The Emergence of ASEAN Halal Tourism Market

BY AHMAD AZUAR ZAINUDDIN
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The halal or Muslim-friendly travel market is among the fastest growing segment in the world. It offers enormous potential for ASEAN SMEs. In this article, ACE explores the landscape, challenges and opportunities which this emerging market segment presents.
The concept of travelling is deeply embodied within the Islamic heritage, so much so, that the acclaimed Muslim philosopher and jurist, Al-Ghazali, had written about the subject in Kitab Adab Al-Safar (Book on Conduct in Travel). Moreover, Ibn Batutta, a Muslim scholar, is widely recognised as one of the greatest travellers of all time. An account of his journey from the Horn of Africa, West Africa, Middle East, South Asia, Central Asia and Southeast Asia to China spanning over a period of 30 years was documented in details in the Rihla (Journey) which serves as an important reference for ensuing travellers.

Indeed, the traditions of these great Muslims have continued to this day. Based on the State of the Global Islamic Economy Report 2015 by Thomson Reuters (published in collaboration with Dinar Standard), the global Muslim travel expenditure, excluding hajj and umrah, is estimated to be worth US$142 billion in 2014 or 11% of the total global travel expenditure. Comparatively, this is a 6.3% increase from the previous year and is expected to grow to US$233 billion by the year 2020. Muslim travel consumer is already among the largest market in the world with only China (US$160 billion) and the United States (US$143 billion) ranking higher.

Muslim travellers from Gulf Cooperation Council (GCC) countries are among the most sought after in the Muslim-friendly travel market. Despite accounting for only 3% of the world Muslim population, the Gulf travellers from these countries represents 37% or US$52.3 billion of the overall Muslim tourism expenditure in 2014. Countries such as Saudi Arabia (US$17.8 billion); United Arab Emirates ($12.6 billion); Kuwait (US$9.7 billion) and Qatar (US$9.5 billion) are the top sources for global Muslim tourism spending, followed by Indonesia (US$7.6 billion) and Iran (US$7.5 billion).

The growth of the Muslim travel market should not come as a surprise as Muslim countries such as the Gulf Cooperation Council (GCC) members, Turkey, Indonesia and Malaysia are among the fastest growing economies in the world. Today’s typical Muslim consumer profile is young, educated and with a large disposable income precipitating propensity for travel.

What makes the Muslim consumer segment distinct is their desire for products and services that takes into account their faith. The emergence of this important market in recent times has resulted in the proliferations of products adhering to the Sharia law across various sectors from healthcare, finance, retail to retail. These products are promoted as halalan tayyiban or permissible and good.

While ASEAN countries have an edge in the tourism market especially among travellers seeking for nature and culture tourism products, how does the region fare in terms of attracting the arrivals of Muslim travellers? More importantly, what are the initiatives that have been taken to cater to the needs and demands of this emerging and lucrative segment?

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The ASEAN tourism industry is already reaping the benefits of the halal tourism market. The report by Thompson Reuters and Dinar Standards notes that countries in the region such as Malaysia, Singapore, Thailand and Indonesia are leading the industry in term of the development and health of its Muslim inbound travel ecosystem.

Among the factors contributing to these countries’ favourable position are the large inbound Muslim traveller base, a strong halal governance and proximity to neighbouring Muslim countries. Nevertheless, the report also highlights the untapped potential of the region’s non-Organisation of Islamic Cooperation (OIC) countries such as Thailand and Singapore, considering the present low awareness of these countries as halal-friendly destinations.

Combined with the fact that the country is home to the largest Muslim population in the world, and its rich nature and culture, Indonesia is perfectly suited to attract Muslim travellers from all over the world. The country is fast gaining a reputation as a world-class tourism destination. In the World Halal Travel Summit 2015 held in Abu Dhabi, the country bagged awards for the World’s Best Halal Tourist Destination (Lombok); the World’s Best Honeymoon Destination (Lombok); and the World’s Best Family Friendly Hotel (Sofyan Hotel Betawi, Jakarta).

Lombok is an upcoming tourism destination which beauty is often compared to its sister island of Bali. The island is home to 3 million inhabitants with over 90% of its population being Muslims thus making halal food and facilities such as mosques available in abundance. Recognising the island’s huge potential to draw arrivals of Muslim travellers, plans arein the pipeline to introduce special zones for men and women. However, these areas have to be carefully identified to ensure that the strategy do not come at the expense of non-Muslim markets that are drawn to the island’s party hotspots such as Gili Trawangan Island off the west coast of Lombok.

