Gasoline prices threaten Southeast Asian tourism

Julia, a 22-year-old Romanian tourist, was forced to cancel her plan to explore Malaysia in regret. The ticket booking screen shows the number 3,440 USD for round trip – a price many times higher than normal. Even if you look for all options to transit through Istanbul or Amsterdam, the cost still does not cool down.

“I can’t afford it,” Julia said. Her experience is a testament to the impact that the tourism industry is suffering due to the Middle East conflict, pushing the price of jet fuel (Jet A1) to reach 234.3 USD/barrel on March 24.

The current crisis is more serious than the combination of the oil shocks of the 1970s and the Russia-Ukraine war, the head of the International Energy Agency, Fatih Birol, said on March 23 at the National Press Club in Canberra, Australia. The global economy is facing a “very, very big” threat.

Since April 1, a series of Asian airline “giants” simultaneously activated the fuel surcharge increase regime. Cathay Pacific (Hong Kong) announced a 34% increase in surcharges on all routes, the highest level up to 200 USD for long flights. Singapore Airlines and Scoot also increased ticket prices across the flight network to offset input costs.

In Southeast Asia, the increase was most pronounced among airlines: Cebu Pacific (Philippines) increased by 20-26% for trips until May; Thai Airways is expected to increase by 10-15%. Vietnam Airlines warns that if fuel prices remain at 200 USD/barrel, the airline “the more it flies, the more it will lose” because operating costs could double.

The Vietnam Aviation Administration has also proposed applying fuel surcharges to domestic tickets from April 1 to June 30. It is expected that the maximum ticket price for the Hanoi – Ho Chi Minh City route may reach nearly 4 million VND, and the Hanoi – Phu Quoc route will reach 4.68 million VND.

The crisis doesn’t just stop at airline tickets. Cost pressure is spreading to every corner of the tourism service industry.

Sheet Bangkok Post noted taxi service disruption at Suvarnabhumi Airport, Thailand where the number of SUV taxis operating has more than halved, from 5,000 vehicles to about 2,500 vehicles.

Panlop Chayinthu, Chairman of the Suvarnabhumi Taxi Coordination Association, said drivers are currently reluctant to take long-distance trips for fear of running out of fuel in the middle of the road without additional supplies.

Gasoline prices increased by 35% and diesel prices increased by more than 60% in Cambodia, causing travel agencies to “stand still”. Mr. Sinan Thourn, Chairman of the Pacific Asia Travel Association (PATA) Cambodia branch, said the fuel crisis has greatly affected travel costs and itinerary construction. Cost pressure is clearly evident in service segments such as accommodation, dining, guided tours and transportation. In particular, the transportation sector is most affected, from domestic flights and interprovincial buses to van services and road transport for tours.

According to Sinan, tuk-tuk services, taxis, shuttle buses and tour operators are facing shrinking profit margins. Some agencies are forced to adjust fares, apply fuel surcharges or re-price same-day tours, which can affect demand, especially for close-to-date bookings.

He warned that increased costs from accommodation to meals will cause guests to tighten their spending and cut back on sightseeing activities during their journey.

Faced with the risk of aircraft having to temporarily stop operating due to expensive fuel, countries are looking for a way out.

The Aviation Association of Thailand (AAT) is preparing to propose a temporary reduction in special consumption tax on aviation fuel to stabilize ticket prices in the context of strong fluctuations in global energy prices. This measure is intended to reduce operating costs for airlines and reduce the burden on passengers.

To minimize the impact of the energy crisis, Thailand has launched a campaign to strongly promote domestic tourism, domestic conferences and group travel to reduce energy consumption and encourage tourists to explore nearby destinations instead of far away.

Domestic taxi companies such as ComfortDelGro and GrabCab in Singapore have increased their fares to support drivers through this difficult period. Director of travel company Traveler DMC, which operates in both Singapore and Malaysia, Ryan Low, said that many tourism units have not yet increased prices and used reserve funds to support visitors to still have quality experiences.

Malaysia’s tourism model is different from regional competitors such as Thailand and Singapore, and this could become the most important “shield” for this country. Arrival data provided by the Ministry of Tourism, Arts and Culture shows Malaysia’s high dependence on the Southeast Asian market, with Singaporean arrivals accounting for 50% of international arrivals by 2025. China ranks second with nearly 4.7 million arrivals, followed by Indonesia and Thailand.

Meanwhile, the European and Gulf markets are much smaller, with the number of visitors ranging from nearly 100,000 to half a million. This difference in customer base helps Malaysia to be somewhat optimistic.

However, expensive airfares are inevitable, according to the founder of the Your Inbound Matters travel platform in Malaysia. Domestic businesses have not been affected much so far, partly thanks to domestic tourism still increasing strongly.

Shukor Yusof, founder of aviation consulting firm Endau Analytics, warned that if the Strait of Hormuz is closed for an extended period, not only the supply of jet fuel but also the price of gasoline, petrochemicals, and food will be disrupted, further reducing demand for non-essential spending activities such as tourism.

“The panic buttons have been activated everywhere,” said June Goh, senior oil market analyst at Sparta Commodities SA, a company that researches and forecasts price trends.