Thailand’s economy is reliant on international tourism, a once-flourishing sector that has been impacted by pandemic restrictions. But there have been continual government efforts to boost domestic travel, and measures to support returning international demand after Thailand began reopening to vaccinated international travelers from 63 countries on November 1, 2021.1 Even as the world addresses emerging variants of the virus, Thailand’s lessons can act as a guide for other tourism-dependent countries facing similar dilemmas as they prepare for the resurgence of international travel.
A heavy blow, adjustments needed to support recovery
In 2019, Thailand ranked eighth globally in international tourist arrivals, with China being a key source market.2 Thailand recorded a high of 40 million visitors in 2019, with the top three spending categories for inbound visitors that year being in accommodation (28 percent), shopping (24 percent of spending), and food and beverages (21 percent).3 Furthermore, the Thai tourism sector created 36 million jobs between 2014 and 2019.4
Unfortunately, the pandemic and related restrictions have hit travel particularly hard, as international travel plunged. Passengers on international flights to Thailand dropped by 95 percent in September 2021, compared to the previous year. Hotels, in turn, only filled 9 percent of their rooms (Exhibit 1).
This decline in visitors had an outsize impact on tourism spending, as international travelers spent significantly more than their local counterparts (Exhibit 2). For instance, in 2019, international travelers made up 33 percent of overall travelers in Thailand yet accounted for almost 60 percent of all tourism spending—international tourists spent $1,543 per traveler on average, compared to $152 by domestic travelers.5 This drop in expenditure undoubtedly caused a ripple effect on Thailand’s food and beverage retail industries, which include 1.2 million small and medium-size enterprises (SMEs).6
Recovery appears to be on the horizon for Thailand. Assuming virus recurrence, slow long-term growth, muted world recovery, and minimal changes to global tourism strategies, Thailand’s tourism sector could only recover to pre-crisis levels by 2024.
Given that Thailand’s GDP relies significantly on foreign tourism income, the domestic tourism market alone is not sufficient to bring the nation’s tourism revenue back to 2019 figures; the sector’s recovery would depend on a resurgence in international travel (Exhibit 3). Globally, this recovery scenario would likely reshape the landscape of the world’s travel industry and create a strong imperative for both the public and private sectors to act to ensure the industry’s survival.
Efforts to stimulate tourism
Thailand has deployed various efforts to compensate for the loss of inbound tourism. Given that for most of the first quarter of 2020, Thailand saw less than 1,000 daily COVID-19 cases nationwide, with cases not rising above 4,000 until November 2020, domestic tourism was still a viable option for travelers. The Thai government’s attempt to boost domestic travel took the form of providing subsidies for hotel stays and flights for travelers. The government also rolled out measures to stimulate international travel to Thailand’s beach destinations and attract high-end travelers from international markets.
Travel together—stimulating domestic tourism
In August 2020, the Thai government launched the Rao Tiew Duay Gun (We Travel Together) program, where it set aside a budget of $640 million to help boost domestic tourism.7
The government subsidized a total of six million nights of hotel accommodation at 40 percent of normal room rates. The subsidy was capped at 3,000 baht ($100) per night for up to five nights. Subsidies for other services, including food, were capped at 600 baht ($20) per room per night. This subsidy was initially limited to facilities outside tourists’ home provinces, but that restriction was lifted in the second phase of the rollout in December 2020. In addition, domestic tourists traveling by air would qualify for a government refund of 40 percent of the ticket price. This was capped at 1,000 baht ($32) per seat, with a quota of 2 million seats.
The program reached its total quota of six million hotel-room nights in February 2021, seven months after its launch.8 During that time, at least $1 billion had been added to the Thai economy.9
Many operators grasped this opportunity, shifted their focus to the domestic market, and attracted local travelers by promoting flights and hotels in collaboration with the We Travel Together campaign. Destinations that once served mainly international visitors welcomed more local travelers, which has helped their economies wade through this difficult period. Many luxury hotels offered deep discounts and attractive promotions to capture the medium- to high-spend domestic-tourist segment.
These efforts to stimulate domestic travel were temporarily paused as COVID-19 cases reached a new high in July 2021. Domestic air travel in and out of red zones, including Bangkok, was banned during July to September 2021 in response to the nation’s effort to control the spread of the Delta variant.10 Phase three of the We Travel Together campaign was paused during the same period, but resumed in October 2021.
