Karam Chand, CEO of Royal Brunei Airlines (RBA), discusses how the potential of tourism can be unlocked in Brunei as part of the government’s agenda to diversify the economy away from oil and gas
Everyone knows Brunei for the oil and gas industry and for the wealth it has created over the years. But recent times have been a lot more challenging because of the external factors such as the plunge in the prices of international commodities. How would you describe the current efforts of the government, the current state of the investment climate and the role of foreign direct investment in the diversification of the economy away from oil and gas?
I think the government has played a very significant role with the ‘ease-of-doing-business’ initiative and the pace of implementing the different strategies. As a result Brunei has moved up the ranks. We are seeing tangible improvements such as the increase in FDI. So I think from the government side we have seen a significant move.
FDI plays a very important part in terms of economic diversification. I think we are starting to see fairly good traction out of China. RBA wants to be an important player in this transition in any shape or form that best adds value. One of the things that I've said publicly is that we need to have the ‘capital-city-to-capital-city’ connection. I think that's a very important enabler of tourism, trade, movement of people, communication, you name it. All those different boxes get ticked if we have capital city connection by air.
What do you believe are the key advantages of Brunei perhaps versus other ASEAN economies like the Philippines, Thailand or Indonesia?
I think ease of doing business and the very modern infrastructure. In addition the collaboration with government agencies in getting access to land or utilities or any other support is a big plus. These are my observation compared to some of other countries. I remain to be corrected because I haven't closely looked at these things in other countries, however I believe in these areas Brunei does have something unique.
The other plus that should not be underestimated is the English language skills. The English law is the foundation of doing business, I think this gives the investors the comfort that Brunei has got a good investment climate where there is respect for law, how contracts are developed and honored. All these things already exist – modeled on the UK system. There is robust legal system and that goes a long way with investors. But they also look at other things; the political stability and place of doing business, Brunei is a very peaceful place.
What do you think is the role of the tourism sector in the diversification and what do you think are going to be the challenges in achieving the target of 450,000 tourists by 2020?
I believe tourism can play a very crucial role because having worked in other parts of world and seen the results first hand it gives me lot of confidence that the industry can be a game-changer. I have seen this in similar markets like the Pacific Islands. This is one industry you can get going very quickly. So if you have some infrastructure on the ground, a hotel, you can get people trained and working there very quickly as opposed to my industry which is far more complicated in terms of training and skills requirement.
To get waitresses and other similar roles to serve the customers requires low to medium level skills, and we can do that very quickly as a country. It doesn't require a long lead time to develop those skills. That’s why I see tourism as a game changer for job creation and economic diverisification .
In terms of the challenges as an industry, I guess there are various. One is the destination awareness. It's quite amazing that, despite being part of ASEAN, if you asked questions within ASEAN countries not everybody would give a very clear response on Brunei. Generally speaking, around the world, not many people know where Brunei is and what Brunei has to offer as a destination. I think in ASEAN it will be fair to say they'll know Brunei, but they truly don't know what Brunei has to offer and thus it dampens the aspirational aspect of the travel booking cycle. Thus perhaps as a nation we've got do a better job selling what we have to offer.
With the introduction of the Brunei Tourism Board, how is the coordination between the different stakeholders in tourism?
I think it is helping. I'm part of the board so I can't say it's not helping. It is helping but we're not quite there yet. So that is a challenge. The other challenge I think is the range of the products. We have quite a few three-star properties, we have a six-star property, maybe one or two five-star properties, then we can argue a need for a four-star property to ensure all price points were covered.
Of course, the players will rightly argue that our occupancy levels are not there so we already have too many rooms and that is fair, but when you are appealing to a broad spectrum of people not everyone wants to buy the five or six-star accomodation. They would be happy to buy four star as opposed to three-star. I don't know how big that is an issue but I know from other places the four-star properties are quite important part of tourism sector. So even having a 250 room size of the hotel with a four-star could be quite a plus.
Getting international brands is important, let's say we had a four-star property here with an international brand that's a plus already. You get a global brand, you get sales, marketing and distribution capabilities globally, and these capabilities do bear fruits. So these so called little things can have a big impact.
Moving on to Royal Brunei Airlines: you took over last year as the CEO. You took over after a restructuring plan that went on for roughly five years which was successful. There was a great transformation and a bit more of a concrete mission. Now that you've taken over, what is your mandate for the next five years of the company? What is your objective?
Well, maybe it's worthwhile just for one minute just to reflect. I think we have tackled some key issues in the previous five years. One was to look at ourselves as an organization where we are and what we stand for. Service became a key part for us in a highly competitive airline industry. The key questions if you want to create a sustainable competitive advantage, what do you really stand for, what is your core competency?
We don't have the network of major international airlines. They fly to many destinations. The country doesn't need that. We have 220,000 visitors arrivals and a population of 430,000, so the combined market is small and there is an absolute limit in terms of how much capacity you can offer. So given the limited market size why we're never going to be Singapore Airlines or similar and we are never going to appeal to the corporate sector in the global sense.
