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Low Cost Travel Boon for Developers

Category: , Posted:16 Jun 2007 | 12:00 pm

Looking at the current phenomenal regional expansion of Asian low-cost airlines (LCCs) such as Air Asia, Nok Air, Tiger and Jet Star, the question that always comes up is just how much more market demand can they generate? Is it a fad or is the face of travel evolving into uncharted territory?

According to several local developers, one key trend that is emerging is that the door-to-door access provided by the regional LCC's is becoming a significant factor in new property transactions.Regional aviation analysts are quick to point out that comparisons between the US, Europe and Asia in terms of air travel are not always relevant. Whereas road and rail links within the US and Europe are prevalent ways to travel, in Asia the airways are the "roadways" between key cities and countries. let's face it, not many people will be driving to Hong Kong or Bali on their next holiday.

Developing Asian countries with such enormous populations often leapfrog even western countries in new technology or trends simply by means of economies of scale.A case in point is the mobile phone boom in India, where there are hundreds of millions of potential users, it is faster to install modern mobile networks than traditional land lines to keep up with the demand. The same could easily be side for aviation in Asia which is home to half the world's population.

One of the best case studies of the LCC's has been Air Asia from Malaysia. Coming with a bold Internet booking strategy, providing limited services (with options on a per pay basis) the airline by June 2006 had flown more than 9 million passengers with just 40 aircraft. It expects to have nearly 100 aircraft in the skies by 2010 and AirAsia.com is rated by Google as the number 1 travel site in Asia.

The direct customer approach in booking with the airline and not travel agents, offering lower prices and flexible rates that offer nearly anyone the option of overseas travel is changing the face of the industry.With the Asian economies currently growing and the emergence of a larger middle class, the region's LCCs are able to service strategic markets, such as China, India, Thailand, Malaysia, Philippine and Indonesia.

While LCCs are often construed to cater only to those without money, the fact is that it creates more frequent travel among a larger market of travelers. It's cheaper for someone who is Singapore-based to fly to Phuket than to spend a weekend in, say, Bintan. Backed by the use of new airplanes and easy web-based reservations, you can plan an international trip with a few clicks of your computer mouse. The impact this increase in airplane seats has on tourism to a market such as Phuket is significant.

One of the key demand drivers for property is return tourists, who make repeat visits to the island and ultimately end up buying a villa or condo here. In a destination resort such as Laguna Phuket, which has strong brand equity, a large portion of their residential buyers are guests who have stayed at the resort many times for years. It's a simple equation: the more tourism grows, the greater the impact on property sales.

An interesting offspring of the LCC's growth is that these carriers are now entering the hotel market. Internationally easyJet has started a hotel brand and now Air Asia has launched Tune Hotels.

In what's bound to raise eyebrows and perhaps cause a few hotel chains to rethink the way they do business, are the innovations of the product. Selling rooms the same as airline seats, direct, prepaid and rates vary depending on how far in advance you book.

Services have been stripped down to offer only a basic room, TV and bathroom, with extras such as air-conditioning and a towel charged if they are requested. There are no phones in the room as they presume everyone already carries a mobile.Hotel lobby space is leased out retail space to a convenience shop, housekeeping and maintenance are outsourced and the average number of staff for a single property is 10. While not suitable for everyone, the product allows a wider range – and a greater number – of people to get on an airplane and have affordable holidays abroad.Tune has opened its first hotel in Kuala Lumpur and has another 10 under development at locations the airline flies to.

However, the jury is still out on the long-term viability of the LCCs both here and worldwide. In the past airlines have followed cyclical trends, but as technology changes new startups such as these seem to be able to embrace it and introduce new products at a rate much faster than legacy carriers.

On a recent flight on Tiger Airways from Singapore, I was startled to see business travelers and affluent local residents in greater numbers then I have ever seen before. For the property development business in Phuket and beyond, the LCCs are going to change the way we see our market for a very long time.

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