The domestic travel boom is a double-edged sword, boosting tourism revenue but straining limited resources.

There’s a first time for everything, like booking a table for one at a pizza restaurant. I did so recently at the insistence of Tsao Yu-lin, owner of the Blueshine B&B on Taiwan’s Matsu islands, even ordering the pie in advance in case the restaurant ran out of dough. “Better to play it safe,” he said. “Their business is really good these days with all of the visitors.”

Tsao was right about the reservation. Beigan Township’s Yinwo Bakery, known for its breads and cakes as well as pizza, was full. Vacationers even packed the terrace’s many picnic tables. Impressive for a Monday night in a quiet village, but this is COVID-era in Taiwan, one of the few countries on earth considered safe for travel.

Far-flung Matsu, an island archipelago governed by Taiwan but geographically much closer to China’s Fujian Province, has probably never been busier, Tsao reckons. Business is up more than 40% year-on-year. “I’ve had to double the summer help,” he says.

With the exception of Taipei, which relies heavily on the international travel market, the story is similar nationwide. Vacationers who would normally travel overseas are flocking to Taiwan’s beaches, mountains, and cities. The tourism sector welcomes the business, especially after a moribund winter and spring, but is straining to keep pace with demand.

Growth is off the charts at Taipei-based online room-booking platform AsiaYo, exceeding 400% year-on-year in July and August. “We weren’t prepared for the travel boom: we downsized 20-25% in February-March,” says founder and chief executive officer CK Cheng. “We doubled our customer service center staff from six to 12 in a month, added new telephone lines, and still we’re often overwhelmed.”

Tourism Bureau data shows tourist-hotel occupancy outside of the capital rising steadily from April, when it was just 28%, to 40% in May and more than 63% in June, an increase of 7% over a year earlier.

According to the government’s definition, “tourist hotels” do not include bed and breakfasts, the main type of tourist lodging in rural Taiwan. With B&Bs included, occupancy rates would be even higher. On Booking.com, for instance, as of mid-August 71% of the rooms in the Penghu islands were booked for the Moon Festival long weekend of October 1-4. In Matsu, 83% of the rooms were booked.

“It’s hard to book a room in many places outside of Taipei,” says Ping Lee, head of Taiwan research at property consultancy CBRE. She notes that safe “travel bubbles” have failed to materialize. The idea of such limited travel between COVID-free countries initially seemed feasible but is proving hard to implement.

The virus is too truculent. In August, it suddenly flared up in New Zealand, a country that had not seen a local transmission in more than 100 days. “Had there been travel bubbles, some Taiwanese would likely have vacationed overseas,” Lee says.

Ivan Tseng, assistant country manager at English First Taiwan, is one of them. But with that option closed, he figured that Penghu, located in the middle of the Taiwan Strait, would be the closest he could get to international travel.

It was easier said than done. “I was so surprised,” Tseng says. “There were no hotel rooms available for the whole of August.” He rescheduled the trip for October.

Room for improvement

Ironically, many of the same problems that arose during the Chinese tourism boom a decade ago have returned as domestic travel reaches new highs. Complaints about overcrowding, unruly tourist behavior, and poor service quality are once again common.

Valtteri Mujunen, a Finnish businessman who has lived in Taiwan for almost a decade, drove around the island this summer with his family. The nine-day, 1,200-kilometer trip had many highlights, from a picturesque sunset over Yunlin’s rice fields to an unexpected invitation for a barbecue to celebrate a birthday at an Amis restaurant in Taitung.

He found the southern beach town of Kenting to be disappointing, however. “People are driving tractors on the beach, and they’re on jet skis in the water creating giant waves right next to small children learning to swim,” he says. “It’s not relaxing. It’s nerve-wracking. I doubt the tractors are helping the air quality either.”

Mujunen suggests that the local government step in to improve Kenting’s environment. “Kenting can regain its charm if the authorities take a more active role in the area’s development,” he says.

Some local governments, concerned about the tourism surge’s environmental impact, are moving to limit visitor numbers. In August, the Pingtung County government announced it would introduce a registration system for the Hayou River, a popular destination in the county’s mountainous region. The new rules, effective in November, require visitors to register with guided tours one to two weeks in advance. A maximum of 500 people a day is permitted. 

Meanwhile, from September 1 a daily limit of 500 visitors went into effect for the area near the abandoned Mianyue branch of the Alishan Forest Railway, popular for the glimpse it provides into rail transport during Taiwan’s Japanese colonial era.

Despite the ongoing pandemic, some tourism businesses are not prioritizing hygiene. I encountered three cockroaches at one Matsu B&B: a carcass upon arrival to my room, a live one in the shower downstairs (a facility shared by all guests), and most dramatically, an enormous live one on my bed when I returned to my room from a hike.

A staff member apologized, but then said that because the house is old and located in the mountains, cockroach infestation is hard to prevent.

Chronic underinvestment in the tourism industry leads to this type of problem, says AsiaYo’s Cheng. “Salaries are too low and the government relies on subsidies to support the industry, which doesn’t always encourage productive investment.”

In Cheng’s view, industry consolidation in the travel-booking sector would improve competitiveness. “I’m not sure Taiwan needs 3,000 small travel agencies,” he says.

Meanwhile, hoteliers based in Taipei, where occupancy rates are between 20% and 30%, hope that the government can extend the current subsidies, due to expire at the end of September, through the end of the year.

At the five-star Sherwood Taipei, weekend occupancy rates have reached 75%-80% on the back of staycations, but weekdays are much quieter, says general manager Achim von Hake.

He sees the domestic MICE business – meetings, incentive, conferences, and exhibitions – as a possible growth driver in the short to medium term, while Taiwan’s borders remain closed. “Taiwan has controlled the pandemic well and people will have confidence to participate in small gatherings, such as local companies’ holding meetings in Taipei,” he says.

It could be months before international business travel, the bread and butter of Taipei hotels, resumes. By von Hake’s estimate, mid-December would be the earliest.

Still, analysts say that Taipei hotels have bright long-term prospects. “Despite the pandemic, some Japanese clients told us recently they’re interested in launching Taipei hotels,” says CBRE’s Lee. “They think the market will recover sooner or later.”