Bringing back international travelers with the ‘sandbox’ approach
Despite promotional efforts for domestic travel, Thailand’s total revenue from domestic travel still saw a significant dip. The country’s revenue from domestic travel dropped from $34.5 billion to $15.4 billion in 2020. An increase in domestic spending alone would not compensate for the impact of the pandemic on the Thai economy. The country has largely been dependent on international markets, which represented about $62 billion or 60 percent of total tourism spend in 2019.11
In response, Thailand launched the “Phuket Sandbox” in July 2021, an effort to recapture demand from international travelers. The initiative offered fully vaccinated travelers (between 14 days and one year before their travel date) exemption from quarantine, provided they remain in Phuket for at least 14 days before traveling to other parts of Thailand.12 Additionally, travelers’ stay in Phuket was restricted to accommodation establishments that have been certified by the Safety & Health Administration of the Thai government. Visitors staying in Phuket for less than 14 days were permitted to leave Phuket only if their destination was outside of Thailand.
The model hoped to draw visitors during the year-end season in Asia, Europe, and America—all key origin markets for Thailand. Several other reopening plans followed, including the “Samui Plus” and “Andaman Sandbox” plans.13 Together, the schemes created a network of reopened destinations, which hoped to position Thailand as an attractive destination for international and domestic travelers alike.
The economic uplift from the Phuket Sandbox were moderate. In the period from July 1 to August 31, Phuket welcomed about 26,400 visitors, who were estimated to have spent at least $48.8 million while staying on the resort island (Exhibit 4).14
A nationwide rise in COVID-19 infection rates in the same period meant that the government had to reconsider social distancing and other measures to minimize risk to visitors.
In any case, Thailand has gathered its learnings from the “sandbox” approach and proceeded to reopen the country to receive international travelers. As of November 1, 2021, the Thai government commenced a phased reopening of the country, allowing fully vaccinated tourists from 63 low-risk countries to visit with one day of quarantine, provided they pass a COVID-19 test upon arrival. The government has also replaced the slow-paced Certificate of Entry (COE) system with the Thailand Pass System, in an effort to make the documentation process of travelers entering Thailand more efficient than the COE application.15
The program also expanded the number of provinces open to international visitors to 17, including major tourism destinations such as Bangkok and Chiang Mai. Subject to readiness, additional major provinces are expected to reopen from December 2021 onwards. To ensure visitor safety, some COVID-19 measures remain in place, although most businesses have been allowed to reopen and nighttime curfews have been lifted in almost every province. The reopening has welcomed tourists globally, with top visitors coming from Thailand’s key source markets—the United States, Germany, and the United Kingdom (Exhibit 5).
Attracting ‘quality’ travelers, with an eye on new markets
Pre-COVID-19, China was one of the main contributors to Thailand’s tourism income, accounting for more than 27 percent of 2019 tourism receipts.16 Given the current prudent approach of the Chinese government toward international travel, the road of return for Chinese visitors to Thailand will be a long one. China’s international-flight seat capacity and passenger numbers remain down by 95 percent compared to pre-COVID-19 levels, and stringent public-health measures for international travel remain in place. Thailand, therefore, needs to reimagine its strategy and try to capture new sources of international travelers in markets where there are more rapid recoveries of international travel demand.
The situation may change rapidly, particularly in these volatile times; closely monitoring the revival of these top source markets, particularly around the country’s stance towards viral control measures, will help industry players plan their recovery efforts and capture untapped value.
Recognizing these shifting traveler trends, and the resilient nature of premium traveler groups, the Thai government is striving to attract “quality” travelers from these source countries. Measures include revisiting and relaxing certain regulations—such as yachting regulations and taxes on personal belongings and luxury goods—to improve and stimulate the premium travel experience.
Taking this a step further, the Thai government is preparing to launch a long-term residence program to attract foreigners to the country through new Long-Term Resident (LTR) visas (up to ten years), tax and investment incentives, foreigners’ residential property ownership relaxations, and more. The program will target four key personas: the wealthy global citizen, the wealthy retiree, the work-from-Thailand professional, and the high-skilled professional. The country’s ambition is to welcome over one million of these target personas and generate over 1 trillion baht in domestic spending in the next five years, beginning in 2022.
