Endless white sandy beaches, inexpensive accommodation, tasty cuisine, exotic jungle treks and friendly locals have all propelled Thailand to its reputation as a quintessential tropical tourism destination, not only within the region but across the globe. Long a can’t-miss destination for Western backpackers and now an increasingly popular stop for vacationers and business travellers in the region, the country’s tourism industry draws a diverse crowd of travellers seeking out all manner of business and leisure opportunities. Well-developed transport and communication infrastructure and a generous offering of luxury accommodation, gourmet restaurants and modern retail centres attract clients from the meetings, incentives, convention and exhibition, and shopping tourism segments, while an assortment of unique ecosystems ranging from tropical forests to coral reefs continues to draw in adventure and eco-minded tourists. All this is complemented by the rich cultural and religious attractions that can be found throughout the country. Thailand’s wide range of offerings has provided the travel and tourism industry with a leg up on its competitors at a crucial developmental point, when the growing number of tourists in the region display increasingly varied holiday interests and preferences.
Sector Stats
The government and private sector stakeholders have been pro-active in marketing the merits of the Thai tourism sector around the world with a string of promotional campaigns. As a result, the travel and tourism sector has grown to become one of the country’s most productive and sustainable industries, contributing a total of $72bn towards the economy in 2014, according to data from the World Travel & Tourism Council (WTTC). The council ranked the industry as the fourth-greatest contributor to the Thai economy behind retail, agriculture and automotive manufacturing, and ahead of the mining, education, financial services, banking and chemicals manufacturing sectors. When including its direct, indirect and induced GDP impact, travel and tourism generated 19.3% of Thailand’s GDP in 2014, nearly double the 11.2% total contribution to GDP from chemicals manufacturing and nearly four times the size of the mining sector’s GDP contribution of 5.2%. Of this, $32bn of the sector was attributed to business directly related to the industry, with indirect and induced activities accounting for the remaining $40bn. Travel and tourism is also an important employer in the country, generating a total of 5.4m direct, indirect and induced jobs in 2014, making it the second-largest employer by sector after agriculture, which had a 14.1% share of total employment.
Destination Thailand
Thailand’s tourism sector continues to draw tourists from around the world and has evolved into a highly successful model many countries in the region strive to emulate. The number of tourists visiting the country has roughly tripled since the start of the millennium, surging from 9.58m in 2000 to 29.89m in 2015, according to statistics from the Ministry of Tourism and Sports.
Over the past few years the ostensibly bulletproof tourism industry has displayed its characteristic resiliency after absorbing not one, but two high-profile bouts of negative publicity in 2014 and 2015 to quickly regain its forward momentum. The allure of the country’s wide array of offerings catering to broad cultural, economic and social cross sections of visitors has proven strong enough to compensate for the damaging effects of disruptive political demonstrations leading up to an eventual military coup d’état in May 2014, as well as the bombing of a popular tourist site in downtown Bangkok little more than a year later in August 2015.
In both instances, a temporary short-term decline in tourist arrivals was quickly followed by a rapid return to strong growth patterns that have characterised the industry for the past two decades. The number of tourists visiting in 2014, for example, declined modestly by 6.54% from 2013, only to see a more than 20% increase in 2015.
Visitors
Travellers from East Asia made up two-thirds (66.5%) of all visitors in 2015, highlighting the interconnectivity of the region from a proximity standpoint and as a result of the cross-border restrictions on travel that were eased through trade liberalisation. For instance, visitors from the ASEAN member countries of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Vietnam are afforded less restrictive and expensive access, as well as less burdensome land border controls thanks to the ASEAN Open Sky Policy.
After Asia, the next-largest contingent of visitors to Thailand was from Europe, with the 5.63m Europeans travelling to the country in 2015 representing 18.8% of all incoming visitors. Russians have traditionally been the most prolific European travellers to Thailand in the past, sending an all-time high of 1.75m tourists to the country in 2013, which accounted for 6.6% of all visitors that year. But as the ruble has crashed in recent years (depreciating 46% against the US dollar in 2014) due to economic sanctions and tanking oil prices, these arrivals have roughly halved, with only 884,085 visits in 2015. This decline has been so steep that it is affecting the hospitality market in certain areas of the country that were heavily frequented by Russian tourists in the past, such as Pattaya, situated east of Bangkok. Sanpetch Suppabawonsathien, president of the Thai Hotels Association, told local press in December 2014 that the Russian tourist market in Pattaya was receding for the first time in 12 years, noting that “hotel room reservations from the Russian market have already dropped by 70% for this high season”. As a result, in 2015 the UK surpassed Russia as the European country sending the highest number of vacationers to Thailand, with a total of 946,919 tourist visits, followed by France (681,097) and Germany (760,604).
