APAC Travel Still Below 2019 but 2025 is Promising – Mastercard
Above, View of Singapore CBD from a room at Swissotel The Stamford. Photo: Raini Hamdi
11 Dec 2024
Travel in APAC is expected to remain robust, although total passenger numbers in mid-2024 were still 12% short of 2019 levels, according to Mastercard Economics Institute (MEI) 2025 outlook. Some of this shortfall is the result of outbound travel from North-east Asia – particularly China and Japan – having yet to recover to pre-pandemic levels.
MEI expects the global economy to see 3.2% growth, similar to the 3.1% seen in 2024.
APAC growth will align with 2024 levels, while lower inflation and easing interest rates will provide relief to consumers and households.
As the disinflationary environment eases the burden on consumers, APAC will see tight labor markets and a catch-up of inflation-adjusted wages, which is expected to contribute to increased spending – especially on discretionary items, including big-ticket purchases such as electronics, furniture and appliances. While some of the pent-up demand for experience spending has subsided, consumers are still prioritizing big-ticket moments, such as major concerts and events.
“If 2024 was about ‘getting back to normal’, 2025 is about normalization as volatility subsides and easing monetary policy allows consumers to benefit from economic growth,” said David Mann, chief economist, Asia Pacific, Mastercard. “However, policy decisions like potential interest rate rises in Japan or US tariffs could significantly impact this growth. Businesses should leverage consumer optimism while preparing for potential trade disruptions.”
APAC Outlook
India is expected to be the fastest-growing major economy in 2025, with a GDP growth of 6.6% and consumer spending growth of 6.2%, driven by a rising middle class and investment, as it is less exposed to global demand.
China is expected to stabilize with 4.5% growth in 2025, driven by increased government stimulus and pro-growth measures to counteract economic headwinds like weakened consumer confidence and a slowdown in the housing market.
Malaysia’s economy is expected to outperform in 2025 with 4.7% GDP growth, driven by a robust labor market and strengthening investment.
Japan faces a unique economic environment with continued inflation volatility and the Yen at historic lows, contributing to the ongoing tourism boom and spending on high-end luxury goods.
Australia, New Zealand and Singapore, having experienced stronger inflation shocks than the rest of the region, are likely to see relief as levels fall to around 2-3% and central banks ease their respective monetary policies.
Two Trends for Hotels & Travel to Watch
Pricing Priorities: ‘Travel Twins’
MEI has observed that travelers are opting for destinations that offer similar experiences to popular hotspots but with lower prices and smaller crowds. These ‘travel twins’ are growing faster and seeing higher year-on-year increases in hotel bookings. For example, Lombok in Indonesia, with its stunning beaches and serene landscapes, is an ideal alternative to Bali, while Fukuoka in Japan offers a Tokyo-like experience without the high costs and crowds.
Similarly, consumers are seeking more cost-effective apparel options. MEI found that, in terms of YTD spending growth, mass apparel brands are outpacing luxury ones globally by an average of 7% points. However, Japan is an outlier, with the depreciating Yen boosting visitor spending on luxury goods, resulting in high-end brand growth outpacing mass market growth by 14 percentage points.
“Even though consumers are set to spend in 2025, there are some caveats,” said Mann. “For essential purchases without substitutes, increased prices are unlikely to affect sales. However, where alternatives exist, consumers may opt for more affordable versions of goods and experiences. This budget-conscious behavior may reflect residual caution after years of economic uncertainty and an attempt to balance a higher, yet relatively stable, cost of living.”
Policy: Shifting Gears?
Heading into 2025, Japan and the China are taking proactive measures to shore up their economies. The Bank of Japan continues to raise interest rates to combat ongoing inflation, an outlier in a region where inflation has mostly eased. Meanwhile, the Chinese government has announced pro-growth actions, including cuts to give banks more latitude, a swap facility for non-bank financial institutions to borrow from the People’s Bank of China to purchase stocks, and reducing the down-payment requirement for second home purchases to a historic low of 15%.
“The policies of individual governments could have substantial knock-on effects in 2025,” said Mann. “For instance, part of the shortfall in APAC tourism is due to decreased outbound travel from North-east Asia. Further recovery may depend on how successfully the Chinese Mainland and Japan stabilize their economies. While there is uncertainty around increased tariffs, MEI suggests that some impacts can be offset by greater intra-regional trade and growing trade in data and services.”
MEI’s Economic Outlook 2025 examined 13 markets across Asia and Oceania, using multiple public and proprietary data sets, including aggregated and anonymized Mastercard sales activity, and models estimating economic activity.