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June 1998 Vol. 13, No. 6   RSS Feed for Undercurrent Issues
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Benefit From the Asian Money Crisis?

For dive travelers is it bargain or bedlam or both?

from the June, 1998 issue of Undercurrent   Subscribe Now

Last summer Asian currencies went into freefall, with the Malaysian ringgit and the Thai baht each falling about 50% and the Indonesian rupiah declining about 70%. Even the Australian dollar fell to an 11- year low, losing about 20% of its value against the U.S. dollar. Naturally, my immediate response was to plan a dive trip to take advantage of these bargain exchange rates. Then I thought about it more carefully.

Others must have reconsidered as well: in Indonesia, tourist arrivals for the first two months of this year fell 12.1% from last year. According to Reuters, East Asia and the Pacific region suffered their worst-ever tourist season. Even Australia is predicting no growth in tourism in 1998.

So why is what sounded like a travel bargain turning out to be a travel bust? Before the current crisis, Asian economies were growing rapidly and gearing up for a great tourist influx. New tourist-related construction broke ground, new airlines were launched, and established airlines embarked on costly modernization programs.

After the floatation of the Thai baht last July, however, the castles in the air fell with a great thud, and the values of Pacific currencies toppled. Experts predict that economic recovery will take two to five years, with countries that were especially hard-hit, such as Indonesia and Thailand, possibly taking even longer.

Where does all this leave the travel industry? Somewhere between the proverbial rock and hard place, by most accounts. When travel is down, half the fares you collect are in sharplydeflated local currencies, and your highest expenses, such as debt, fuel costs, and lease payments, are fixed in dollars, it just doesn't leave a whole lot of room to maneuver.

Although some carriers, such as Australia's Qantas, are on fairly stable financial footing after canceling only a handful of routes, many Asian airlines are in serious trouble and could cancel flights without notice. Malaysia's regional carrier, Saeaga Airlines, suspended operations in March. Indonesia's Garuda International has reduced the frequencies of many flights and suspended its only U.S. flight. All Indonesia's airlines are cutting routes, taking planes out of service, even returning leased planes. Malaysia Air, Thai Air, and Australia's Ansett are also trying to improve their cash positions. Primary carriers will probably survive, but analysts predict that secondand third-tier carriers, such as Malaysia's Pelangi Air and Indonesia's Sempati, will probably disappear. Sempati, for example, left a plane with mechanical problems on the tarmac in Bali for weeks, stranding hundreds of passengers.

Food and taxi services are certainly much cheaper. Many hotels tried to protect themselves by charging in dollars but provoked so much local ire that some of them are now rethinking their position.

With live-aboards, however, dollar pricing has long been the norm, because they are aimed squarely at the U.S. diving market. Many of their expenses are also in dollars. A spokesman for Siam Dive n' Sail explained that boat parts, engines, labor, equipment, compressors, advertising, and internet charges are all tied to the dollar. And U.S. advertising and agents' commissions tack a heavy markup onto the bottom line.

When it comes to diving, even little things seem tethered to the dollar. The price of a tank filling, for example, is partially determined by the cost of the imported air filter and spare parts. Wakatobi Divers says "guests pay for top dive equipment, top-of-the-crop expatriate dive instructors, satellite-based communication -- all imported, all paid in dollars." And as long as profits are tabulated in dollars, the cost of trips and services will be, too.

In addition, some travelers understandably have cold feet about Asia's political and social instability. Even a few weeks ago, before the situation in Indonesia had become so volatile, the Fantasea had decided to postpone its Indonesian cruises for one year, saying that the "relentless negative press coverage makes Indonesia a difficult destination to sell and bookings were disappointing to say the least." Similarly, the Asian Diving Equipment and Marketing Show, which was to be held in Jakarta this year, has also been canceled. Now, with death tolls from Indonesian riots reaching into the hundreds, the State Department has recommended that American citizens evacuate the country.

When the political situation stabilize, however, there are still Indonesian destinations that should be serviced by major carriers. Resorts like Kungkungan Bay on Sulawesi, which we reviewed favorably, should not be significantly affected since both Silk Air and Singapore Air have international service into Manado. Wakatobi, in the far south, which I liked a lot, may also fare well since the Ujang Pandang to Kendari flight is a relatively major one and they also have a ferry for backup. (Last year there were two flights a day; now it's down to one.)

Major international carriers fly into Indonesia, so live-aboards leaving from major points of embarkation should not be significantly affected. The same is true for Thailand, where liveaboards depart from primary destinations like Phuket. And Australia, of course, is no problem.

Despite inconveniences, bargain-basement exchange rates and low airfares are still tempting. Island Dreams reports ticketing a passenger from Los Angeles to Bangkok for $800, and Qantas offered roundtrip fares between Los Angeles and Sydney for as little as $718.

So if you're hell-bent on traveling to Asia, you'll have to be flexible and attentive, monitoring flights continuously to get where you want to go. If you do, some grand bargains await you.

-- John Q. Trigger

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