatically like each other already and we share the same passion for food.

That’s two reasons for me to return and this time, I won’t wait 10 years.

Yeoh Siew Hoon is the producer of Web in Travel – WIT 2009 – held alongside ITB Asia at the Suntec Convention Centre Singapore, October 20-23