Indeed, balancing between catering to the needs of Muslim and non-Muslim markets are among the challenges faced by the SMEs in this sector. In addressing this issue, many players promote themselves as “family-friendly” or “value-driven” to maintain inclusiveness while accommodating to the needs of their Muslim guests.

The Sofyan Hotel which operates several Sharia-compliant three-and four-star hotels in Indonesia broadcasts calls to prayers within its hotel rooms, conduct congregational prayers and showcase religious programmes on the TV screens at public areas. While it is clear that the Sofyan Hotel caters primarily to Muslim guests, other Muslim-friendly hotels may be more low-key by offering halal food, kiblat (prayer direction) in rooms or extensive buffet spread for iftar (breaking of the fast) during Ramadhan so as not to alienate non-Muslim guests.

These inconsistencies in the interpretation of the concept of Muslim-friendly travel raise the need to introduce a standard in order to preserve the integrity of tourism products which claims to be halal or Muslim-friendly. Towards this end, Malaysia has introduced the MS 2610:2010: Muslim Friendly Hospitality Services (MFHS) Standards which is dedicated to the Islamic tourism sector in 2015. The MFHS provides the much welcomed guidelines on three critical components of the Islamic tourism supply chain, namely the accommodation premise; tour packages, and tourist guides.

Moreover, CrescentRating, a leading authority in the halal travel market, has also released an eBook on the Terms & Definitions on the Muslim Travel Market in an attempt to bring some level of consistency to the terms used by the industry.

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Although the segment may have some teething issues, the Muslim-friendly travel segment still offers enormous potential for ASEAN SMEs. The next question then is where lies the opportunities?

While targeting wealthy Muslim travellers from the GCC countries makes sense for premium brands, there are significant opportunities for SMEs to develop mid-tier products catering to middle income Muslim travellers, especially those from within Southeast Asia. After all, intra-ASEAN travelers already account for more than half of the tourist arrivals to region. This is further supported by the bourgeoning low-cost airlines sector which enhances connectivity with no visa requirements for travel between ASEAN countries.

Conversely, SMEs could also explore opportunities of convergence between the concepts of Muslim-friendly travel and other growing global trend in tourism sub-sectors. An example of this is the potential in converging Muslim-friendly travel with voluntourism or eco-tourism. Offering charitable and ethical trips not only enable SMEs to differentiate and gain competitive advantage but are also in-line with the teachings of Islam.

In essence, Southeast Asia is teeming with tourist attractions from heritage sites like Angkor Wat in Phnom Penh to more modern sites like the Universal Studios in Singapore waiting to be explored by Muslim travellers. Traits of Muslim travellers are two sides of the same coin with non-Muslim travellers from emerging countries with the exception that faith-based needs are influencing their purchasing decision. For a vast majority of Muslim travellers, this need is simply access to halal food. There isn’t much additional investment required for new or existing SMEs to start catering to the emerging market of Muslim-friendly travel. So what are you waiting for?

The Asean Tourism Edge

BY AHMAD AZUAR ZAINUDDIN
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In this new segment of ACE, we shall embark on a journey to uncover stories from SMEs as well as relevant stakeholders in the hope of arriving at a deeper appreciation and understanding on the key drivers and enablers who shape the industry they operate in. We kickstart our endeavour with the tourism sector.
How important is the tourism sector for the ASEAN economy? It is a question that many would be able to answer without much hesitation. After all, the region attracts over 100 million tourists each year, contributing 12% to its gross domestic product (GDP)and 3.7% to employment in 2015. In addition, the sector has proven to be resilient in the face of the current challenging economic climate. It comes to no surprise that the tourism industry was selected as one of the priority sector to be given special attention in the implementation of the ASEAN Economic Community (AEC)

Southeast Asia is blessed with rich natural resources and culture. This is evidenced by the United Nations Educational, Scientific and Cultural Organisation (UNESCO) which has pinpointed 37 World Heritage Sites in the region. Many entrepreneurial SMEs in the region have tapped on this huge tourism potential to develop diverse tourism products ranging from accommodation, transportation services, food and beverage (F&B) services, retail trade, recreational industry, and travel agencies.

Among the key catalysts for the growth of the sector is the increase of new middle class within the emerging economies in the region with more disposable income for travel. A closer look at the numbers reveals that over 75% of the international arrivals to the region come from Asia, out of which, more than half comprise of intra-ASEAN travelers.

The emergence of low-cost carriers plying routes in the region such as Air Asia, Jet Star, Tiger Airways and Cebu Pacific had also served as game-changer in boosting the tourism sector by making air travel more affordable. Capitalising on the massive tourism opportunity in the region has made Tony Fernandez, the founder and CEO of Air Asia a regional entrepreneur icon and a global household name.

