Before the pandemic, outbound tourism expenditures enjoyed a 4% CAGR between 2015 and 2019. By 2019, Filipinos spent PHP 61.4 billion in shopping overseas alone. Shopping was one of the fast-growing components of spending over a 5-year period, only second to travel agencies and reservation spending (+8% CAGR) and tied with F&B (+6%).
In 2020, departures from the Philippines were estimated to have been substantially reduced to just 1.48 million due to the COVID-19 pandemic. During this period, the Philippine government estimated that outbound tourism expenditure shrunk by 73.2%.
These are the themes shaping outbound travel and tourism in 2022.
The Return of Incentive Travel.
During the pandemic, sectors such as insurance have offered cash incentives as a replacement for travel incentives. As travel restrictions are lifted, demand for incentive travel is likely to return. For instance, an insurance company mounted its first international trip in years in Maldives, while one has offered Iceland and Hawaii as international travel destinations for top sellers. “[Travel] is something everyone is excited and looking forward to after being deprived for two years,” says a middle manager from an insurance company during an interview.
Reconnecting: VFR, Groups & Families to Drive Outbound Travel Demand.
VFR as a travel purpose for Filipinos has historically been an important segment of international departures. In Singapore alone, VFR constituted between 25 to 30% of Filipino tourism arrivals between 2011-2013, according to a market study by the Singapore Tourism Board. In 2005, VFR travel in domestic tourism constituted 55.6%, according to a researcher at the UP Asian Institute of Tourism.
While these figures reflect travel pre-pandemic, the strong family bonds in Philippine culture suggest that VFR is likely to stay — and even see a spike in 2022 and the medium term — driven by pent-up demand for reunions. In 2020, the Philippine Statistics Authority estimated that 6.7% of the 1.77 million OFWs are based in Europe. But the total population of Filipino heritage may suggest a more potent demand. The total number of overseas Filipinos in Europe in 2015 was roughly 434,000. In the U.S. in 2019, Pew Research Center estimates that the entire Filipino population was at 4.2 million.
Having delayed reuniting with children who work abroad or family members based in international destinations, Filipinos are likely to resume VFR upon easing travel restrictions.
Similarly, Filipinos are looking to travel more together. According to the Air Asia study, Filipinos are likely to travel with families (69%), partners (40%), and close friends (24%). This puts emphasis on the need for social experiences and building new memories together after 2 years of physical distancing.
WFH Effects on Travel.
Outbound travel, whose demographic market is mainly concentrated to the socio-economic classes A, B, and Upper C, will likely be influenced by the shift in work setups. Whereas work pre-pandemic had to be done in the office, the dramatic shift during the pandemic towards work-from-home and hybrid setups have given Filipinos not just extra time from commuting, but also greater flexibility with managing their schedule. Indeed, many white-collar and freelance Filipino workers have left Metro Manila and cities to travel destinations such as Boracay, Siargao, and similar leisure destinations to stay longer and work remotely in 2021. Executives in the Philippines have also continued serving their local roles while based in places like the U.S. and UK.
Another way that WFH will impact travel is by the effect it has on mental health. According to consumer researcher Kantar Philippines, white-collar mature workers have coped surprisingly better with WFH over younger white-collar workers.
Kantar Philippines President Gary de Ocampo said: “As a result, we have more from the younger group, in their urge to deal with lockdown stress, who have thrown their cares out of the window to venture out of their homes—either to go back to their workplaces or for entertainment in malls and other places of leisure. Some even added their number to the Great Resignation. This is not to say that the more senior do not experience lockdown fatigue, but they tend to be relatively “more cool” about it—still wanting to continue with the WFH arrangement and simply stepping out of the safety of their houses to be entertained outdoors.”
These suggest the following implications: Firstly, the younger generation will likely have a significantly higher desire for travel for the holidays. This may justify the return of incentive travel and FIT, especially within the Philippines. Secondly, older travelers, who have greater flexibility on WFH arrangements because of seniority and acceptance of this new work setup, are likely to mix travel and work together.
Luxury Shopping Remains Resilient.
Despite the growing dominance of e-commerce, one only has to look at the new wing of Greenbelt 3 to see the importance of physical store experiences in the luxury retail sales mix. In October 2020, Anton Huang of the luxury retail owner Store Specialists Inc. said about the local luxury consumer, “Our core customer base has proven to be resilient, as seen in the performance of key categories in our portfolio during this pandemic.” Indeed, across several sectors (real estate to fashion), the higher socio-economic class consumers have not been seen to have become more averse with consumption. Huang admits that preferences may have shifted depending on demand (lower sales for footwear and cosmetics at the height of the lockdown), but investments such as fashion, accessory, and home items have remained resilient.
The resilience of luxury retail in the Philippines aligns with general observations around the world about the inelasticity of luxury consumer demand and among the fastest to recover from a crisis. At the same time, it will be too naive to assume that buyers will still consume in the same way as before COVID-19. The rise of digital natives into the customer mix of brands and their new perspectives on luxury will lead to a shift in the curated experience. New luxury now means “self-expression”, “investment asset”, “elevated essentialism”, “conscious”, and “always on”, while old luxury meant “status” symbol, “owned property”, “indulgence” spending, “conspicuous”, and “ad hoc”.
Education, Visibility & Travel Counsel Grow More Important.
Information symmetry has been one of the driving forces of the democratization of travel, leading to greater FIT demand. When all information one needs in order to travel can be found online, travelers are able to plan their trips better within budget by themselves. There was less need for travel agency counsel, especially for less complicated journeys.
In the aftermath of COVID-19, the role of counsel will become more important. Lack of awareness of rules and protocols is an expensive mistake that can have catastrophic consequences on travel plans. The risk of erroneous planning has increased. When borders have become more open, destination marketing companies will need to work harder to educate Filipino outbound travelers and get their attention.
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