Tourism alone can no longer carry Thailand’s economy, former TAT chief warns

Thailand can no longer rely on tourism as its primary economic growth engine as the industry faces a structural slowdown, weaker visitor growth and intensifying regional competition, according to former Tourism Authority of Thailand (TAT) governor Yuthasak Supasorn.

Yuthasak argued that the post-2023 period has exposed deeper weaknesses in Thailand’s tourism-dependent economic model, at a time when overall GDP growth remains at around 1.5-2.5%, household debt is high and manufacturing has weakened.

For decades, tourism played a significant role in supporting Thai GDP, employment and foreign-exchange earnings. But Yuthasak said the sector could no longer shoulder the burden of an economy facing persistent household debt, weak domestic purchasing power and a manufacturing sector that has contracted for several years.

Tourism-led growth model under pressure

Thailand’s economic challenges extend beyond fluctuations in tourist numbers, Yuthasak argued, describing the situation as a “structural tourism recession” in which the industry’s ability to generate wider economic value has weakened.

Manufacturing, which accounts for about 25% of GDP and employs more than 6.2 million people, remains vital to the economy but has faced prolonged weakness.

The World Bank expects Thailand’s economic growth to slow to 1.6% in 2026, citing weaker global trade, high household debt and a slower tourism recovery. Its latest Thailand Economic Monitor also confirms that manufacturing accounts for 25% of GDP and about 16% of employment.

Yuthasak said this illustrated why services and tourism alone could no longer guarantee macroeconomic stability, particularly amid geopolitical uncertainty and fiercer competition for international travellers.

Visitor numbers struggle to regain pre-Covid peak

Thailand welcomed a record 39.9 million foreign tourists in 2019, before the Covid-19 pandemic brought international travel to a halt.

Arrivals recovered to around 28 million in 2023 and about 35.5 million in 2024, but momentum weakened again in 2025, when the number of international visitors fell 7.23% to 32.97 million. Foreign tourism revenue declined 4.71% to about 1.53 trillion baht, according to figures cited in the analysis.

For 2026, TAT has maintained a policy target of 34.9 million foreign arrivals and total tourism revenue of 2.79 trillion baht from domestic and international markets.

Independent forecasts, however, are more cautious.

Kasikorn Research Center, or KResearch, expects 31.36 million foreign arrivals in 2026, down 4.9% year on year, with international tourism revenue of around 1.54 trillion baht.

Yuthasak said the figures reflected an industry that could no longer assume a steady return to its previous growth trajectory.

China’s decline leaves major gap

One of the biggest structural changes has been the weakening of the Chinese market, once Thailand’s largest source of international visitors.

Thailand previously received more than 11 million Chinese tourists annually, but the market was expected to fall to around 4.5-5.5 million during 2025-26, according to figures cited by Yuthasak.

He attributed the decline partly to stronger domestic-tourism policies in China and concerns about safety in Thailand. Chinese group tours have recovered to only about 45% of previous levels, he noted.

Meanwhile, average spending by foreign visitors reached about 52,833 baht per person per trip in the first half of 2026, according to figures cited from the National Economic and Social Development Council.

Long-haul markets spend considerably more, with Middle Eastern visitors averaging about 80,137 baht per trip and Europeans between 55,000 and 62,000 baht.

However, Yuthasak argued that their smaller numbers meant they could not fully compensate for lost East Asian traffic.

Tourists overall have also become more cautious, cutting expenditure on souvenirs and discretionary products.

As a result, Thailand’s shift towards a “value over volume” tourism strategy has yet to generate enough additional economic value to fully offset weaker visitor numbers, he said.

Tourism revenue leaks out of economy

Another structural issue is tourism leakage, in which part of the money spent by foreign visitors ultimately flows overseas.

Research cited in the analysis estimates Thailand’s tourism leakage rate at 28.37%, meaning that almost 30 baht of every 100 baht spent by tourists could leave the domestic economy.

