Higher energy costs increase cash flow risks for Thai tourism firms
Some operators may absorb higher costs for about one to three months, while the travel agents’ association calls for energy price stability and help for small and medium-sized firms.
- Rising energy prices are directly increasing operating costs for Thai tourism firms, with estimates suggesting a 15% energy price hike could raise overall business costs by 3%.
- Small and medium-sized enterprises (SMEs) are particularly at risk of cash flow problems, as they may only be able to absorb the increased costs for one to three months due to limited liquidity.
- Many tour operators cannot immediately raise their prices to cover the higher costs because they have already sold tour packages at fixed prices to overseas partners.
- A tourism association is urging the government to stabilize energy prices and support SMEs, as raising tour prices is seen as a last resort that would harm Thailand's competitiveness.
Dr Adith Chairattananon, honorary secretary-general of the Association of Thai Travel Agents (ATTA), told Thansettakij that continuing rises in energy prices were directly increasing operating costs for Thailand’s tourism businesses, particularly tour vehicle operators, transport providers, hotels and related service businesses.
He said higher overall costs could affect the liquidity of small and medium-sized enterprises (SMEs) and the country’s long-term competitiveness.
ATTA estimates potential 3% rise in overall costs
Rising energy prices directly affect tourism operators’ costs.
In a scenario where energy and transport account for around 20% of total operating costs, a 15% rise in energy prices would immediately increase overall business costs by about 3%.
This excludes indirect effects from higher prices for goods, raw materials and other services in the supply chain.
Tourism SMEs may face cash flow risks within 1–3 months
Beyond rising costs, Thailand’s price competitiveness is a key concern, particularly for tour operators that have agreed prices and sold packages in advance to overseas business partners.
These commitments prevent them from immediately adjusting selling prices to reflect actual costs.
Operators’ ability to absorb higher costs varies according to their cost structures, profit margins, working capital and contractual obligations.
SMEs, which have limited liquidity and working capital, would begin to see a significant impact on profits and working capital if they continued to face overall cost increases of around 3–5%.
This range is a preliminary assessment, not the result of an industry-wide survey of operators.
Some operators may be able to absorb the additional costs in the short term for about one to three months.
Persistently high energy prices, however, would increase risks to liquidity and business continuity.
The association believes the issue extends beyond how long operators can bear higher costs.
Tourists’ purchasing power and Thailand’s competitiveness must also be considered.
“Price rises” should be a last resort
In adapting to these pressures, the private sector’s first priority is to manage internal costs more efficiently through the following measures:
- Planning transport routes for maximum cost-effectiveness and efficiency.
- Reducing unnecessary energy use throughout service delivery.
- Managing tour vehicle utilisation to maximise efficiency.
- Negotiating with business partners to manage costs jointly.
If energy prices continue to rise beyond operators’ ability to absorb the costs, however, businesses may need to gradually revise service charges and tour package prices to reflect actual costs, taking account of contractual obligations and the impact on tourists.
ATTA stressed that raising prices should be a last resort, as Thailand faces intense price competition from regional rivals while tourists’ purchasing power remains limited.
Three proposals for energy price stability and SME support
ATTA has therefore put forward three policy proposals to the government:
- Introduce measures to stabilise energy prices.
- Provide urgent support to ease cost pressures on SMEs.
- Avoid imposing additional overlapping costs through government measures while businesses continue to face economic volatility.
“The private sector is ready to adapt and manage costs to the best of its ability, but maintaining the competitiveness of Thailand’s tourism industry requires cooperation between the public and private sectors to prevent rising costs from becoming a burden on tourists and affecting the country’s tourism economy in the long term,” Adith said.
Source: Thansettakij
