Could intra-Asia travel provide a soft landing?
Travel industry leaders around the world are bracing themselves for the fallout of the Trump tariffs announced yesterday, and even more so in Asia, where most countries have been lumped into the “worst offenders” bucket and are facing what BBC described as “truly remarkable” tariffs.
Other than Singapore, which faces the base rate of 10%, countries in the region have been hit with tariffs ranging from 17% (the Philippines) to 24% (Japan and Malaysia), 32% (Taiwan and Indonesia), 36% (Thailand), 46% (Vietnam), 49% (Cambodia) and China (54%) – a move which the BBC said, “will break the business models of thousands of companies, factories and possibly entire nations.”
There is no doubt that this biggest change to global trade in 100 years will have ripple effects across industries, including global travel on several levels – and Asia’s travel industry will not be unscathed. It impacts every sector of travel, from leisure to corporate and conferences and exhibitions.
Says Timothy O’Neil-Dunne, principal of T2Impact, a Seattle-based travel tech consulting firm, “Travel and tourism rely on a safe environment. Whether that be for business or pleasure. Trump’s tariffs are a devastating blow to the world economy and that will have a double whammy effect on our sector, perhaps even a triple. Effect #1 – pure economics, there is less money to spend on travel. Effect #2 – travel to and from USA will be impacted by fear. Effect #3, retaliation and restrictions in reality by border controls.”
Adds Mike McGearty, CEO & co-founder of Dublin-based Meili, which builds technology for car rental companies to integrate and partner directly with airlines and travel brands, “Overall the impact of the proposed US tariffs will be negative for the entire industry. As the tariffs stand today, they will increase costs for all operators (airlines, hotels, car rental, etc.) within the industry and therefore lead to increased prices. Increased pricing will dampen demand and the economic uncertainty created could reduce consumer confidence even further.
“I would have a cautious outlook until this plays out further and we have full visibility on how possible retaliation leads to a negotiated position which hopefully is less impactful on the industry.”
Chris Hemmeter: “Global interdependence is too fundamental to be kept down for long. Travel has an inevitable flow to it and any short-term setback will be rapidly offset by a surge forward.”
Four-level impact: “Short term is uncertain but long term is not”
Chris Hemmeter, managing director of Thayer Ventures, a major US-based travel and hospitality fund, counts down the possible impact at four levels.
- Inbound US – negative impact because of negative US brand response and strong dollar. Likely relatively short term.
- Outbound US – moderately neutral. Recession risk causing downward pressure, but strong dollar drives cheaper options.
- Impact on global – generally negative as everyone pulls in their horns and spends less.
- APAC – possibly neutral. Economic pressure pushing down travel but swing away from US increasing regional options for China travellers especially.
“All that said, global interdependence is too fundamental to be kept down for long. Travel has an inevitable flow to it and any short-term setback will be rapidly offset by a surge forward. I used to say this in the early days of the pandemic, and I think we have all seen that the momentum is real. The short term is uncertain but the long term is not,” notes Hemmeter.
Nicholas Cocks: “Travel is often a discretionary expenditure and the first to be cut when recession bites.”
A question of retaliation: Longer term risk and effects on wealth
In Singapore, Nicholas Cocks, partner at Velocity Ventures, a travel-focused fund in Asia, asks, “The big question is how do countries in the region retaliate? As most South-east Asian nations have a trade surplus with the US, counter tariffs are not effective. So what retaliatory measures will be taken?
“Will governments in the region look to retaliate through other means for example visa restrictions or taxes on visitor arrival? It remains to be seen how countries in the region respond but such measures are possible which would obviously affect our industry dramatically.”
The biggest concern, he observes, is global instability. “The Trump administration is demonstrating that their modus operandi is very disruptive. We have seen markets fall on the announcement. And I suspect many boardrooms are withholding investment decisions because the environment is just too uncertain.
“These factors may well produce a recession and as we all know travel and hospitality is often a discretionary expenditure and the first to be cut when recession bites. This is a longer term risk for our industry and one which we are very worried about at Velocity Ventures.”
Fritz Demopoulos, CEO of Queen’s Road Capital, a family fund with interests in travel, comments, “There might be a wealth effect issue, ie lower stock market influences people willingness to spend. My gut tells me 80% of travel is consumed by the top 20% of consumers, and those are the ones most affected by the wealth effect. The opposite occurred during periods of high inflation. The top 20% of consumers were less impacted and hence could continue travelling.”
Inbound to US: Beyond economics, it’s perception
One clear impact is on inbound to the US because beyond the economics, it’s about perception.
In his most recent podcast, Professor Scott Galloway said “Brand USA” has taken the deepest, furthest dive of any brands in the last two years and this plunge will affect purchase decisions, including that of travel.
Ross Veitch, CEO and co-founder, Wego, an OTA prominent in the Middle East and South-east Asia, said, “US cities are already very expensive for international visitors and increased tariffs will make this even worse. This combined with all the anti-foreigner rhetoric and news stories about rounding up and deporting foreigners is really damaging the appeal of the US to visitors of all types. I’m very glad I’m not running Brand USA.”
Adds McGearty, “Inbound tourism to the US has already been impacted by the tariffs imposed on Canada so this will now continue further based on the countries impacted by yesterday’s announcement. So the immediate outlook for inbound tourism to the US is negative which may be softened in the short term by some domestic demand.”