Emerging from the storm: Actions for travel and tourism
Thailand has put innovative measures in place to help its vitally important travel and tourism sector wade through the COVID-19 crisis. As new variants of the coronavirus emerge, health and safety should remain the foremost priority as countries contemplate their travel programs. Once it is safe to do so, there are actions that stakeholders can take to steer into and thrive within the next normal.
Adjust offerings and pricing strategy to meet market needs. Hotels, tour operators, restaurants, and transport providers could look to explore opportunities to offer services and products that meet new travel demands.
Bundle products, such as hotel and flights, offer upselling and cross-selling opportunities as well as a diversified revenue stream.
Travel companies could also devise and deploy targeted pricing strategies to drive long-term loyalty and stickiness for when international travel fully returns. Given the phased reopening of popular provinces in Thailand, and the inclusion of more visitors from select countries on a quarantine-exemption list, travel companies can leverage data on traveler behaviors to set the right prices and conduct targeted campaigns by country of origin and destination.
Explore opportunities within the mass-affluent traveler segment. Focusing on premium travel experiences may be a viable strategy in some markets, but it may have limited impact in Thailand. Given that the top three inbound visitor-spending categories in 2019 were shopping, accommodations, and food, targeting the high-end market would only benefit a small segment of travel companies and would not contribute to the country’s economic recovery across all relevant sectors.
By promoting more differentiated travel experiences and attractions such as ecotourism and cultural tourism, which are naturally location based and sought after by younger mass-affluent travelers, operators could contribute to greater aviation and transportation use in Thailand.
Form partnerships across the travel ecosystem. As a result of the government’s We Travel Together program, which subsidizes travel through a digital redemption mechanism (the Pao Tang app), the country has seen an estimated 30 to 40 million users join and use the platform.17 This has created an opportunity for domestic consumer data to be collected and analyzed to provide more personalized tourism offerings that consumers are more likely to consider spending on.
Taking this a step further, tour operators, restaurants, and shopping malls might link up, creating a connected ecosystem where a traveler could be strategically engaged through multiple personalized services, products, and loyalty programs along their journeys.
Expand the network of destinations. There is an opportunity to offer travelers a wider variety of destinations in first- and second-tier cities, such as Nakhon Si Thammarat, Chiang Rai, Nakhon Nayok, Ratchaburi, and Loei. These locations have been able to sustain visitor numbers at a relatively low rate of decline, largely due to domestic travelers looking for new places to visit during international travel restrictions.
With a boost in promotion and appropriate infrastructure investment, tourism will not only contribute to the survival of the industry in these cities, but it could also lead to enduring tourist appeal that extends beyond domestic traveler groups, especially with the gradual return of international visitors. For example, the Tourism Authority of Thailand is collaborating with airlines to offer direct flights to alternative second-tier tourism destinations.
Leverage digital to connect, attract, and retain travelers. Travel companies can digitalize the customer journey from check-in through payment, including the provision of maps and information. Traveler preferences can be tracked in real time to design better and more relevant offerings, while digital booking channels can target different customer segments. Digital marketing can also entice visitors to return and to share their experiences on social media.
For instance, the Tourism Council of Thailand is working with Singapore-based IsWhere to deploy a digital-marketing platform for tourism business operators to better connect and engage with a potentially sizeable number of domestic and international travelers; the platform’s prior partnership with a major tech company has enabled it to reach 600 million digital customers worldwide.
Reimagine support needed by industry players. In the short term, industry players would need stimulus, support, and guidance on health and safety policies from the government. In the medium term, small and medium-size players would benefit from the government’s support in adjusting to online travel services and digital marketing, such as a one-stop digital platform to connect industry players with international travelers.
As such, the Tourism Authority of Thailand announced its plan to establish a private digital firm to work on creating a digital infrastructure for tourism, utilize big data in the industry, and potentially introduce blockchain-based e-vouchers and nonfungible tokens to provide tourism operators with more options for reaching travelers online and offline.
In the wake of the COVID-19 pandemic, tourism recovery in Thailand will be gradual and complex and requires varied strategies from both industry and government. As the world eagerly prepares for the eventual revival of international travel, Thailand and other countries can draw important lessons from its experience during this difficult interim period.