The recovery in APAC tourism will continue in 2024, albeit at a slower pace due to less favourable base effects, Fitch Ratings says.

Fitch forecasts visitation in APAC to reach 92% of the 2019 level, with nominal international tourism receipts exceeding that in 2019 by 6%. Most Fitch-rated APAC sovereigns have recovered from the services balance shock due to the collapse in tourism revenues.

The APAC recovery has lagged that in other regions, where tourism arrivals and revenues have surpassed or recovered closer to pre-pandemic norms. We expect the APAC recovery to be fuelled by robust demand, economic resilience, additional flight capacity, policy efforts to reignite tourism, and depreciated local currencies. We project outbound visitation from China to return to 86% of pre-pandemic volume in 2024, bolstering the tourism recovery in APAC, though Chinese tourists' restrained spending will extend into the rest of the year.

Fitch’s baseline assumes a full recovery of international tourism visitation volume in APAC will materialise in 1H25.
However, we expect recovery prospects to remain vulnerable to multiple risks, such as a slow restoration of international air traffic, elevated airfares and energy prices, and heightened geopolitical tensions.

A global shock or pronounced economic downturn, especially a more substantial weakening of the Chinese economy than our baseline, could dampen demand for travel and spending, hindering the tourism recovery in China and the region. In addition, the impact of climate change presents challenges for some APAC economies that depend more on nature-based tourism.

The sovereigns in APAC most vulnerable to a weaker tourism recovery or fall in demand are the destinations where tourism plays a significant role in the economy and public finances have deteriorated over the past few years, like Thailand. In particular, frontier-market sovereigns with fragile external liquidity positions, such as the Maldives, are more exposed to a scenario where a large exogenous shock leads to reduced tourism receipts.

The report "APAC Tourism Heads Towards Full Recovery" is available at www.fitchratings.com or by clicking the link above.