Thailand’s tourism industry: adapting to changing times

• Thailand’s tourism industry is bouncing back in 2022, but international arrivals will take a long time to recover to pre-pandemic levels, which is unlikely to happen until 2024 at the earliest.   

• Recognising that the zero-covid policy in China will extend well into 2023, as well as a difficult global economic outlook for that year and the emergence of new global technological trends and social changes, the Thai authorities are adjusting their tourism strategy to reduce their over-dependence on a few source markets and to diversify their target customer groups in the years ahead. 

• The tourism industry will continue to recover in the medium term and will remain an important contributor to GDP growth and foreign-exchange revenue for the country. The expansion of tourism infrastructure will continue despite a smaller number of tourists in 2023‑24 compared with the pre-covid period.

From fewer than 1m to potentially 10m tourists in 2022 

The entry requirements for international travellers, which in July 2021 began to gradually loosen, were fully lifted from October 1st after Thailand formally recognised covid‑19 as an endemic virus. The progressive reopening has led to a recovery in international arrivals in 2022, reaching 4.4m at the end of August—a remarkable rebound when compared with the annual arrivals of just over 380,000 people in 2021.  

In July and August monthly arrivals exceeded 1m people, raising hopes that the government’s annual target of 10m arrivals can be met. Reaching this target is possible if the upward trend in monthly arrivals continues in September-December, which will also be helped by the approaching peak season for inbound tourism that starts in November.

Despite the strong recovery so far, Thailand’s tourism industry is still a long way from the pre‑covid levels when annual arrivals regularly exceeded 30m. The total number of arrivals in January-August this year is only 17% of that in the same period in 2019. The composition of arrivals by nationality sheds light on the cause of the weakness. Tourists from Thailand’s largest source market in 2019, China (accounting for 28% of total arrivals then) accounted for only 3% of total arrivals in January‑August 2022. The recovery in 2022 so far has been driven by arrivals from Association of South‑East Asian Nations states (37% of the total) and European countries (24%). Notably, in January-August tourists from the US made up 4% (3% in 2019) and Russian visitors accounted for 2% of the total (4% in 2019); not much has changed from before the pandemic in terms of percentage share. Another indicator—hotel occupancy—recovered to 47% in July, up from a nadir of 2% in April 2020, but far from 81% in January 2019.

Thailand’s new tourism industry will rely less on mass arrivals and become more green

Thailand in the past consistently ranked among the top travel destinations globally. Although the country’s prestigious reputation will work in its favour to attract future visitors, the paradigm for the tourism industry has shifted owing to the pandemic and changing global circumstances. The prolonged zero-covid policy in China, which looks set to extend well into much of 2023, means that the mass tourist arrivals from China will not return soon. Furthermore, the number of European tourists, including those from Russia, will be constrained by adverse economic circumstances of their countries, which may well lead to reduced travel budgets. A gloomy economic outlook in the US and many developed economies also cast a pall over the demand for leisure travel in the short term.

In response to an anticipated period of weak leisure travel demand, Thailand aims to make it easier to have high-spending visitors stay longer in the country. The authorities have introduced a new version of a long-term resident (LTR) visa to attract highly skilled, wealthy individuals and retirees to stay in the kingdom for up to ten years. The LTR visa programme aims to make Thailand an attractive second-home option for global citizens and widen the pool of skilled professionals to start a business in the country, which the authorities hope will help to stimulate job creation for the local population. Other countries such as Singapore, the UAE and Indonesia have also recently offered a similar visa scheme, competing for the same pool of international visitors. Thailand’s advantage lies in its lower living costs compared with Singapore and Middle Eastern countries, and a better business environment compared with Indonesia.  

Thailand’s Board of Investment has started to accept LTR visa applications since September 1st. It has also seen a more enthusiastic response than its previous version of the Smart Visa scheme, which was introduced in 2018 and aimed at attracting high-tech professionals. Nevertheless, the country’s goal to attract 1m visitors under the LTR visa and generate Bt1trn (US$24.8bn) in five years in new investment and purchase of properties appears to be overly ambitious. 

Other than targeting long-term high-spending visitors,the country is widening the net to attract a broader range of  tourist groups through various targeted marketing campaigns. These marketing campaigns are usually attuned to the latest trends in global travellers’ demographic and behavioural changes, as well as opportunities made possible by new technology. 

The move toward greater diversification of the source markets and customer segments is clear in the Tourism Authority of Thailand’s marketing plan for 2023. It will adopt different marketing strategies to attract visitors from different age groups. Campaigns will also be devised for special interest groups such health and wellness, sports and responsible tourism, as well as digital nomads and remote workers. Given Thailand’s already existing diverse tourism assets ranging from leisure, adventure, wellness and medical establishments, the sector is well-placed to serve visitors in these niche areas without major effort required to rebuild the supporting infrastructure.

In addition, given the Thai government’s push for the Bio-Circular-Green (BCG) economy model, the Tourism Authority is encouraging local tourism businesses to adopt said model, which they hope will attract a young generation of tourists who prioritise sustainable travel. Responses from businesses in the tourism industry have been positive, owing not least to the attempts to economise after the recent surge of energy prices have driven up their operational costs. More and more hotels and tourist establishments are adopting renewable energy such as solar power as a supplementary energy source for their electricity needs.   

Implications for the economy and businesses  

The tourism industry will change according to tourists’ shifting demand, whether or not Thailand will see the same level of tourist arrivals as in the pre-covid period. Moving forward, the strategy is to diversify and widen the country’s appeal across different age groups and segments of customers. We do not expect the change in strategy to disrupt the current plan to expand existing tourism infrastructure such as airports and rail work. We expect businesses in the tourism industry to invest more in their IT infrastructure to cater to the demands of tech-savvy young travellers, as well as digital nomads and remote workers. We also expect businesses to pay more attention to environment protection and sustainable practice, which will increasingly become the global industry’s norm. 

The revival in tourist arrivals will continue to strengthen in the coming years, which will support jobs and incomes in the tourism and related sectors. In 2023 tourism is expected to be among the main sectors that will contribute to GDP growth when the merchandise export sector will see slower growth. Revenue from tourism, which used to account for 11% of GDP in 2019, when it reached US$59.8bn, dropped to a dismal US$5bn or 1% of GDP in 2021. In the first half of 2022 travel receipts were roughly on a par with the level seen in the full year of 2021. As arrivals picked up further in the third quarter of 2022, the recovery of travel receipts looks set to continue and accelerate in 2023‑24. Ongoing and future investment to expand the infrastructure and supporting facilities will also support GDP growth. We forecast that the tourism industry will return as a major sector that contributes to GDP growth next year and over the medium term. 

The analysis and forecasts featured in this piece can be found in EIU Viewpoint, our new country analysis solution. EIU Viewpoint provides unmatched global insights covering the political and economic outlook for nearly 200 countries, helping organisations identify prospective opportunities and potential risks.