Thailand's tourism industry may have bounced back after previous bouts of political unrest, but a bomb attack in the heart of Bangkok that targeted foreigners likely will prove a more-formidable challenge, analysts say.
Monday night's blast, which killed 20 people -- more than half of them foreigners -- was unprecedented for the capital, despite a history of coups and a decade of instability that has at times turned violent. A second failed bombing at the Sathorn pier Tuesday only deepened concerns.
The blast hit one of Bangkok's most popular commercial hubs, ripping through a crowd of worshippers at the Erawan shrine close to five-star hotels and upscale shopping malls. Ironically, it came just hours after the government released data showing the economy had slowed in the second quarter, with tourism and public spending the only bright spots.
"Tourism is the last fully functioning engine of economic growth in Thailand," Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG told Bloomberg News. "Growth in the second half of the year could be weaker as tourists, especially from China, react swiftly."
As of Tuesday, 23 countries had issued travel advisories urging caution or outright avoidance of travel to Thailand. And travel agencies in Hong Kong have agreed to cancel all organised tours to Bangkok until the end of August for safety reasons, Joseph Tung, executive director of the Hong Kong Travel Industry Council, told Bloomberg.
Chinese tourists, the most important part of Thailand’s tourism sector, is also the most at risk by the Bangkok bombings, analysts said. (Photo by Taweechai Tawatpakorn)
On Wednesday, Japan Expo Thailand 2015, an event to promote Japanese culture featuring the all-girl pop group AKB48 and others, was postponed in the wake of bombing attacks, Kyodo News reported.
The expo had been scheduled for Aug 28-30 at Central World, just across an intersection from the Erawan shrine. The event would have included a concert by AKB48, as well as sales of Japanese food and a fashion show.
On its website, the event organiser expressed condolences and sympathies, but said "at this juncture, we would like to postpone this event until further notice."
Such swift reactions to the bombings show that they "could undermine the recovery in the tourism industry, deepening the country's economic woes", BMI Research, a subsidiary of financial information provider Fitch Group, said in a note obtained by AFP.
Almost 25 million foreign visitors flocked to Thailand last year and the industry, bolstered by record numbers of Chinese visitors - who now make up one in every five foreign tourists in the kingdom - was on track to meet or exceed the Tourism Ministry's goal of 28.8 million arrivals and 2.2 trillion baht in tourism revenue.
Now, however, tourism could drop 10% in the short term, Adithep Vanabriksha, Bangkok-based chief investment officer at Aberdeen Asset Management Co, told Bloomberg.
"Previous declines in tourist arrivals have been temporary in nature as previous episodes of political unrest in 2006, 2010 and 2014 indicated. The risk is that a bombing could be perceived as a more negative development than political unrest," ANZ bank agreed in a research note published by AFP.
Tourism and Sports Minister Kobkarn Wattanavrangkul said Tuesday that the government does not yet see any need to revise its full-year targets.
"It's too early to estimate the tourism damage caused by the bomb horror, but we're concerned about the tourism situation for the rest of the year," she said.
Chinese tourists now account for one in every five foreign visitors to Thailand. (Photo by Taweechai Tawatpakorn)
Concern stems from the fact that tourism now accounts for 10% of the country's GDP, with some estimating it actually is worth up to 20% of GDP when taking into consideration indirect contributions to the economy.
"A loss of momentum in the tourism sector -- the only firm growth driver in Thailand currently -- will present a new downside risk to economic activity," ANZ said.
BMI said the blast would add to the country's economic woes, especially since the economy was still recovering from the political turmoil that ended with last year's coup. A BMI note said the hotel and restaurant sectors could see particular setbacks "undermining government efforts to bolster the ailing economy".
"Economic headwinds are mounting," Jin Lai Chan, a BMI analyst in Singapore told Bloomberg. "Investors' sentiment has been wavering for some time and this attack just puts another dent in Thailand's armour."
