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 The Brancatelli File

joe WHAT A DIFFERENCE
A YEAR MAKES IN ASIA


BY JOE BRANCATELLI

June 25, 1998 -- The whole world was changing a year ago and, like street suckers watching a three-card monte game, we were looking in the wrong place.

While we fretted about the political fate of Hong Kong as it reverted to Chinese suzerainty a year ago, the financial sky was falling in Asia. While we ogled the pomp and circumstances in Victoria Harbor, Asia's economies began their free falls. While we watched the phlegmatic British sail away and the jack-booted Chinese communists strut in, everything we thought we knew about business travel in Asia changed.

It's okay to admit it now. We were all blindsided. On July 1, 1997, we were watching Prince Charles lead the British retreat from Hong Kong in a teeming rainstorm. Meanwhile, in total obscurity, a panicky Thai government devalued its currency and unleashed a financial firestorm.

A year after the economic dominos toppled in Asia, it's worth scattering a few electrons to see where we stand in the post-modern world of Pacific Rim paper tigers.

Let's start with the currencies themselves. Ever since Thailand devalued the baht, Asia's major currencies have plummeted in value against the once-again Almighty Dollar. As you can see by the chart below, the year-over-year gains in the dollar's buying power have ranged from substantial (10 percent in Pakistan and 15 percent in Singapore) to eye-popping (more than 50 percent in Malaysia, the Philippines and South Korea) to genuinely inconceivable (a greenback now buys almost five times as many Indonesian rupiah as it did a year ago).

This unprecedented currency reordering has been felicitous for U.S. business travelers. Given the magnitude of the fluctuations, there has been surprisingly little inflation in Asia, thus allowing frequent flyers to take full benefit of the financial shock wave. Everything from taxi rides and restaurant meals to daily newspapers and shoe shines costs a fraction of what they did last year.

The one wrinkle, of course, is Hong Kong. The Hong Kong dollar is pegged to the U.S. dollar, so currency values haven't changed. But since Hong Kong has revalued its economy in other ways--both stock prices and real-estate values have essentially collapsed--effective prices for U.S. travelers have, in fact, declined sharply.

Asian airline service has changed radically in the last year. As currencies collapsed, airline traffic collapsed. In response, carriers slashed frequencies, abandoned or restructured routes and shed aircraft with frenzied determination, all to little or no avail. At least two national carriers (Garuda Indonesian and Philippines Airlines) are near financial collapse.

What Asia service remains sells for bargain-basement prices. Last year at this time you couldn't beg, borrow or steal a premium-class seat. The cheapest coach seats cost $1,500. Now, transpacific coach seats have been sold for as little as $400 roundtrip and the premium cabins are often empty.

Asian hotel accommodations are also fantastic bargains now. Nightly room rates are often half of last year's prices--and this year's rock-bottom rates may come bundled with all sorts of amenities and special services. Once impossibly expensive, five-star rooms in cities such as Bangkok and Hong Kong are going for prices we haven't seen in a decade. In Kuala Lumpur, where several new hotels opened just as the currency crisis struck, rooms in world-class properties are now $75 or less. Jakarta's once-bustling hotels are ghost towns.

Lastly, we come to Japan, until recently the most expensive nation on the planet for business travelers. The yen's decline actually began about four years ago. After topping out at about 80 to the U.S. dollar, the yen is now around 135. That means Japan is a relatively affordable place to do business again. And as the Japanese economy slides further into recession, price deflation picks up steam. The days of the $30 melon, the $600-a-night hotel room and the $200 cab ride from Tokyo's Narita Airport are over, at least for now.

Where we go from here is anyone's guess. Smart American companies are sending their business travelers to Asia on scavenger hunts for derelict assets. Vulture funds are popping up to buy depressed Asian real estate. U.S. concerns are buying Asian manufacturing facilities for dimes on the dollar and for a fraction of their replacement cost.

What a difference a year makes.

THE ALMIGHTY DOLLAR IN ASIA

Country (currency)

Dollar Value
(6/27/97)

Dollar Value
(6/19/98)

Increase in
Buying Power

Australia (dollar)

A$1.34

A$1.68

25%

India (rupee)

Rs35.6

Rs42.1

18%

Indonesia (rupiah)

Rp2,430

Rp14,250

486%

Japan (yen)

114.7

134.7

17%

Malaysia (ringgit)

MYR2.52

MYR3.87

54%

New Zealand (dollar)

NZ$1.47

NZ$1.89

29%

Pakistan (rupee)

Prs40.3

Prs44.3

10%

Philippines (peso)

P=26.3

P=40.4

54%

Singapore (dollar)

S$1.42

S$1.63

15%

Korea (won)

W886

W1,393

57%

Taiwan (dollar)

NT$27.8

NT$34.1

23%

Thailand (baht)

Bt24

Bt41

71%


This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.