Another impact is outbound from the US – will Americans, hit by higher prices at home, stay home? Could a stronger dollar mitigate that? Or perhaps just the desire to escape their country’s most politically turbulent period in recent history?
Japan may feel the pinch. In 2024, the country experienced a significant increase in American tourism, with over 2.7 million US visitors, a 33% rise compared to 2023, according to the Japan National Tourism Organization (JNTO). This surge contributed to Japan’s record-breaking total of nearly 36 million international tourists that year. Monthly data from the JNTO highlights that in January 2025 alone, 182,500 American travellers visited Japan.
Observes McGearty, “Outbound traffic from the US will be impacted by retaliatory tariffs which will likely increase costs, reduce demand and may drive more domestic tourism in the short term.
This is likely to have the same effect in the European market which will see fewer US travellers but stronger European demand.”
Soft landing: Why intra-Asia could cushion the blow
Other than creating a more divided world, this global trade war will also create a travel industry that is more domestic and regional, than global, continuing on the momentum set by the pandemic.
In Asia, travel industry leaders are banking on the rising tide of intra-Asia travel to hopefully soften the landing.
American hotel chains such as Marriott have seen a rise in its intra-regional business in recent years. Pre-pandemic, intra-Asia travel comprised around 37-38% of Marriott’s business. Today, that figure has surged to nearly 60%, highlighting a significant shift in regional mobility and spending patterns.
Consider these:
- Intra-Asia travel accounts for nearly 80% of total Asia-Pacific international travel: According to the Pacific Asia Travel Association (PATA) and ForwardKeys, as of 2023, about 4 out of 5 international trips made by Asian travellers are within the region. This is significantly higher than pre-pandemic levels, when it was closer to 70-75%. Rising middle-class demand and short-haul recovery are the main drivers.
- ASEAN’s growing middle class: South-east Asia alone is expected to see its middle-class population grow from 135 million in 2020 to 334 million by 2030 (World Bank). This rising affluence is fueling more regional travel, especially to neighbouring destinations that are culturally familiar, cost-effective, and accessible via low-cost carriers.
- Short-haul flights now dominate seat capacity: Data from OAG (2024) shows that intra-Asia seat capacity has returned to 95-100% of pre-pandemic levels on most routes, outperforming long-haul services which are still lagging. Capacity recovery is strongest between China and South-east Asia, Japan, and Korea.
- China’s outbound shifts inward: Since late 2023, over 60% of Chinese outbound trips have remained within Asia, compared to about 50% pre-Covid (COTRI). Even as Chinese outbound travel gradually recovers, the preference has shifted towards nearby destinations like Thailand, Malaysia, Singapore, and Japan – partly due to cost concerns and lingering long-haul uncertainty.
- Intra-APAC Tourism Spending: According to Mastercard Economics Institute (2024), intra-APAC tourism spending has shown a faster recovery than intercontinental tourism spending, driven by affordability, proximity, and the growing availability of low-cost carrier (LCC) routes.
Hannah Pearson: “The UNWTO-ILO study noted that countries with diverse source markets were comparatively less affected by a decrease in international tourist arrivals during the global economic crisis–- a lesson the region also learned painfully during the pandemic. In 2025, we’ll see which countries paid attention.”
Lessons from 2008-2009: Asia is Asia’s largest source market
Hannah Pearson, director of Pear Anderson, a travel research and consulting firm based in Kuala Lumpur, makes these observations.
“To what extent Asia will take the tourism hit is the biggest question. A UNWTO-ILO study, Economic Crisis, International Tourism Decline and its Impact on the Poor looked at the impact of the 2008-2009 Global Financial Crisis and drew conclusions that advanced economies’ travel industries were more impacted than emerging economies, and those countries who had strong links to the European and the North American source markets were the most impacted.
“If we apply this to 2025, Asia might come out of the other side of this economic challenge relatively unscathed, as the largest source market for Asia is – Asia. For those countries who have reported their full-year 2024 international travel arrivals, intra-Asian arrivals accounted for 77% of total arrivals.
“However, the difference here is the list of countries being targeted by the tariffs – some of those with high tariffs in Asia include China, India, South Korea and Japan, all important source markets for Asia and accounted for 57% of total international arrivals in 2024 when combined (the lion’s share, of course, from China). If tariffs proceed and these economies are impacted, it’s not a stretch to foresee a decline of outbound arrivals from these countries.”
However she says, it’s still not all bad news.
“Surveys consistently cite consumers agreeing that leisure travel each year is an important priority (the latest Tourism Economics Travel Trends Survey, Q4 2024 put the stat at 76%), and so we may see instead travellers in those hard-hit Asian countries switch to short and medium haul travel within the region.
“The UNWTO-ILO study noted that countries with diverse source markets were comparatively less affected by a decrease in international tourist arrivals during the global economic crisis–- a lesson the region also learned painfully during the pandemic. In 2025, we’ll see which countries paid attention.”
In other words, tariffs may still rattle the region – but don’t bet against the adaptability of Asian travellers and the resilience of its short-haul market.
“Travellers adapt. They may not go as far, or spend as much, but they will still travel,” says an Asia-based senior travel executive. “For APAC, that’s the silver lining.”
