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Economic News

22 Jul 2010
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Despite the expected decline in worldwide tourism and Thailand's limited growth in the sector in recent years, the country should come out of the financial crisis relatively unharmed as Thailand finds itself in a unique position to capitalise on its competitive advantage as an affordable tourist destination.

Thailand's tourism sector - which contributes 14.1% to the country's Gross Domestic Product (GDP), directly and indirectly - has been hit particularly hard by both the global downturn and domestic political instability.

The sector is expecting a decline in visitor numbers, due to political tensions in recent months. According to statistics from the Tourism Authority of Thailand (TAT), tourist arrivals declined by 1.5% in 2008 down to 14.2m, well below the 15.7m target. Amid last year's political embroilment, a week-long closure of the country's two main airports has left hotels empty, forcing them to either cut room rates by more than half or to close down completely.

Overall, TAT estimates that violence in the southern region of the country has led to a noticeable decline in tourists in the past few years, from 1.4m in 2003 to 758,842 in 2005, and 685,439 in 2007. In turn, this has led to a significant slump in tourist revenue in the south, from Bt4.7m ($132,215) in 2003 to Bt1.4m ($39,489) in 2007.

Just as political stability was beginning to settle throughout the region earlier this year, the external financial crisis reached the East, hitting the Thai tourism industry.

According to TAT forecasts, the number of tourists will decline by 2.5m year-on-year and cost the Thai economy $3bn. Another source, the Tourism Council of Thailand, estimates that the country will lose 30% of projected visitors in the first quarter alone. Hotels in the capital have already felt the pinch, with some of them showing occupancy rates as low as 10%.

Although the impact of the financial crisis has already been apparent, Thailand is keeping its head up. Sensing a tightening of Western purse strings, the sector has been quick to adjust to the crisis, choosing to focus on the lower-end segment.

Prakit Chinamourphong, president of the Thai Hotels Association believes that tourists will continue to flock to Thailand where they can find a range of products at cheaper prices than in other destinations.

As a matter of fact, last year, for the third consecutive year, Thailand was named the world's best "brand" in terms of value for money, according to the 2008 Country Brand Index. Commenting on the award, Phornsiri Manoharn, the governor of TAT, told the local press, "in today's difficult economic times, to be considered the best value-for-money destinations perhaps the best brand image [a country] could enjoy."

In order to both improve Thailand's image and offset the challenges presented by the financial crisis, the Cabinet allocated Bt1bn ($28m) to the Sports and Tourism Ministry on February 10. Of this sum, Bt250m ($7m) will be spent on improving Thailand's image, Bt350m ($9.9) on tourism campaigns, and Bt400m ($11m) on marketing.

TAT took prompt action with its global campaign "Amazing Thailand, Amazing Value". TAT's governor, Phornsiri Manoharn reckons the campaign will cost roughly $4.5m and attract at least 14.8m tourists.

Santichai Euachongprasit, deputy governor for international marketing at TAT, said that the purpose of the campaign was to focus on the "competitive advantage that [Thailand] has in terms of room rates, shopping, food etc." He reiterated that Thailand offered "the best prices without compromising on the quality, hence providing a better value for money."

One of the latest moves initiated by the government in the hope of drawing more foreign tourists to Thailand is its decision to waive the visa-fee for a period of three months for India, China and a number of other countries. The date for the implementation of this waiver is still under discussion though.

Among other measures being taken, Prime Minister Abhisit Vejjajiva allocated Bt5bn ($14m) to assist private sector tourism operators, while airline landing and departure fees are due to be cut this spring by 20% and 50% respectively. Abhisit told local press that "these measures will help the tourism sector one way or another."

Prakit Shinamornpong, the president of the THA, expects the tourism stimulus package will lead to a recovery of the industry by the second or third quarter of this year. In anticipation of a rebound, 65 hotels, with 11,500 rooms, are due to open on schedule by 2010. Investors are similarly optimistic, expanding and undergoing investments to tap into the Thai growing market. Thailand, with its numerous incentives for travel, will welcome tourists sooner than one could have hoped.

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