Southeast Asian tourism is benefitting from the ongoing geopolitical tensions in Northeast Asia: ANZ

Southeast Asia has benefited from a growing tourism sector, as tourists prefer Southeast Asia over Northeast Asia due to the latter's ongoing geopolitical tensions, according to ANZ.

Continuing civil unrest in Hong Kong, a mainland Chinese ban on individual travel to Taiwan, as well as strained Japan-South Korea relations have dampened tourism.

Consequently, more tourists are heading towards Southeast Asia instead. The biggest beneficiaries are economies like Vietnam, the Philippines, and Thailand - as their key tourism source markets are China, Taiwan, Japan, and South Korea.

As mainland Chinese tourists move away from Hong Kong and Taiwan to other destinations like Vietnam and Thailand, the latter are likely to receive a boost in revenues greater than what the arrivals data suggest, thanks to Chinese tourists' higher than average per capita spending.

Diverging tourism fortunes will produce varying degrees of impact on Asian economies, subject to the importance of the tourism sector to each economy and the extent of dependence of the tourism sector on foreign visitors.

Hong Kong will suffer the largest adverse impact to growth due to the scale of lost tourists, and also because tourist flows are a high revenue generator for its economy. Every 10 per cent drop in foreign tourist arrivals in Hong Kong shaves 0.4-1.3 percentage points off its GDP.

Thailand and Vietnam will receive the highest growth boost due to tourism inflows and the relative size of their tourism sectors. Every 10 per cent increase in foreign tourist arrivals adds 0.8-1.7 percentage points to Thailand's GDP. Its ongoing tourism recovery leads ANZ to believe that Thailand's current account surplus will stay elevated, which will in turn bolster the Thai Baht.

The report also noted that Indonesia will need a large surge in foreign visitors to significantly boost its economy. As of now, Indonesia has not benefited from the diverted tourism flows.

ANZ expects the current trend to persist into 2020, as Northeast Asian geopolitical tensions show no sign of abating and airlines have been re-adjusting their flight routes to reflect these developments.

Tensions in Hong Kong will continue to take a toll on tourist arrivals in the foreseeable future. One need look no further than Thailand, whose political unrest from 2013 to 2014 suggests that even after the tension has substantially subsided, it can still take more than six months before tourist arrivals normalise.

China-Taiwan relations are likely to remain testy at least until Taiwan's presidential election in January 2020, while disputes over wartime compensation and trade issues continue to weigh on Japan-South Korea ties.

In contrast, tourist arrivals data of Southeast Asian economies so far, like Vietnam's tourist arrivals in October and Thailand's Suvarnabhumi airport international passenger arrivals in October and November month-to-date, has indicated a rosy future ahead.