Thailand: Tourism faces down obstacles

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Solid growth is expected in Thailand’s tourism sector this year, proving once again its resilience to natural disasters, political instability and economic slowdown.

Foreign arrivals are forecast to top 17m in 2011, Thailand’s prime minister, Abhisit Vejjajiva, said in March, well up on the 15.8m overseas visitors recorded in 2010, a year made notable by long-running street protests in Bangkok that briefly discouraged holidaymakers. Arrivals fell 12.9% in May 2010 compared to the same month in 2009, though the year ultimately saw tourist arrival numbers up 12%, the Ministry of Tourism and Sport announced at end-December.

The projected increase will continue to underscore the importance of the sector to the national economy. According to the 2011 country report on Thailand by the World Travel and Tourism Council (WTTC) the direct contribution to the Thai economy this year will be BT617.7bn ($20.5bn), or 5.9% of the total, a figure that is expected to rise to BT1.36trn ($45.1bn, using 2011 prices), or 8.2%, by 2021.

The sector is also one of the leading job creators in the Thai economy, the WTTC reported, with 1.85m locals, or 4.7% of the national active workforce, directly employed in the sector currently. In a decade, the council predicts this will rise to 3m jobs, or some 6.9% of those in employment.

This confidence in Thai tourism is based in part on its long-term resilience, which has again been tested of late. In little more than a month Thailand’s tourism industry has had to face the fallout from two very different but potentially damaging natural disasters, one overseas and one at home.

The damage caused by the March 11 earthquake and tsunami that struck Japan is expected to cut its GDP growth to less than 1.5% this year – down from the 3.9% of 2010 – causing a sharp reduction in the numbers of Japanese planning to take overseas holidays in 2011 and possibly beyond. Japan is one of Thailand’s biggest tourism markets, with almost 1m Japanese visitors passing through Customs control in 2010, the Bangkok Post reported in March. As such, any continued weakness in the Japanese economy will flow on to the Thai tourism industry, though the ripple effect of the tsunami is expected to wear off by the last quarter of the year.

Closer to home, the heavy flooding across much of southern Thailand in early April also had a dampening effect on tourism in the region, with estimates putting the damage and losses at $333m, with the industry bearing a heavy burden.

According to Kongkrit Hiranyakit, the chairman of the Tourism Council of Thailand, the recent floods could cut the industry’s revenue by around $100m, with visitor numbers to the affected region expected to fall by almost 200,000 in the coming month.

Despite that, Kongkrit said he expected the sector to bounce back quickly. While both the floods and the disaster in Japan had affected tourists psychologically, the impact would be short, he told local media on April 9.

The World Bank has also downplayed the impact of the flooding, upgrading its 2011 growth forecast for Thailand in April by saying that GDP would expand by 3.7% this year, rather than the 3.2% the bank had expected. This revision was a result of stronger domestic consumption, higher demand for Thai exports and the improved performance of the tourism sector.

While the author of the latest World Bank report on Thailand, Frederico Gil Sander, acknowledged that the widespread flooding in the south of the country would hamper tourism, he told reporters that he expected the industry to recover quickly from the adverse effects, as it had after previous natural disasters or political turmoil.

Though the tourism industry has managed to bounce back from repeated buffetings thanks to the strength of its product, it must ensure that its offerings remain strong or risk losing the brand’s appeal.

In recent years there have been complaints that some of Thailand’s best known tourism regions are becoming too commercialised, with excessive building activity impacting the natural beauty that is one of the country’s key selling points. Rising costs and instances of poor service could also deter prospective visitors.

Just as important is the rise of competitors, with Vietnam potentially being the “next big thing” in tourism in the region. Arrivals there climbed by 35% last year, almost three times the rate of increase seen in Thailand. Though Vietnam attracted fewer than 6m visitors last year, it offers many of the same holiday attractions as Thailand, while still having something of a new appeal about it for those wanting to get off the beaten track, if only slightly.

In order to ward off the challenge of Vietnam and other regional destinations, Thai tourism operators will need to maintain the quality of their product and ensure that they do not price themselves out of the lower end of the market, while at the same time hoping that the forthcoming general election set to be held before July and natural events do not further test the sector’s resilience.

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