Moreover, advances in the telecommunication sector with wider broadband and mobile network penetration, coupled with innovative online travel solutions have also served as enabling factors that has made traveling more hassle free. Today’s consumers are always connected and enjoy making their travel planning and booking arrangements online or via their mobile phones.

Indeed, SMEs in this sector would be missing out if they do not take advantage of this development by having their products listed on popular travel websites such as Agoda, Expedia and TripAdvisor, among others. Social media sites like Facebook and Instagram are also must-have business tools for promoting and engaging with customers. These two-way engagement tools are important for SMEs to monitor online enquiries and feedbacks and respond to them in a timely manner.

In the accommodation sub-sector, today’s travellers place high importance to reliable Internet access. The TripAdvisor Global Travel Economy Report 2015 reveals that 74% file “free-wifi” as a key factor in deciding their accommodation. Certainly, the numbers would be higher among the Gen-Y and millennial travellers. As people are increasingly comfortable in sharing their travel experiences online, it is also important to ensure that the free-wifi service is up to speed and reliable to avoid negative feedback.

As we desire to develop the tourism sector further, it is important to preserve the ASEAN tourism edge. The World Economic Forum’s Travel and Tourism Competitive Survey 2015 reports that nature and heritage are key competitive strength of the region’s tourism sector. The Philippines, Indonesia and Malaysia are among the world’s 17 countries identified by Conservation International as mega-diverse countries that harbour a majority of the Earth’s species as well as a high number of endemic species.

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With tourist arrivals to ASEAN expected to increase by 123 million by 2020 and 187 million by 2030, it is important that the SMEs strive to strike the right balance between profit, people and planet to ensure long-term sustainability of the industry. This does not necessarily have to be a trade-off between profitability and cost. Today’s consumers are more inclined to businesses that are sensitive to the environment in which they operate in. TripAdvisor reports that more than half of travel consumers indicate eco-friendliness and sustainablity as factors impacting their decision when booking accommodation. In fact, both elements ranked higher than brand name of the accommodation, special offer and loyalty programmes.

Naturally, many pioneering SMEs in the region have embraced eco-tourism as the model of their business venture. The International Ecotourism Society (TIES) defines eco-tourism as “responsible travel to natural areas that conserves the environment and improves the well-being of the local people”. This type of tourism brings together conservation, communities and sustainable travel.

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This commitment on sustainability and inclusivity is affirmed in the vision of the ASEAN Tourism Strategic Plan 2016-2025 which envisages that come 2025, ASEAN will be a quality tourism destination offering a unique, diverse ASEAN experience, and will be committed to responsible, sustainable, inclusive and balanced tourism development, so as to contribute significantly to the socio-economic well-being of ASEAN people”.

Muslim friendly or halal tourism, which caters to the faith-based needs of Muslim travellers also presents huge potential for SMEs in the region. The global Muslim travel expenditure is estimated to be worth US$142 billion in 2014 or 11% of the total global travel expenditure with only China (US$160 billion) and the United States (US$143 billion) ranking higher. By the year 2020, this segment is expected to grow to US$233 billion. Countries in the region, including non-Organisation of Islamic Countries (OIC) members like Singapore and Thailand, are well-positioned to draw Muslim guests as a result of strong halal governance and their proximity to neighbouring Muslim countries.

In essence, ASEAN definitely has the edge in the tourism sector. With its rich natural and cultural resources, coupled with strategic government support in term of infrastructure investments and business-friendly policies, the stage is set for the SMEs in the region to set sail and embark on their journey to success.

Nobody Wants to Miss the Halal Business Boat

BY ROY CHEN
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Prospects of the halal business are so enormous that they have prompted non-Muslim majority ASEAN countries – notably Thailand, the Philippines and Singapore – to jump onto the bandwagon.
THAI EXPERIENCE
Japanese noodles and seaweed are a step closer to being exported to Muslim countries after an official signing of an agreement with Thailand’s National Food Institute that aims to bring investment from companies interested in halal certification. According to the NFI president, Yongvut Saovapruk, Japanese companies have been increasingly interested in Thailand’s halal potential and were looking to invest in its Islamic food industry. The country now ranks ninth for halal food exports and has its own established market, particularly in the largely Muslim southern provinces notably . “The Japanese are not familiar with halal food which requires a deliberate process including acquiring the raw materials, the cooking process and cooking standards that have to match specific religious requirements,” he explained. “By changing some of the procedures, the same product can be sold to a broader group of customers in those growing Muslim communities.”

