Cambodia might have to deal with competition from popular destinations and a resurgence in Covid-19 cases in the region that could keep aviation growth down

An upward shift in the travel sector will soon become apparent as Cambodia decides to open up tourist hotspots – Preah Sihanouk and Koh Rong off its coast, and Dara Sakor in Koh Kong province – to vaccinated tourists from December onwards. This will be followed by Siem Reap in 2022.

Elsewhere in Southeast Asia, similar plans loom as confidence grows with the rate of vaccination despite Covid-19 flare ups in a few countries, including China.

Comparatively, Cambodia’s inoculation programme with 86 per cent of the population double-vaccinated, comes in second after Singapore and far ahead of its peers, Thailand and Indonesia.

Indeed, it gives a headstart over other ASEAN destinations to be able to promote itself as a safe tourism destination, said Hannah Pearson, founding partner of Kuala Lumpur-based tourism consultancy and sales representation Pear Anderson.

“The news that Cambodia is planning to open the Sihanoukville Sandbox on November 30, and the fact that it has already shortened quarantine requirements for travellers, is a positive step forward to reopen the country,” she said.

The phased opening requires vaccinated travellers to show proof of vaccination, medical insurance, and negative test results 72 hours before departure. They will also be allowed to visit any of the destinations for five days without quarantine.

Chhay Sivlin, president of Cambodia Association of Travel Agents, said after “two long dreadful years” it seemed reasonable to open to fully vaccinated tourists.

She commended the government for selecting Sihanoukville and Koh Kong to be the starting points to receive tourists due to its “abundant coastal and natural treasures”.

“It is now winter [in the northern countries], so we hope to become one of the attractive destinations for tourists from those countries,” Sivlin said.

However, she noted, for this plan to succeed, it would require “active cooperation” from air transportation, given the limited number of flights into Sihanoukville airport.

“Therefore, domestic connecting flights between Phnom Penh and Sihanoukville should become frequent in order to facilitate tourist arrivals,” Sivlin commented.

For the aviation industry, this is good news after nearly 18 months of subdued growth as most local airlines carried out piecemeal flights.

Much of this mimics regional performance. Even though the pandemic eased a little in the West leading to upticks in travel in Europe during the summer, Asia’s air travels have been sliding due to border restrictions and quarantine requirements.

Cambodia Airports CEO Alain Brun said passenger throughput remained “very low”, without “any improvement” in the third quarter of 2021.

From January to September this year, all three airports combined handled 181,644 international, domestic and transit passengers, representing 91.2 per cent drop from 2.1 million passengers in the same period in 2020, and minus 97.9 per cent from 11.6 million passengers in 2019.

However, cargo activity was a “silver lining” for the sector, helping to mitigate the shock, Brun said, noting that in the last three to four months, figures were almost at pre-pandemic level.

The performance was driven by various reason including the lockdown in Thailand and Vietnam, seaport congestion, reopening of factories in Phnom Penh after the vaccination of a majority of factory workers, and competitive air cargo rates against trucking to Bangkok and Vietnam.

Competition hotting up

Cambodia’s move to open up comes after months of internal discussion and repeated pleas by industry players, many of whom shut down or downsized businesses, resulting in indebtedness and tens of thousands of job losses.

Within a year of the pandemic, the travel and tourism industry was blighted, losing nearly $5 billion in revenue, despite having contributed 18.7 per cent to gross domestic product growth in 2019.

But, while the government decision to open is timely, travel consultant Pearson opined that the effort might not be enough, given that competition is “hotting up” in the region for international tourists.

Not too far from Cambodia is Vietnam’s Phu Quoc island on the Gulf of Thailand, which is expected to open to tourists soon, while Thailand rolls out the red carpet to travellers from 46 countries without quarantine starting November 1.

Apart from that, Singapore will soon have 13 vaccinated lanes, while Malaysia expects to reopen its island resort Langkawi. Indonesia’s Bali is already accepting tourists, albeit with a quarantine.

“With the exception of Singapore and Thailand, the majority of these reopening schemes focus on beach destinations or islands.

“By choosing to reopen Sihanoukville, Cambodia is directly pitting itself against these other popular beach destinations, rather than showcasing one of its advantages, [which is] visiting a largely empty Angkor Wat – a once-in-a-lifetime experience,” she said.

As such, to ensure a successful reopening, it needs to come up with a “well thought-out” strategy that would differentiate itself from its ASEAN neighbours.

This strategy should address three factors pertaining to the scale of its opening – ideally being all of Cambodia, which nationalities are welcomed, either everyone or with few limits, and the ease of entry, which relates to direct flights, visas on arrival, limited paperwork and zero quarantine.