On the other hand is the low-cost carriers. They've got a very ‘no-frills’ product. They are designed to be low cost so that they can offer low fares. As a nation, we don't want to be there. We have been a full-service carrier, a very proud one and we plan to be remain as such.
So then where do we stand? When you start to cut through that and analyze it, the only thing that's going really for us is service. That we have to deliver consistent service and the customers will say, "Wow, there is something different here." Of course, you can't make a huge difference unless you spend millions of dollars to try and make a distinction, but what we do is use the rich cultural heritage of Brunei, the hospitality of our people and do little things well. That's working really well for us.
The other one was to invest into a new fleet because I believe the fleet is an important part, both from a product point of view and reliability. We provide more than 75% of the seats to and from Brunei, so when we are in pain the nation suffers. So we have to deliver reliable products meaning our flights need to depart on-time. We have one of the best on-time performances in this region and we're very proud of that.
So when you start looking at all those elements, service is such a key part. We have built that. My job is now to look at the next stage and keep innovating and improving. The other key element is wisely deploying our narrow-body fleet as that comes with much lower commercial risks when you are developing new markets as opposed to widebody aircrafts.
We are already committed to seven new aircrafts next year so that will allow some growth. We are going from six narrow body aircrafts to nine aircraft next year and five Boeing 787 dream liners. So how do we effectively use it? What are the strategic destinations for us as an airline in terms of revenue and profit generation but also for the nation? So that's why I believe the ‘capital-city-to-capital-city’ connection becomes very important. I see nice synergies for the Nation and the airline.
Let's ask the obvious question. You've already announced the direct service to Beijing, we know you did the agreement with Hong Kong Airlines as to have the connection to Tokyo. Is there plans in the near future as a result of that growth of a direct flight to Tokyo, maybe to Osaka?
Tokyo is the capital city and certainly of interest to us. I've spoken about Beijing, Tokyo, Taipei, I think those cities does give us the right balance. We don't want just the leisure traffic, we also need corporate and government traffic. It is only when we get the right mix of fares on the plane that we will turn a profit out of it.
The airlines always have a business motivation to get the right clients on the plane. The capital city connection gives you that quite easily. We were in Tokyo talking to a whole range of industry people to see the interest in Brunei and whether we could make this work. They showed strong interest and desire to work with us. There is more work to be done before we can make an announcement.
So Tokyo is on our radar. We are completing our studies and will present to our board soon for a decision and if approved commence the route start-up process including regulatory matters. But purely from everything we discussed earlier about the demographics and the natural fit to some of the products we've got, but also FDI interest, and knowing that a ‘capital-city-to-capital-city’ connection gives you one of the best opportunities. Tokyo offers lot of potential. We are testing all these out at present and plan to complete our research and route study within few months. We need to have a strong business case to commence operations to Tokyo.
How do you collaborate with the Japanese private sector, not only for the possibility of tourism directly with Japan but with the travel agencies even to bring them to invest in the tourism sector, what is your interest towards the private sector of Japan?
That's a very good question. Of course, they will be very happy. We met both of those businesses during our recent trip. For them to have Brunei on their portfolio is a good thing because then they'll offer something completely new to their clientele or the potential clientele. So they're very open about that. They see something unique about Brunei. They love the peace, tranquility, the climate, and the products on offer.
Wholesalers generally work with the airline by taking inventory on the aircraft and they use that inventory and land content to create client tours. For us, that will be ideal, it is for them to set up a small tour operation here, because they have the know-how and the cultural and language skills. We would like to see them as a long-term investor in our tourism industry.
We've done something similar with Korea. Sinar Tours is a collaboration between a local partner and a Korean partner. And what they have done very smartly is bringing the tour operator elements and they are a long-term investor. So it can make a real difference.
We believe if Japanese investors, such as JTB or HIS or any of the other wholesalers came here and put a little tour operation and/or worked with the local companies, whichever model suits them could be quite interesting. Because they can take care of any initial barriers that we may have, like language and culture, and resolve them very quickly. So for me that would be an ideal model for Brunei when dealing with the Japanese market.
What is the added value of that new link between Hong Kong Airlines and yourself for Japanese people looking to come here?
There are several ways you can enter a new market especially for the size of the market we have. We talked about 4,400 visitors from Japan which is a very tiny market at present. So first of all if we could do a codeshare or interline arrangement with other airlines and make that much easier for the for the customers. So people going to Tokyo could be checked in all the way to .
So it is a quite seamless and painless experience. Customers get the boarding pass and transfer to the other airlines without having to collect baggage mid-point.
The next stage would be to do some charter flight. So we could operate in the peak season, via charter flights, creating the awareness with the partners and consumers. With dedicated capacity, RBA and its partners will have to implement its sales and marketing plan and thus create destination and brand awareness.
The third option is direct flights. When we flew to Tokyo we left Brunei at 10.30 that morning and arrived in our room in Tokyo at midnight. That's a long journey when you think about the direct flight which would take less than 5.5 hours.
So the direct flight itself will be quite a big difference. It will certainly stimulate traffic, cut down the cost, the time, and starts to appeal to all segments.