Other world regions have a noticeably smaller representation in the tourism sector, leaving ample room for further growth. Led by 867,000 US visitors, North and South America combined to account for 1.24m tourists in 2015 (4.13% of the total), up 12.31% on the previous year. India accounted for the bulk of South Asia’s 1.4m visitors (4.7%), with 1.1m travellers. Tourists from Oceania totalled 921,355 (3.08%), followed by 658,129 from the Middle East (2.20%) and 161,640 from Africa (0.54%).
Bang For The Buck
This increased headcount over the past few decades has generated a dramatic ripple effect in terms of the revenue collected by the industry. Receipts from tourism totalled BT706.6bn ($21.3bn) in the first six months of 2015, up 31% on the same period in 2014. Average tourist expenditure amounted to just under BT5000 ($150.50) per day, with each stay averaging a little less than 10 days. Retailers in particular have benefitted significantly from tourist expenditures, as each visitor spent an average of BT1184 ($35.64) on goods daily, slightly less than the BT1473 ($44.33) spent on accommodation. Meanwhile, average expenditure was less on food and beverages (BT949, $28.56), local transport (BT501, $15.08), entertainment (BT500, $15.05) and sightseeing (BT194, $5.84).
The biggest spenders in Thailand tend to be from the Middle East. The top three countries in terms of per capita spending were the UAE, Kuwait and Saudi Arabia. In 2015 visitors from these countries spent a daily average of BT6356 ($191.32), BT6228 ($187.46), and BT6224 ($187.34), respectively. The only other nations whose visitors spent more than BT6000 ($180.60) a day were Hong Kong (BT6131, $184.54) and Singapore (BT6001, $180.63).
Travel and tourism’s direct contribution to GDP grew by 187% between 1995 and 2014, according to WTTC data, outpacing a host of other sectors, including mining (146%) and banking (48%). The WTTC’s “Thailand Benchmarking Report 2015” projected the continuation of strong growth in the sector through to 2025, increasing at a compound annual growth rate of 6.2%. This is higher than the growth forecast for all other sectors, including banking (4.3%), automotive manufacturing (4.3%), financial services (3.4%) and agriculture (2.9%), with total economy growth forecast at 2.8% per annum.
Prime Location
In addition to its own inherent merits, Thailand is benefitting from strong regional economic growth, which has created a burgeoning middle class eager for new vacation experiences. This has also led to a surge in cross-border business, which is in turn boosting the business travel segment (see analysis). Accounting for nearly one-third of the world’s economy and more than half of the world’s population, the Asia-Pacific region has been at the forefront of tourism development since the beginning of the millennium.
Strong GDP growth rates coupled with rising disposable incomes have led to a rapid increase in tourism in the region, especially out of China, which emerged as the world’s top spender in international tourism in 2012. From 2007 to 2014, the total number of outbound trips made by travellers from the Asia-Pacific region (excluding Chinese travel to Hong Kong and Macau) increased by 65% to a total of 170m trips, according to World Travel Monitor figures. This growth outpaced overall global growth by more than twice as much over the seven-year period, as the region increased its share in the global outbound travel market by three percentage points to almost one-fifth.
In 2015 the second-largest demographic of tourists to Thailand comprised 7.89m visitors from ASEAN countries, which translated to 26.4% of all inbound travellers. Malaysians were by far the largest subset of this figure with 3.42m visits, followed by Laos (1.23m) and Vietnam (751,091). As integration policies within the 10-member bloc have liberalised trade and movement, tourist arrivals from the region have more than tripled since the turn of the millennium, when only 2.14m visitors to Thailand were received from ASEAN member states.
This trend is showing only minor signs of slowing, even as economic growth within the region and around the world continues to cool. Through the first eight months of 2015, international tourist arrivals to Asia and the Pacific rose 4%, which is within the 4-5% growth range predicted by the World Tourism Organisation for 2015 but less than the historical average annual growth rate of 6% recorded between 2005 and 2014. Led by Thailand, arrivals in South-east Asia grew by 6% from January to August, slower than Oceania at 7% but well ahead of the 4% increase seen in South Asia and the 3% growth in North-east Asia.
Regional Impact
Regional travel trends in recent years have also played to Thailand’s strengths, with the Asia-Pacific market increasingly favouring short trips, beach holidays and city trips over traditional tours. At the same time, there has also been a shift towards upmarket hotels and higher levels of average spending. The number of four and five-star hotel reservations increased by 16% from 2007 to 2014, which translated to 45% of total bookings, while the share of one-, two- and three-star hotels declined by a similar rate to less than 30%.
For the Asia-Pacific region as a whole, the direct contribution of travel and tourism to GDP in 2015 amounted to $635.9bn (2.7% of GDP) and is forecast to rise another 5% to $667.7bn in 2016, according to WTTC statistics. This primarily reflects the economic activity generated by businesses such as hotels, travel agents, airlines and other passenger transport services (excluding commuter services), as well as the activities of the restaurant and leisure industries directly supported by tourism. These contributions are projected to further expand over the next decade, with the direct contribution of travel and tourism to GDP expected to grow 4.9% annually to $1177.1bn (3.2% of GDP) by 2025.
