2009-10-12 21:35:03 -Thailand Tourism Report Q4 2009 - a new market research report on companiesandmarkets.com
H109 Arrivals Figures Slump Bearing out our gloomy prognosis for the Thai tourism industry in 2009, tourist arrivals have fallen sharply in the first half of 2009. Figures released by the Office of Tourism Development (OTD) showed that tourist arrivals fell by 16.2% year-on-year (y-o-y), to arrivals of only 6.6mn. This followed a decline of 2% y-o-y in 2008 as a whole, with Thailand being one of the first countries to be affected by the global economic downturn.
Thailands tourism attractiveness continues to be damaged by external and domestic factors. With regards to the former, the economic slowdown continues to act as a deterrent to international visitors, although domestic tourism benefits during a downturn. The industry, in common with many other countries in Asia, has suffered following the outbreak of the H1N1 (swine flu) virus in Mexico in April, which swiftly spread to Asia and further discouraged visitor arrivals. It is notable that visitor arrivals fell particularly strongly in Q209 even though the industry might have been expected to benefit from the spring holiday season. Arrivals fell by 16.6% y-o-y in Q209 to 2.96mn, an 18.7% quarter-on-quarter (q-o-q) decline.
Tourist arrivals totalled 3.64mn in Q109.
As well as the swine flu outbreak, this sharp decline is also linked to a resurgence of political protest in Thailand, which is has disrupted transport, including the blockade of Suvarnabhumi International Airport Bangkok in November 2008. In particular, riots in Bangkok in April led to the declaration of a state of emergency in the capital and five other provinces by the government. Given these negative factors, we believe that Thailand will continue to be one of Asias poorest performing tourist industries in 2009, and maintain our full-year arrivals forecast of 12.9mn.
Thailand Turns To Domestic Tourism With international arrivals slumping so dramatically, the government is turning to domestic tourism as a means of shoring up revenue during the downturn. Domestic tourism has been steadily growing and in 2008 totalled more than international visitors. However, Thai tourists tend to make shorter visits, such as weekend breaks, and spend less. In order to bolster domestic tourism, the Tourism Authority of Thailand (TAT) have launched a number of marketing campaigns to attract tourists to less well known parts of the country. For example, in mid-2009, TAT launched the 5 Region Thai Travel Fest, a touring travel fair targeting the provinces of Chonburi, Ubon Ratchathani, Phitsanulok, Nakhon Si Thammarat and Phra Nakhon Si Ayutthaya.
Thai Airways Experiences Positive Q1 Despite the slowdown in tourist arrivals, national carrier Thai Airways International succeeded in posting a profit in Q109. Net profit totalled THB7.87bn (US$228mn), up from THB2.22bn in Q108. This follows the airlines significant losses in Q408, when it posted a loss of THB14.8bn (US$411mn). Thai Airways has managed to turn this situation around by implementing a wide-ranging restructuring and cost cutting plan, as well as by agreeing a US$1bn loan from financial institutions. One sign of the airlines determination to reduce costs was the reaching of an agreement with Airbus to delay the delivery of six Airbus A380s from 2010 until 2012. However, the airline is unlikely to repeat such a positive performance in Q209, with the impact of swine flu and political unrest continuing to weigh on revenues.
Special Focus: Thai Political Crisis Thailand has experienced extreme political instability since the military coup in September 2006 that deposed former prime minister Thaksin Shinawatra. This appeared to briefly resolve the conflict between Thaksin supporters and opponents, which had spilled over into frequent protests and violence, particularly in Bangkok. However, subsequent elections returned Thailand to its pre-coup situation, with Thaksin supporters winning a majority under new leader Somchai Wongsawat, Thaksins brother-in-law.
The conflict reignited in 2008, with opposition to the government coalescing behind an umbrella group known as the Peoples Alliance for Democracy (PAD), led by Sondhi Limthongkul. The PAD have organised repeated anti-government protests, which worsened in H208 and became more violent. While this did not physically affect tourism, which is largely away from Bangkok on the coast, it further damaged Thailands international reputation. Travel advisories issued by countries, including the US and the UK, warned against travelling to Thailand, providing a significant disincentive for potential tourists.
The protests peaked with the occupation of Bangkoks Suvarnabhumi Airport on 26 November 2008, which left about 3,000 passengers stranded. No tourists were hurt in the protest, which was largely peaceful. The PAD protesters were demanding the resignation of Somchai, prompting rumours of a fresh coup. Somchai resigned on 2 December. Abhisit Vejjajiva became Prime Ministers on 17 December after winning a special parliamentary vote.
This airport protest will have a major negative effect on Thailands tourism prospects. This was the first time that the industry had been directly targeted, and the protesters use of this tactic suggests that they consider attacking the lucrative industry as a highly effective way of putting fiscal and political pressure on the government. Despite the eventual peaceful resolution of the occupation, the direct effort to disrupt travel sets a worrying precedent and will act as a disincentive for tourists considering a holiday in Thailand in 2009.
Special Focus: Southern Insurgency Continues Despite speculation that the tenure of the military government in 2006 might herald a shift in policy towards the disturbed southern region, little change was initiated. Since early 2004, the southern provinces of Yala, Pattani and Narathiwat have experienced bouts of significant unrest, which are often attributed to Islamist secessionists seeking to win independence for the region. This conflict has claimed more than 3,500 lives since 2004 and is characterised by the use of co-ordinated bombings and direct attacks on police and military bases.
Initial suggestions that the military government might attempt to open negotiations with insurgent groups who are primarily seeking autonomy or independence were abandoned as it became clear that neither side had any real incentive to begin talks. Instead, the military government followed the Thaksin administrations policy of launching security initiatives in the south as a means of shoring up domestic support. In June 2007, the military launched a programme of security sweeps on areas in Yala, Pattani and Narathiwat as part of Operation Defend the Southern Border. The security operation was intended to reduce violence in these areas ahead of the December elections. Although there have been some improvements, such as a decrease in bomb attacks on military patrols, the level of violence has not decreased significantly.
For some time the report has warned of the possibility that militants could attempt to strike targets in Bangkok or key tourist areas to pressure the government, and there were widespread concerns that the Bangkok bomb attacks on December 31 2006 marked an escalation of the insurgency. However, no group has yet claimed responsibility for the attacks and there have been no further suggestions that the insurgency has spread. Also, targeting areas such as Bangkok or major tourist sites would be counterproductive for insurgents, since this would strengthen public opinion against the secessionist movement.
Instead, insurgents are continuing to target areas in the south that are not major tourist destinations. This regional concentration of activity lends weight to argument that the southern insurgents were not responsible for the New Years Eve bombings and should reduce fears of an expansion of the southern bombing campaign across the country in the medium term.
However, the strength of the insurgency remains a low-level threat and will continue to act as a drag on the performance of Thailands tourism sector. Although the south is relatively tourist-free, heavily publicised bomb attacks in the south would have negative implications for the sector as a whole. In this regard, an attack in March 2008 demonstrated that the insurgents retain a strong military capability. A car bomb was set off outside the CS Pattani Hotel in the southern province of Pattani, where tourists and local politicans are frequent visitors. This may have been a response to the military governments crackdown on the insurgency in 2007, which has been maintained by the civilian government. The shift towards attacking commercial premises, as well as the more usual clashes between insurgents and security forces, may act as a further deterrent to potential visitors despite the souths relative unimportance to tourism.