Tourists are spending less in Singapore. How should the country respond?

According to the Singapore Tourism Board (STB), the 9.3 million tourists who visited Singapore in the first half of 2019 was 1.3 per cent more than the same period in 2018. However, tourists’ spending of S$13.1 billion for the first six months of 2019 was 3 per cent lower than that the same period the year before.

STB figures further showed that in the third quarter of 2019, tourist arrivals rose to an all-time quarterly high of 5 million, driven by higher demand from China. This was 3.5 per cent higher than the 4.8 million in the same period in 2018, which was the previous quarterly high.

While there were no figures on tourists’ spending in the third quarter, a Business Times report suggested that local travel agencies did not see corresponding gains in their businesses, partly due to changing travellers’ preferences.

Figures from STB’s website show that both tourist arrivals and spending have risen significantly over the past 10 years, going from 10.1 million and S$15.5 billion in 2008 to a record of 18.5 million and S$26.9 billion in 2018. 

However, a back of envelope calculation shows that the per-tourist spending is lower in 2018 (S$1,454) than in 2008 (S$1,535).

Why is this so and what can Singapore do?

First, the challenge to get more tourists to spend even more in Singapore is real.

This is due to macroeconomic factors, geopolitical tensions, climate change, as well as competition from other regional and global tourist destinations.

Furthermore, mainstream tourists’ spending behaviour has been evolving due to the convenience and accessibility of online shopping, shared accommodation options such as Airbnb and more usage of digital platforms in making travel choices. While Airbnb is not legal here, it is available in many countries that compete with Singapore for the tourist dollar.

As a result, tourists choose their destination based on deals, shop less in malls overseas, and fork out fewer dollars on lodgings.

On the other hand, they spend more on sight-seeing and unique experiences in dining, entertainment, cultural shows and lifestyle activities such as sports, ecotourism and wellness.

GOT TO CATCH THEM ALL

Many industry observers believe that STB has historically focused on higher-spending visitors, such as those in the meetings, incentives, conventions and exhibitions tourism segment, as opposed to mass market visitors.

Given tourists’ changing preferences and growing affluence of travellers in China and other key source markets, it would be prudent for STB to adopt what I would term a total market coverage approach. This targets tourists across both mass and premium segments, achieving both volume (numbers) and value (receipts) to ensure sustainable tourism growth.

Singapore needs to rethink its legacy positioning as a gateway to Asia. This STB marketing strategy in the early days was due to the underdeveloped tourism sector then.

It was a good tactic in the past to promote tourism growth, even though tourists who visit Singapore as part of a regional tour tend not to stay long and thus spend less.

But now, neighbouring Asean destinations are also levelling up in terms of marketing, accessibility, affordability and the diversity of experiences they provide and Singapore has to adjust accordingly.

The execution of the total market coverage strategy will be challenging, as many of the Asian destinations such as Indonesia, Malaysia, the Philippines and Vietnam have the added advantage of a healthy domestic tourism sector, producing volume and receipts.

Thus they can continue to invest and develop their natural, cultural and historical attractions, drawing more international tourists, especially those from China and India, sources that Singapore is also heavily reliant on.

For instance, during my trip to Palawan in the Philippines in late November, I was impressed with the sheer number and diversity of tourists who visited attractions such as the iconic Puerto Princesa Underground River. The infrastructure and hospitality in Palawan are good, and just like Singapore, it is clean and safe for tourists.

So how can Singapore compete then?

TARGETING THE MICRO MOMENTS

A total market approach targetting both premium and mass travellers will require rich consumer insights, integrated omnichannel (offline and online) execution, as well as dynamic pricing and promotional efforts by all tourism partners.

We have to understand the customer journeys of both affluent and mainstream tourists and target the key micro moments.

The battle today for the consumer and tourism dollar will be won or lost in micro moments, defined by Google as “intent-driven moments of decision-making and preference-shaping that occur throughout the entire consumer journey”.

A typical consumer journey comprises of three stages: Consider, evaluate and buy. It is important for travel brands to effectively build awareness, engage customers and encourage advocacy during this journey by leveraging on both digital and traditional channels.  

Beyond the current marketing and outreach activities, it is important to understand what influences tourists before, during, and after making a decision. It also pays to look at their behaviour across personal devices and third-party platforms.

Consumers are increasingly turning to their mobile devices such as smartphones and tablets to decide various aspects of their travel plans.

Research conducted jointly by Google and Ipsos MediaCT highlighted that 69 per cent of leisure travellers who are smartphone users search for travel ideas during their free moments, such as waiting for the train or standing in a queue. 

About half of those travellers continue to book their choices through a different channel.

In another study by Google and Phocuswright on the influence of technology on US travellers, it found that more than 60 per cent made travel decisions on impulse based on a good hotel or flight promotion.

About 57 per cent of the respondents wanted travel brands to provide tailored information based on personal preferences and past behaviours. Interestingly, a third of these respondents were willing to pay a higher price for travel brands that personalise or customise experiences.

Competition in tourism is stiff. Tourists are increasingly connected on digital platforms. It is incumbent on STB to strengthen its collaboration with key stakeholders to build a data rich environment, where consumer journeys of key tourist segments are better understood and key micro moments are effectively targeted.

Basically, brand Singapore has to feature prominently during all stages of the consumer journey, from consideration to purchase, with appropriate targeting and messaging compaigns that resonate with different tourism sources.   

Tourism just like any other product and service is not immune to the threat of “commoditisation”, where competition is based on price and not differentiation of the product. Commoditisation will threaten future tourism receipts.

To fight this, Singapore should leverage technology and rich consumer insights, as well as its strategic location and great digital and physical infrastructure, to deliver tailored diverse experiences.

That will give tourists a holiday to look forward to, and also help to bring some cheer for the tourism sector here.

ABOUT THE AUTHOR:

Dr Prem Shamdasani is Associate Professor of Marketing at the National University of Singapore (NUS) Business School. These are his own views.