Open Skies
This growing economic clout is complemented by the removal of institutional restrictions through the accelerated liberalisation of travel barriers in recent years. A crucial cog of ASEAN’s 2015 regional economic integration, the ASEAN Open Sky Policy is designed to increase regional and domestic connectivity, integrate production networks and enhance regional trade by allowing airlines from ASEAN member states to fly freely throughout the region. The liberalisation of air services under a single, unified air transport market will lead to a more efficient sector, offering passengers and cargo shippers more flights at lower costs, thus increasing intra-regional travel and, by extension, boosting numbers of business and leisure tourists.
Despite the fact that the final barriers of the policy were expected to have been removed by the end of 2015, some ASEAN members remain reluctant to fully exercise all the components of the agreement, which are known as “freedoms”. The first two freedoms – the right for an airline to fly over foreign airspace without landing and the right to stop in another country for refuelling or maintenance – are already common practice. The third, fourth and fifth freedoms are addressed in two multilateral agreements that technically came into force at the end of 2015. The multilateral agreement on air services liberalises market restrictions among ASEAN capital cities, while the multilateral agreement for the full liberalisation of passenger air services frees up secondary cities and sub regions. But with ASEAN’s self-imposed deadline having passed, two members – Indonesia and Laos – have not yet ratified the full agreement. As of February 2016 Indonesia remains opposed to opening up its secondary cities, and Laos has yet to free up Luang Prabang and its capital Vientiane.
Spreading The Wealth
Although trade agreements and the easing of border restrictions have been important steps in attracting more visitors from the Asian region as a whole, the sheer economic might of China, as well as the size of its population, has drastically transformed the demographic makeup of the Thai tourism industry over the past decade. The country’s growing financial clout has quickly given rise to throngs of tour groups in airports, hotels and popular tourist attractions across the country, particularly during Chinese holidays.
Taken as a whole, China has recently emerged as the largest source market for international travel in the world. Already the global leader in tourism departures, it is estimated that China overtook the US as the largest source of international travel spending in 2014. A total of 109m outbound tourists left China in 2015, racking up $229bn in holiday spending in the process, according to German research institute GfK. Once content with primarily visiting China’s special administrative regions of Hong Kong and Macau, as a result of their proximity and cultural similarities, Chinese travellers have become more adventurous in recent years and travel to increasingly diverse locales offering more varied cultural and historical experiences, and shopping opportunities. As of November 2015, Thailand ranked as the second-favourite destination for Chinese tourists, with visitor numbers having increased by 263% since 2011. This placed the country second only to South Korea, which saw 112% growth over the same period, and ahead of Hong Kong (up 37%), Japan (up 157%) and Taiwan (up 54%).
Spending Power
According to GfK data, half of China’s outbound travellers are between 15 and 29 years old – the “millennials” group – while over a third (37%) are between 30 and 44, and 10% sit in the 45-59 age bracket. The impressive size of the millennial group within China’s outbound tourist bloc has garnered the marketing attention of tourism sectors worldwide, including Thailand, and countries are vying to appeal to this market demographic. Interest in this group is heightened by the fact that approximately two-thirds of Chinese millennials come from relatively high-income brackets, with their financial standing expected to increase as their careers progress and with seven out of 10 millennials employed in “white collar” executive or professional jobs.
The Thai travel and tourism sector is targeting this audience to an ever-greater extent, and the number of Chinese tourists visiting Thailand grew ten-fold in just a six-year period (2009-15), during which time the number of visitors from mainland China skyrocketed from 777,508 to 7.93m. The spending power of this market dwarfs that of all other nationalities, with Chinese tourists shelling out BT188.8bn ($5.7bn) in the first six months of 2015. This was more than the BT168.6bn ($5.1bn) in receipts from the next five nationalities combined (Malaysia, Russia, the UK, India and the US). Furthermore, these figures do not include travellers from Hong Kong, which contributed a total of 669,165 visitors and whose tourists exhibited some of the highest per capita spending habits of all nationalities visiting Thailand.
Outlook
A well-developed infrastructure and reputation as a premier travel destination across a wide array of tourism subsectors will continue to place Thailand’s travel and tourism sector at the forefront of the global industry for the foreseeable future. Even though the breakneck pace of China’s economic growth over the past decade is set to gradually slow, the Chinese economy will remain a leading emerging market and continue in its newfound role as the single largest economic bloc by nationality represented in the Thailand tourism industry. Continued economic growth among ASEAN members also bodes well for the industry going forward, particularly in the light of greater freedom of movement resulting from ongoing ASEAN integration.
Meanwhile, the low-cost and long-haul markets hold significant untapped potential, and Thailand could take advantage of the fact that its long-haul audiences are situated in areas of high population density that consist of multiple nations. Finally, the sustained depression of oil prices continues to be positive news for the industry due to potentially lower airfares and a lower overall cost of living generating higher levels of disposable income.
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