Phuket's vision has major consequences for the nation's economy. Thailand's exports are sluggish and commodity prices are falling. One of the few engines that can rescue growth next year is tourism.
The economic contribution of Thailand's tourism sector is a huge 1 trillion baht, or 9% of GDP, and Phuket is undoubtedly a major contributor. The island's number of tourists has nearly tripled over a decade, to 12 million in 2013. Phuket became the 15th most popular destination in the world last year, according to Euromonitor, a leading market research agency. The sharp rise of tourist arrivals warrants a celebration for some, but certainly not for the locals.
Last month, I had the opportunity to hold a workshop with 15 leaders from the province's public and private sectors — prominent hoteliers, high-level officials including representatives of the Tourism Authority of Thailand (TAT), and community leaders.
As they see it, Phuket, rather than playing the numbers game, must shift its focus towards improving the quality and sustainability of its tourism sector. That was one of many insights that emerged from our lively and candid discussions, which were aimed at developing a new vision for Phuket to present to the Minister of Tourism and Sports, Kobkarn Wattanavrangkul.
Phuket is becoming a victim of its own success, overtaxing its infrastructure. Last year, its airport welcomed over 11 million passengers, nearly double its capacity. Traffic jams are common, and during high season, beaches are clogged with tourists and vendor stalls. There is too little public transport for either visitors or locals, putting more pressure on limited road space.
The provincial government's outdated system of budget allocation is one factor behind Phuket's infrastructure gap. The province receives development funds only in proportion to its number of registered residents. Imagine a sewage and garbage collection system designed for just 300,000 people that in fact needs to service another 500,000 non-residents who work there, plus those 12 million annual visitors.
In preparation for the workshop, the SCB Economic Intelligence Centre (EIC) dug deep into Phuket's tourism data. The result offers three observations about what has been happening there and how the situation might be improved. As it turns out, our analysis echoes much of what was said in the workshop by Phuket's leaders, who see the situation first-hand.
First, TAT figures show that Phuket has seen its arrivals by senior travellers, age 65 and above, fall by half during the five years after 2007. These numbers should actually be rising, because the populations in advanced economies — Europe, North America, Japan as well as many other emerging economies like Thailand — are ageing fast. Global growth among older travellers should generate good growth opportunities for Phuket, especially because these tourists have more time and money to spend and are gentler to the environment.
Second, arrivals by Chinese travellers have surged and will continue to do so; yet, Phuket is tapping only the mass tier. About 14% of all international visitors to Phuket in 2012 were from China, up from 6% in 2007. About 200 million Chinese are projected to travel abroad every year by 2020, according to CLSA. Within this group of tourists, there are a variety of segments: from high-end to first-time travelers. Thailand is one of the top three destinations among Chinese tourists today, according to a survey by Hotels.com. Unfortunately, the same survey also looked at where Chinese travellers wish to visit next, and Thailand did not even rank among the top 10 destinations on their "wishlist". The implication is that Phuket is losing out on attracting quality travellers, such as repeat visitors; rather it increasingly draws budget-minded first-timers on cheap package tours.
Third, a close look at tourism spending in the past five years reveals that Phuket's revenue growth came solely from higher numbers of visitors, while the length of stay has declined. Tourist spending per head has in fact gone down when accounting for inflation. Of course, this is due in part to attracting younger visitors and first-time travellers on packages. Because this small island's tourism assets — its beaches, infrastructure, architectural heritage — are limited, a sustainable tourism strategy for Phuket should focus on bringing in visitors who spend more and stay longer.
To ramp up tourist expenditure and prolong visitor stays, Phuket needs more than just a beach destination. Offering diverse attractions will help target customers who are willing to spend good money on a quality experience. For example, our executive survey suggests conference and exhibition centres and wellness and spa resorts are particularly attractive investments. MICE facilities can attract business travellers, who spend 40% more than average tourists; it can also smooth out the seasonality of beach visitors. Heritage neighbourhoods and historic architecture appeal to long-time travellers who seek out the enlightening experience of other cultures.
What is most needed from the public sector? Phuket leaders at the workshop agreed unanimously on a good mass transit system — one that is both efficient and aesthetically pleasing such as monorail. The emphasis is on not being penny wise and pound foolish, by investing in cheap systems that may destroy a much larger value of Phuket's past investments and future potential.
The first few steps toward change do not require billions of baht, but should pick low-hanging fruits by strengthening what is already there. This might involve managing public areas better, such as reducing eyesores like rundown buildings and excessive signage, cutting noise pollution and preventing destruction of heritage architecture. A simple example from the workshop is to change regulations such as allowing yachts from abroad to stay longer. This tourism segment is on the rise, but is blocked by outdated rules imposing an unreasonably short stay. Another good example is the recent clean-up of Phuket's beaches, which instantly restored them to pristine condition.
But how long will that clean-up last? Commitment matters more than money. Transforming Phuket into a premier destination will require closer collaboration among all stakeholders, public and private alike.
Community order is needed to ensure life-long commitment. Otherwise, vision without action is just a daydream.
Sutapa Amornvivat, PhD, is chief economist and first executive vice-president at the Economic Intelligence Centre, Siam Commercial Bank. She has international work experience at IMF, ING Group and Booz, Allen, Hamilton. She received a BA from Harvard and a PhD from MIT. eic@scb.co.th | EIC Online: www.scbeic.com