Logo of Phnom Penh Post newspaper Phnom Penh Post - Bringing home the importance of tourism to the overall economy

Bringing home the importance of tourism to the overall economy

Bringing home the importance of tourism to the overall economy

Many foreign investors and business owners have sold their stakes in order to profit from greener pastures abroad.

The changing makeup of foreign arrivals shows how country of origin is crucial to the big picture

Tourist arrivals might not be the best indicator of actual spending that is taking place in the tourism sector in cambodia.

International visitor
arrivals to Cambodia

change(%) 2009*/08




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As Cambodia moves into what is traditionally a peak time for tourist arrivals, the collapse of Wall Street investment bank Lehman Brothers in 2008 continues to cast a long shadow over the sector.

While some operators are seeing evidence that bookings are firming up, others are looking ahead to a high season of empty rooms, as the International Monetary Fund (IMF) pointed out last month as it issued a stark reminder that the impact of the global economic crisis on Cambodia is far from over.

The IMF said the tourism sector was one of three key engines of Cambodian economic growth sputtering out this year as it predicted a 2.75 percent contraction for the entire economy over 2009 following a fact-finding mission to the country.

According to David Cowen, the deputy division chief in the IMF’s Asia and Pacific Department, there has been “quite a sharp reduction” in hotel occupancy rates in Cambodia this year and the immediate future was far from bright.

“We expect that there will be some signs of recovery as we go into the main tourism season towards the end of the year, but I should caution that in speaking to the tourism sector they still did not have a lot of visibility in terms of their forward bookings, so we don’t have a lot of reason to be optimistic with regard to near-term performance in this sector,” he said.

The tourism centres have been particularly hard-hit, with an oversupply of hotels in Siem Reap contributing to the empty rooms there now.

The number of foreigners visiting Siem Reap was down 8 percent over the first nine months of the year to just over 700,000, while visitors to the southern resort town of Sihanoukville fell 12.43 percent to 94,102, figures from the respective provincial tourism departments show.

A major factor in the decline has been a falloff in arrivals from East Asia. Ministry of Tourism figures released this month show visitors from South Korea, which used to be the top source of arrivals in the Kingdom, have fallen 31.23 percent in the first eight months of the year to 123,729. Japanese visitors fell 14.05 percent over the same period to 77,305, as arrivals from China fell 10.24 percent to 70,135.

However, Chheuy Chhorn, the administrative director of Siem Reap’s tourism department, said the province appeared to be turning the corner with arrivals up 2 percent in the third quarter compared with the previous three months. “I hope, it will be better again for the last quarter because it is the holiday period for foreigners,” he told the Post last week.

A sharp increase in Vietnamese tourists had also offset some of the losses from Korea, Japan and China, he said, with nearly 200,000 Vietnamese visiting the home of Angkor Wat over the first nine months of the year, the majority travelling overland by bus via the Bavet-Moc Bai border crossing in Svay Rieng province.

The increase was mirrored by national tourism arrivals data, which showed a 43.66 percent rise in arrivals from Vietnam to 172,171 and a 126.29 percent rise to 61,462 in arrivals from Laos for the year up to the end of August, according to tourism ministry figures.

The increase in visitors from Cambodia’s neighbours boosted overall visitor numbers 1.37 percent to 1.42 million over the period as a result.
However, Cowan warned that all tourists are not equal when it comes to their contribution to the tourism sector, with day-trippers from Vietnam being a poor substitute for tourists from East Asia and long-haul arrivals from North America and Western Europe.

“There is a tendency here in Cambodia to look at tourist arrivals, but tourist arrivals might not be the best indicator of actual spending that is taking place in the sector,” Cowan said. “On the one hand, tourist arrivals are slightly up for the year, but those are being driven by regional tourists and in particular those coming from Vietnam, where the waiver of visa fees has made this a more attractive destination. However we are seeing some very sharp falls in arrivals from places outside the region, in particular the North American market, the East Asian market and also Western Europe.”
The ministry’s latest figures showed a 13 percent slide in air arrivals in the first eight months of 2009 year on year, whereas land arrivals were up 20.54 percent.” Air arrivals are down and air arrivals are typically going to bring your higher spending tourists,” Cowan said.

The importance of the tourism industry to Cambodia’s economic well-being cannot be overstated. According to the UN Development Programme, tourist spending accounts for just under 10 percent of the economy, although related activities swell that to closer to 20 percent. It has also been a major source of foreign direct investment, attracting a third of all inward investment since the mid-1990s. Foreign arrivals have increased from a very low number in the mid-1990s to about 2.1 million arrivals last year, before the global crisis hit.

The downturn is not just affecting hotels and restaurants. Oum Yorn, the owner of Chiso Silk Weaving, a small enterprise in Takeo province, has seen his sales of traditional Khmer silk products halve from mid-2008 as fewer foreigners came to visit the nearby Phnom Chiso temple. “This year, fewer tourists have come here, and if the tourists do not come, we cannot sell our products,” he told the Post recently.

Anthony Alderson has seen the rapid rise and sudden fall of the tourism sector in Cambodia at first hand since he arrived in 1992, initially as a pioneer in the restaurant sector and more recently as operations director at the FCC group, which owns hotels, bars and restaurants, and cafes in Phnom Penh and Siem Reap. He has recently sold his stake in the FCC in order to invest in greener pastures in Myanmar, but he says the sector is already beginning to recover, led by independent travellers.

“One can already see when you look at the rooms that the FCC is involved in that the bookings have been strong and the market seems to be coming back towards the end of the year,” he said.

However, he acknowledged that hotels that rely on group bookings could struggle for a while longer. “If you look at the group side of things, that’s been very hard-hit because they are the lowest demographic of income earner, and they are the ones more likely to have lost jobs in the downturn,” he said. “You see a much bigger downturn in group bookings, but individual bookings are coming back strongly.”


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