The Asian Financial Crisis: Causes and Implications for Australia's Tourism Industry

By Prideaux, Bruce | Australian Journal of Hospitality Management, Spring 1999 | Go to article overview

The Asian Financial Crisis: Causes and Implications for Australia's Tourism Industry


Prideaux, Bruce, Australian Journal of Hospitality Management


The following section present topics of contemporary interest.

Abstract

The 1997 Asian financial crisis was an unexpected detour from Asia's otherwise rapid rise in economic prosperity. An immediate impact of the crisis was a fall in the number of Asians travelling abroad. Effects were felt in both Asia and Australia. This paper examines the causes of the crisis and assesses the impact on Australia's tourism industry. Strategies that could be adopted to mitigate further effects on Australia's inbound tourism industry are discussed.

Keywords: Asian Financial Crisis, Australian Tourism, Government Policy

Introduction

Prior to the Asian financial crisis that began in July 1997, Australia's tourism industry was experiencing a rapid increase in Asian inbound tourism, based on growing Asian prosperity. Optimistic forecasts of double-digit annual inbound growth caused a resurgence of interest in tourism investment in Australia, mirroring high levels of investment in hotels and resorts in the late 1980s. By the end of 1997 the financial crisis, which began in Thailand, had spread to South Korea and Indonesia and the first evidence of the impact of the crisis on Australia's inbound tourism industry was beginning to emerge, as arrivals from most East Asian nations declined. This paper will examine reasons suggested for the emergence of the crisis as well as highlighting its short-term impact on Australian's tourism industry. Strategies to reduce the adverse effects of the crisis in the long-term are also considered. For the purpose of this paper, an expansive definition of the tourism industry is taken to include the private sector and those elements of the public sector that provide the range of goods and services necessary for the operation of the tourism industry.

Literature Review

The speed with which the crisis emerged and engulfed East Asia caught most commentators by surprise. As late as May 1997, Joseph E. Stiglitz (1998), Chief Economist of the World Bank, was describing East Asia's economic success as the engine of growth for much of the rest of the world. Given the severity of the crisis and its possible long term implications for tourism in the Asia Pacific region, it is surprising that few tourism academics have published detailed analyses of the crisis from a tourism perspective. Apart from a special edition of Current Issues in Tourism devoted to the crisis, analysis of the causes and the possible effects of the Asian financial crisis have been largely confined to the business press and academics active in economics, finance and business research. This paper will rely on the business press, conference proceedings (both published and unpublished), government reports, World Tourism Organisation reports (WTO 1998a, b), industry reports, web publications, the initial books on the crisis and references to the crisis in the tourism literature.

Published comments on the crisis have been prolific in the business press, in particular, and the wider popular press in general. Articles appearing in the popular press range from predictions of a speedy resolution of the problem to expressions of gloom and continuing problems. Comment in the business press has generally been more considered and analytical. In the academic press, Mules (1998) observed that Australia may have to reinvent its tourism industry to balance the traditional fare of sun, sea, sand and wildlife with new products that appeal to more diverse markets if it is to cope with the anticipated (at the time of writing) impacts of the Asian financial crisis. Prideaux (1998a) briefly discussed the impact of the financial crisis on inbound Korean tourism into Australia, noting that there was a need to maintain strong links with the Korean industry throughout the crisis period, while at the same time developing new tour options for the next wave of Korean tourists in the post-crisis period. Prideaux and Witt (1999) observed that the Asian financial crisis highlighted the need for additional research into tourism forecasting methods, such as contingency planning and scenario development. …

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