According to a recent Booking.com survey, Hong Kong was voted by global travellers as the top city for food. Other Asian cities that were in the Top 10 include Tokyo, Kuala Lumpur and Bangkok. Singapore was voted number 11.

Over the last ten years, tourism growth in the region has been dominated by intra-regional tourists, but interests from the rest of the world did not disappear.

Continued economic growth and the diverse national cultures have allowed the premium Asian cities to develop offerings that are now competitive in the global arena.

New tourism trend

According to the same survey, three-quarters of global travellers listed Gastronomic tourism as an important factor in picking their next travel destination.

One recent trend, especially among tourists from more developed markets, is to engage in lifestyle tourism, where instead of focusing on tourist attractions, travellers would try to experience city life as the locals do. Gastronomic tourism, especially when the focus is on food offered to locals, is an example of this trend.

Traditionally, the government has a crucial role in promoting tourism. In the early days of a city’s development, the industry only grows when infrastructure such as airports and hotel sites are developed.

This factor is still valid for secondary cities in the region, and major infrastructure investment, such as the construction or expansion of a city’s airport, can stimulate tourist interests for decades.

Also, tourist attractions often also depend on government policies to create the appropriate legal environment and develop the necessary infrastructure.

Governments (usually) play a central role

Heritage sites need clear rules to balance protection and development, and new attractions, such as theme parks or casinos, often require government support to be developed.

That is partially why, as analysts, we often directly use government forecasts of tourist arrivals as modelling assumption because of the government’s central role in developing the industry.

Lifestyle tourism, however, depends on the organic growth of the local industry and government support is often indirect. Take gastronomic tourism as an example.

Government policies in Singapore led to over 110 hawker centres, some of which are gaining international fame as food destinations. However, the hawker centres were developed to serve the local population and were not originally intended to be a tourism destination.

The Hong Kong government, through its Vocational Training Council, has formed two culinary schools, training hundreds of chefs and other restaurant professionals annually.

The government had several policy goals when the culinary schools were set up, including an additional career path for young people and to improve amenities offered to the business and expatriate communities, but creating a new form of tourism was never explicitly stated.

How food affects tourism

In both of the above examples, cities develop food cultures initially to serve local demand. But as the offering improves and diversifies, it becomes a tourist activity.

When I teach at the undergraduate level, I often ask students to read government or parliamentary papers to understand the official plans to develop tourism.

After understanding the plans, the students are often requested to generate assumptions to our modelling of stocks in the hotel, mall, and retail sectors. As lifestyle tourism becomes a stronger driver for future demand, the industry can often outperform these assumptions.

Since 2015, Hong Kong has faced a slowdown of Chinese tourists, and the number of tourist arrivals has contracted in the last two years. That has led to analysts and others to downgrade their medium-term estimates.

However, in the last half year or so, tourist arrivals from other Asian countries, particularly from Japan and Korea, have been growing in double digits, helping to bring the overall tourist arrival numbers back to positive.

While it will take time and data to ascertain why this growth happens, anecdotal reports suggest that many of these tourists were attracted to lifestyle tourism.

Tourism and the hotel sector

The various forms of lifestyle tourism may create additional growth drivers, which can help improve the long-term growth prospects of the industry.

Within real estate, hotels are often seen as a more volatile sector, and as a result, it is traded at higher cap rates than other asset types. As the volatility comes from the fact that hotel leases are daily, we do not think that lifestyle tourism alone will eliminate the cap rate gap.

Over time, however, a more diverse set of growth drivers may perhaps attract more institutional capital to the hotel sector.

Click here to read more content from Victor Yeung, Chief Investment Officer of Admiral Investment.

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