Cambodia already has “one win”, Pearson pointed out, which is its “impressive” vaccination rollout. Thus, the strategy could place Cambodia ahead of its peers and ensure significant tourism recovery.

That being said, her observation has a tenuous link to the often discussed topic of weak tourism product diversification to attract return visitors.

Recently though, talks of developing eco-tourism as a new product offering saw the approval of five sites in Kampot while several other projects are being planned but with little to show, thus far.

Industry experts, in the past, have urged the authorities to expand the tourism offerings instead of relying on 12th century Angkor Wat to draw visitors to Cambodia.

For decades, the ancient temple complex in Siem Reap province, north of Phnom Penh, has been luring millions of tourists to its site, who mostly ignored the rest of the country.

Standalone destination

This year, the Roadmap for Recovery of Cambodia’s Tourism During and Post Covid-19 (2021-2025), devised by the government revealed plans to develop a “modernised brand” to promote “Cambodia: Beyond the Temples”.

It also talked about improving air connectivity, an aspect that has been raised by industry players with the authorities to establish more direct flights.

The idea is that it would attract more long-staying visitors instead of short-term visitors transiting from larger transport hubs to only visit Angkor Wat.

For that to happen, Phnom Penh would have to step up its resources to become an international airline hub. The question would then be whether it has that potential to rival Bangkok, where 40 million tourists arrived in 2019, data by Nikkei Asia showed in February this year.

SSCA’s Chansereyvutha is confident that the new Phnom Penh International Airport (PPIA) with a 4F-class terminal has what it takes to become an international hub.

He said the airport which is being built by Overseas Cambodia Investment Corp at a cost of $1.5 billion was planned to compete as a future hub in Southeast Asia.

For Brun of Cambodia Airports, which owns a 45-year concession on the three existing airports including the present Phnom Penh International Airport, the notion of achieving that vision is slightly different.

He felt that the government should make use of the “opportunity” from the pandemic and its impact on the air travel sector to rethink, in particular its tourism offerings, such as developing diversification of products, and transition to a standalone destination.

“Cambodia is a country with a lot of potential and there’s no reason to not set ambitious goals,” he commented.

Too early to assess

Aviation growth in Cambodia has been exponential in the past few years. It is indicative of the increase in tourists, businesses and airline companies because of the growth of foreign direct investment, primarily from China.

To date, there are five locally-registered airlines comprising flag carrier and majority state-owned Cambodia Angkor Air, Lanmei Airlines, Cambodia Airways, JC International Airlines and Sky Angkor Airlines. They mostly rely on the Chinese market.

Source: Cambodia Airports, 2021.

Chinese investments in airport infrastructure have also risen in tandem. For instance, three airports including the $350 million Dara Sakor airport and $880 million new Siem Reap International Airport, are currently being built by Chinese investors.

In 2019, Chinese visitors represented more than one third of the total 6.6 million tourist figures, at 2.4 million, which was a 16 per cent growth year-on-year.

Under the pretext of the Belt and Road Initiative, foreign direct investment from China has risen steadily since 1994, coming up to 37 per cent out of $3.1 billion total investments in 2018, the ASEAN Investment Report in 2019 stated.

All of these, notwithstanding China’s significant role in official development aid and loans as well as bilateral trade is making Cambodia increasingly dependent on this relationship, the World Bank wrote in June.

So much so, the impact of the pandemic on China which imposed travel restrictions is seemingly palpable in Cambodia.

All three airports have had to contend with falling passenger numbers, and aircraft movements, which plummeted 70 per cent year-on-year from January to September this year.

“Flights have dropped owing to the specific fact that flights between Cambodia and China have slowed to a trickle because Chinese authorities have enforced stringent entry rules into China,” said CEO Brun.

That being said, the choice of reopening Sihanoukville and Dara Sakor to travel, which are havens for Chinese investment, suggests that the government harbours hope for Chinese nationals to come back soon.

Going by recent analyses by industry players on ASEAN’s reopening vis-à-vis the resurgence of Covid-19 cases in the region and globally as well as China’s restrictions, this might be a stretch for Cambodia in the short-term.

However, Brun said the recent announcements by authorities aimed at reducing quarantine requirements and the lifting of flight bans with certain countries are “positive signals”.

Though it was still “too early” to assess how those measures would translate into more air connectivity and resumption of flights, he remained confident in the “resilience” of the air travel sector.

“Studies suggest that there’s an appetite for travelling and airlines are able to swiftly reinject capacity when demand grows and measures curbing travelling [such as] quarantine, cross borders restriction, are eased and lifted.

“The aviation sector is resilient and reacts quickly. That’s why it is critical for governments to coordinate and harmonise or standardise their cross borders, testing, Covid-19 certification . . . policies in order to reopen and restore confidence in air travels,” Brun said.