Yongvut signed the memorandum of understanding (MoU) with officials from Japan Halal Development and Promotion, a government agency for boosting halal food standards in Japan and promoting Japanese food products in Muslim countries. Under the terms of the MoU, the NFI will assist Japanese investors to gain the official halal trademark from the Central Islamic Council of Thailand. Halal food accounts for roughly one-third of Thailand’s overall foods exports which amounted to 897 billion baht (US$25.43 billion) in 2015.

Moreover, Thailand’s Industry Ministry has budgeted 180 million baht (US$5.1 million) to promote exports of halal products for fiscal 2016. The department will also expedite development plans for halal products of small and medium enterprises (SMEs) and on a One Tambon, One Product (OTOP) basis to propel Thailand into becoming the world’s top five halal exporters by 2020. The Industry Ministry has allocated 120 billion baht (US$3.4 million) for the National Food Institute (NFI) and 60 billion baht (US$1.7 billion) to the Department of Industrial Promotion, some of which will be allocated to the Central Islamic Council of Thailand to fund the certification operations for halal food products which currently cover more than 5,000 companies.

With growing consumer acceptance and recognition of Thai halal foods, exports of these products should continue to expand this year. The rising world Muslim population will also raise demand for hygienic and high-quality halal foods. With the rapid expansion of e-commerce, development of a halal certification system and the government’s five-year plan to support and promote halal-food exports, there is hope of the kingdom becoming a top-five halal exporting nation by 2020.
PHILIPPINES’ EXPERIENCE
Meanwhile, the Philippines is working tirelessly to formulate regulations for the export and trade of halal products, processes and services; the promotion of halal products to the global market; the implementation of research and development programmes; and the facilitation of training and capacity building for farmers and manufacturers, among others.

The Department of Trade and Industry’s (DTI) Export Marketing Bureau Senate Bill or the Philippine Halal Export Development and Promotion Act Of 2015 aims to create the Philippine Halal Export Development and Promotion Programme as well as the Philippine Halal Export Development and Promotion Board.

The new policies will also seek to establish the accreditation process of halal certifying bodies – through the Philippine Accreditation Bureau – and to develop Philippine National Standards for halal through the Department of Agriculture’s Bureau of Agriculture and Fisheries Standards (for primary and post-harvest foods), the Department of Health Food and Drug Administration (for processed and prepackaged foods, drugs and cosmetics) and the Department of Trade and Industry’s Bureau of Philippine Standards (for non-food products aside from drugs and cosmetics).

National Meat Inspection Service Director Minda Manantan said three halal meat-processing facilities have already been accredited in the Philippines, while data from the DTI showed there are already 514 halal-certified companies. A study conducted by the Dubai Chamber of Commerce and Industry showed that the global halal market is projected to grow to US$1.6 trillion by 2018. Of this amount, halal food trade alone contributes US$630 billion.
SINGAPORE EXPERIENCE
With stringent food safety and its widely recognised halal standards by several Gulf countries and ASEAN neighbours, even secular and Muslim minority Singapore is well-positioned to ride on the growing demand for halal products and services globally. This includes demand from the emerging Muslim tourism markets such as Japan and South Korea where halal products and services are not as well developed.

Majlis Ugama Islam Singapura (MUIS), the primary halal-certifying and ritual cleansing body in Singapore, authorises seven types of schemes from products and eating premises to central kitchens, factories and poultry abattoirs. In 2014, TFK Corporation, a Japanese subsidiary of Singapore Airport Terminal Services (SATS), became the first company overseas to be issued halal certification (for its central kitchen in Tokyo’s Narita Airport) by Warees Halal, a company limited by guarantee that MUIS formed in 2014 to strengthen its halal inspection arm.

In the same year, just over S$4 million (US$2.95 million) in income was derived from halal certification in Singapore – up from S$2.98 million (US$2.19 million) in 2013, according to MUIS’ 2014 annual report. There has also been a five-fold increase in halal-certified premises in the last 15 years – from 533 in 2000 to 2,941 in 2014.

What’s interesting about Singapore is that even though it is a secular country, it is empowered by the AMLA (Administration of Muslim Law Act which came into effect in 1968) that seeks to protect the halal industry. This ensures the legality and genuineness aspects of the halal framework.

With the ASEAN Economic Community (AEC) formed, Singapore will have the opportunity to position itself strategically in fronting the halal market. Given that the republic lacks its neighbours in terms of manufacturing capacity – it can certainly offer that fundamental service that will educate and bring companies into the halal market. Singapore currently has over 10 active halal consultancy firms – about three of which are non-Muslim firms – that help companies attain halal certification locally and globally.