The Emergence of ASEAN Halal Tourism Market

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?

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.

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?