HK Airlines proves pent-up demand to travel in China

Saipan Chamber of Commerce director Alex Sablan shares that Hong Kong Airlines is proof that there is a pent-up demand to travel in China with Hong Kong’s weekly flights bringing in more tourists than United Airlines’ thrice-weekly Japan flights.

The Chamber held its monthly general membership meeting yesterday at the Kensington Hotel Saipan.

During the meeting, Chamber board secretary Ron Smith discussed the importance of “Operation 500K,” a strategic plan to bring in at least 500,000 visitors needed to keep the CNMI’s economy afloat.

“Operation 500K” entails at least four flights a week from three source markets, currently the CNMI has daily flights from Korea, three weekly flights from Japan, and once a week flights from Hong Kong.

During the presentation, concerns were raised if there really is a pent-up demand to travel from China to which Chamber director Alex Sablan said “yes” and Hong Kong Airlines is proof of that.

“There is pent-up demand, we’re seeing it through the Hong Kong Airlines flight, [People’s Republic of China] tourists are even willing to transit through Korea. Their numbers aren’t entirely lost, we have more Chinese tourists through this weekly flight from Hong Kong Airlines than we do from the three weekly flights by United from Japan.”

Sablan also noted that the United States has even seen over 2 million PRC tourists coming in post COVID-19 and that’s through B-2 tourist visas.

The CNMI has an advantage over the continental United States as it’s the only territory with the CNMI Economic Vitality & Security Travel Authorization Program (EVS-TAP), which essentially makes traveling easier for Chinese tourists to visit.

“If you look at post-COVID data, there was about 1.2 million travelers from China to the U.S., last year there was about 2.2 million, there’s a projected 3.3 million coming into the U.S, next year and beyond the United States is looking at around 3.7 million to 4 million. These are B-2 visas, but the CNMI is the only territory with the EVS-TAP program as a resource. This was negotiated through 902 talks during the Trump administration and the Biden administration saw it through and are now implementing it,” he said.

According to Saipan Tribune archives Chamber vice president Joshua Wise shared that the CNMI is in crisis mode.

Wise explains that fiscal year 2017 was the last year the CNMI was on track for a healthy and sustainable tourism industry.

“We were recognized by the World Tourism Organization as the third fastest growing tourism destination in the world. We had over 663,000 visitors, and the fourth highest fiscal year arrivals in history. We achieved this with nearly 5,600 flights from three major markets,” he said.

Wise adds that as of this year and last, the CNMI is far from 2017 numbers.

“Last year, we reached just over 215,000 arrivals. We are forecasted about 300,000 arrivals this year. That’s absolutely not enough. We need at least 500,000 arrivals to break even. This forecast is a 54% loss compared to arrivals in 2017. Hotel occupancy also follows arrivals. We went from 90.89% in 2017 to 37.63% in 2023. Hotel occupancy of 80% is what hotels need to make a profit but 70% is what we need just breakeven. So, at 37% occupancy, which takes into account only HANMI members, is a massive loss. When we take into account the entire island’s room inventory from non-HANMI members like guest houses, AirBnbs, our best occupancy we can achieve is just over 25%. This is an over 71% loss compared to our occupancy in 2017,” he said.

Based on these numbers, Wise said the CNMI has collected significantly less Hotel Occupancy Tax and Business Gross Revenue Tax.

“This affects our entire economy. With less occupancy, means less occupancy tax, which means less BGRT. In 2017, we had nearly $17 million collected in HOT and $5.6 million in BGRT from HANMI hotels. However, last year, we had just $6.2 million collected in HOT and over $604,000 in BGRT. This year, the CNMI is expected collect about $7.2 million in HOT and around $2.4 million in BGRT from HANMI members,” he said.

Wise explains that the significant drop in arrivals (which resulted in the significant drop in hotel occupancy) is a result of less flights.

“Less flights mean less visitors. In 2017, the CNMI received 5,597 flights but when compared to last fiscal year, the CNMI only had 1,799. that’s a 67.86% loss in flights. Meanwhile, in 2017, the CNMI had 12 airline carriers but in 2023, there are only four,” he said.

Wise said with the CNMI’s current flights, the maximum number of tourist arrivals is about 270,000 which is nowhere near the 500,000 needed to “break even.”

“The Korea market is already saturated, the Japan market is struggling with a record-low yen, and HK Airlines can only achieve 5% of China 2017 arrival. Bottom line, the current conditions are not stable,” he said.

To address these issues and to bring the CNMI’s economy to the point of breaking even, Wise says the Chamber and the Hotel Association of the NMI has established “Operation 500K.”