Ms. Kattiya Indaravijaya, Chief Executive Officer of KASIKORNBANK (KBank), noted that the Thai economy underperformed other ASEAN countries for more than 10 years (2008-2020). Tourism has always been an essential element of Thai economic growth. In 2019 alone, the tourism industry contributed 3 trillion Baht to the Thai economy, or 18 percent of the nation's GDP. Of this, 2 trillion Baht came from international tourism, which represented 12 percent of GDP; and 1 trillion Baht from domestic travel, or 6 percent of GDP.
The COVID-19 pandemic which began in December 2019 plunged global tourism to its lowest level in 33 years. The crisis has sent shock waves through tourism supply chains, from accommodations, restaurants and souvenir shops, to car rental business at tourism hubs. In 2020 alone, Thailand lost more than 2.1 trillion Baht in tourism revenue, or 13 percent of GDP. The resurgence of COVID-19 late last year has hindered any potential recovery in tourism. As evidenced, the pandemic cost the tourism sector more than 55 billion Baht during the first two months of 2021.
The Thai tourism sector has been the main casualty of COVID-19 nationwide. It may be later rather than sooner before it emerges from the doldrums, lagging behind other industries. As far as estimates go, it may take more than three years - or not until 2024 - before the Thai tourism industry can definitively regain its footing and generate income of around 2.7 trillion Baht, close to the pre-pandemic level of 3 trillion Baht recorded in 2019. Much will depend on the Thai government's policy for reopening to international tourists, the policies of home countries of foreign tourists towards international travel, and the progress of vaccinations.
The recovery in Thai tourism is expected to take place in three phases. The first phase will be driven by domestic travel during 2021-2022, helping improve the overall Thai tourism as compared to that seen in 2020. The second phase is set to be bolstered by short-haul travel within the region, primarily for business purposes. The third phase will be supported by global travel. Trips to Thailand will be made by leisure travelers whereas business travel during this phase will substantially decline as most business transactions may have already been carried out virtually.
An important factor to help Thai tourism recover is a vaccine passport, though its implementation may take a while, depending on the speed of vaccine rollouts globally, vaccine effectiveness and Thailand's procedures in accommodating international visitors.
Due to the COVID-19 pandemic, tourism - once a key driver of the Thai economy - faces a number of immediate challenges, including how to ensure that travel-related businesses can stay afloat and workers remain employed. To ascertain such capacities, such businesses could follow basic guidelines to conduct a self-assessment based on income, expenses, liquidity and breakeven point. Income must not decline by more than 70 percent of the total, and it should come from multiple sources. Expenses per month should amount to less than 65 percent of total income. These businesses must also ensure that their liquidity or cash flow is sufficient for at least six months. Entrepreneurs must assess whether or not they have achieved a breakeven point or their interest burden has eased. Businesses that can meet all of these guidelines should be able to survive. While waiting for recovery in the inbound tourism market, travel-related business could focus on the domestic travel market by offering products that meet the needs of Thais, generating income from diverse sources, adopting effective cost management and avoiding price-driven competition.
Additionally, Thai tourism will face long-term challenges including how to build sustainable tourism, address structural problems and issues related to resources that affect its competitiveness, distribute income to communities, and conserve natural resources and cultural heritage. These challenges may require adjustments in terms of both national policy and business cooperation to strike a balance between the economy, communities and environment.
Of chief importance are business operations under sustainable tourism, consisting of three components, as follows:
- New travel culture: Focus should shift from price competition and high numbers of tourists (Red Ocean) to quality tourism (Blue Ocean) such as wellness and medical tourism, in order to raise average spending per head and lay the groundwork for sustainable tourism via environmental protection (Green Ocean) and social responsibility (White Ocean).
- Collaboration: The government, private sector and local communities should work in tandem to manage tourism-related businesses, foster understanding among locals and encourage them to develop quality tourism. Such efforts could be achieved through the promotion of unique local traditions, community-based tourism (CBT) and conservation of environmental resources.
- Digitalization: Technology should serve as a tool to ensure sustainable growth in the tourism industry through the creation of platforms and data analytics for the benefits of business planning, timely marketing, data sharing with related parties, facilitation of travel plans, establishment of related online hubs and offering of new experiences in planning trips and business operations.
Through the aforementioned sustainable tourism business model, Thailand's tourism industry would be one step closer to achieving its targets of increased long-stay tourism and tourist spending, diversification of tourism revenue to less-visited provinces, as well as enhanced comfort and better value for tourists; all of which would contribute to more repeat visitors in the future.
Ms. Kattiya said in closing that the tourism industry has long been regarded as a "Hero" business that helps to sustain the Thai economy, but going forward, the country may not be able to rely solely on the revenue of any single industry. Instead, "Heroes" must emerge from other industries and band together as a team. In other words, it is imperative that operators with growth potential receive as much support as possible, including businesses that deal in health, wholesome foods and electric vehicles (EVs). At the same time, efforts should be made towards strengthening the tourism industry over the long term.
Source: Kasikorn Bank