The leakage can occur through imported equipment and supplies used by hotels, profit repatriation by foreign companies and fees paid to overseas online travel agencies.

Yuthasak argued that this weakens tourism’s multiplier effect, meaning headline tourism receipts do not necessarily translate into an equivalent increase in incomes for Thai businesses and workers.

The problem comes alongside pressure on Thailand’s services balance and current account, with softer tourism receipts, higher freight costs, imported energy and profit remittances adding to external pressures.

Household debt hits domestic travel

Thailand’s high household debt is also weakening the domestic side of the tourism industry.

Household debt in 2026 remains at around 85.9-86.7% of GDP, equivalent to about 16.44 trillion baht, according to figures cited in the analysis.

Although the ratio has declined, Yuthasak argued that this does not necessarily indicate healthier household finances. Tighter lending standards have also prevented many consumers from securing new credit.

Average household income was cited as falling 2.5% to 28,308 baht, while lower-income groups remain heavily dependent on government support.

The pressure has affected domestic tourism campaigns. Although Thai travellers are expected to make around 277.1-282.6 million domestic trips, many are choosing shorter and cheaper journeys, reducing overnight stays or avoiding conventional hotels.

Smaller hotels outside major destinations such as Bangkok, Phuket and Chonburi are therefore confronting oversupply.

While nationwide occupancy rates remain around 71-72%, average daily room rates have weakened, raising concerns over increasing non-performing loans among smaller hotel businesses.

Vietnam and Japan intensify tourism competition

Thailand is also facing what Yuthasak described as a regional “tourism war”, as competing destinations offer stronger value propositions.

Vietnam has pursued a cost-advantage strategy, with goods and services estimated to be around 25% cheaper than in Thailand, alongside a 45-day visa-exemption policy.

The country attracted 21.2 million international visitors in 2025, including around 5.3 million Chinese tourists, according to figures cited in the analysis.

Japan has benefited from the weaker yen, making travel and shopping more affordable for foreign visitors.

It welcomed 36.87 million international tourists in 2024, overtaking Thailand, while Thai travellers themselves have increasingly spent money in Japan.

Yuthasak said Thailand was consequently facing pressure on both inbound tourism receipts and outbound travel expenditure.

Advanced green manufacturing offers alternative engine

Rather than trying simply to attract ever larger visitor numbers, Yuthasak argued that Thailand needs a more balanced economic model combining tourism with advanced manufacturing, green investment and high-value services.

The World Bank’s Thailand Economic Monitor: Advanced Green Manufacturing for Growth identifies advanced green manufacturing as one route towards stronger productivity and higher-value employment.

Green goods already represent nearly 10% of Thailand’s total exports, while the country’s Green Complexity Potential score of 1.4 exceeds its current Green Complexity Index of 0.7, suggesting substantial scope to develop more sophisticated green industries.

Potential growth sectors include batteries, electric vehicles, solar technology, energy-efficient equipment, advanced electronics and digital infrastructure.

Investment applications in emerging industries nearly doubled during the first nine months of 2025, according to the World Bank.

Tourism itself must become greener and retain more value

Yuthasak said tourism should remain an important part of Thailand’s economy, but its structure needs to change.

Government policy should encourage tourism businesses to use more domestically produced materials, technology and products, reducing the amount of visitor spending that leaks overseas.

Thailand should also develop stronger domestic tourism and digital-service platforms to retain more booking revenue rather than allowing a large share to flow to foreign online travel agencies.

Linking tourism more closely with local agriculture, manufacturing, technology and green industries could allow foreign spending to circulate more effectively through the Thai economy and reach workers and local businesses.

The broader challenge, Yuthasak argued, is no longer simply how to bring visitor numbers back to record levels.

Thailand’s economic resilience over the coming decade will depend on whether it can rebalance away from excessive reliance on tourism, raise manufacturing productivity and combine high-value services with advanced green industries capable of generating stronger and more broadly distributed growth.

Source: Thansettakij