The sluggish economies in China and Japan as well as an unequal tourism recovery that favours large operators are seen as the the most critical challenges for the new government by tourism operators.
A survey conducted last month by the Thai Hotels Association (THA) and the Bank of Thailand found 29% of hotels rated three stars or less suffered a severe impact from interest rate hikes and might need debt restructuring.
The Tourism Council of Thailand (TCT) predicted a similar trend for the third quarter as 34% remain uncertain about the tourism outlook and 19% believe they will earn less this quarter than the previous one.
Chamnan Srisawat, president of the TCT, said solving unequal business opportunities for small and medium-sized enterprises (SMEs) remains a tremendous challenge for the new government.
"After Covid-19, a K-shaped recovery has been apparent as the rich got richer, while SMEs, which account for 34% of tourism enterprises, severely struggled to maintain their businesses," said Mr Chamnan.
He said one option is in addition to using the budget, funds or loans to support firms' financial status, the government should also amend the laws that prevent operators from registering their businesses, such as small hotels that face obstacles in obtaining a licence.
The public sector should also incentivise the private sector, which wants to improve its digital capabilities for smart and green services, said Mr Chamnan. This could help leverage the tourism industry when competition from other countries is particularly intense, he said.
Marisa Sukosol Nunbhakdi, president of THA, said as interest rates remain elevated, most hotels incurred a higher financial burden from increasing debt.
Hotels with three stars or less fared the worst, as this segment continues to compete for tourists amid a weaker than expected inbound market, she said.
As of Aug 27, Thailand registered 17.5 million foreign arrivals this year.
Though China remains the top source market with 2.79 million travellers, the number is below hotel operators' predictions, as 61% of hotels estimated they would register less than 20% of the number of Chinese guests this year compared with 2019, said Mrs Marisa.
"The new government should prioritise helping small operators. Most of them are located in second-tier destinations that could not benefit from the subsidy programmes during the pandemic, unlike five-star hotels in major provinces that received relatively high bookings from domestic tourists and could maintain good room rates from high-spending foreigners after the reopening," she said.
BOOSTER SHOT
With China's GDP growing only 5.5% in the first half and a weak yen making Japanese tourists hesitant about taking outbound trips, Thailand will find it difficult to attract 27 million tourists this year, said Mrs Marisa.
In 2019, the Chinese and Japanese tourist markets created a combined revenue of 625 billion baht, or around 33% of total international tourism revenue of 1.9 trillion baht.
She said small hotels have been directly affected by fewer tour groups arriving from China, while most hotels reported a significant decrease of Japanese travellers attributed to the weak yen. Japan already slipped from the top five source markets prior to the pandemic.
Mr Chamnan said during a recent TCT visit to Kunming, the council learned how the Chinese government promoted domestic tourism, which could partly explain the lower number of Chinese visitors to Thailand.
"China has built many man-made attractions in the past decades to increase domestic tourism. Kunming has a population of only 8 million, but can attract 20 million tourists per month," he said.
Mr Chamnan said in order to generate tourism revenue for more provinces, the Thai government should consider investing in or incentivising man-made projects that are environmentally friendly to attract domestic travellers. Another goal should be to improve the quality at existing attractions, he said.
Mr Chamnan said the commitment from new prime minister Srettha Thavisin to improve the tourism industry lifts the outlook, but the industry still needs a "booster shot" of additional budget to stimulate sluggish domestic and international demand in the final quarter.
He said the added budget need not be as high as the 3.9 billion baht allocated by the outgoing government in January, but it should be sufficient for authorities to nudge the market in the high season and reach the target of 30 million foreign arrivals.
