Thai hotel sector faces rising closures after widespread losses

Thailand’s hotel and accommodation sector is facing mounting pressure from weak tourism demand, rising competition and high operating costs, with business closures accelerating after more than half of operators reported losses last year.

KASIKORN RESEARCH CENTER (KResearch) said 148 hotel and accommodation businesses registered their closure during the first nine months of 2026, up 42% from the same period a year earlier.

Meanwhile, about 51% of operators recorded losses in 2025, with smaller businesses the most vulnerable. Around 54% of small operators were loss-making, while 42% had accumulated losses for three consecutive years from 2023 to 2025. Overall, 38% of hotel and accommodation operators recorded accumulated losses throughout the three-year period.

KResearch warned that the outlook for 2027 remained highly uncertain as the tourism recovery stays uneven, competition intensifies and operating costs face further upward pressure.

Hotel market grows, but recovery remains uneven

Thailand’s hotel and accommodation market is expected to be worth about THB1.1 trillion in 2026, up 2.6% from 2025.

Accommodation accounts for about 77% of sector revenue, with the remaining 23% coming from areas including catering, meetings, seminars, food and beverages.

The industry comprises about 15,000 operators, more than 98% of them small and medium-sized businesses, and employs around 430,000 people. Its market value is equivalent to about 5.7% of Thailand’s gross domestic product at current prices, according to KResearch.

Despite overall revenue growth supported by international meetings and conferences and continued domestic travel, the recovery has not been evenly distributed.

The nationwide occupancy rate increased by only 0.18% year on year during the first nine months of 2026, while 19 provinces recorded declines.

New business registrations also slowed. A total of 779 hotel and accommodation businesses were established during the first nine months, down 31.2% year on year, although the figure remained above the comparable level in 2024.

Foreign arrivals remain below pre-pandemic level

KResearch expects Thailand to receive about 31.4 million foreign visitors in 2026, down 4% from 2025 and equivalent to only about 79% of the 2019 pre-pandemic level.

The research house attributed the slow recovery to stronger competition among tourism destinations, economic weakness in source markets, safety perceptions and geopolitical tensions.

Visitor numbers from 18 important markets remained below their 2019 levels in 2025, including China, South Korea, Japan, Laos, the United States and Scandinavian countries.

Changing travel preferences are also reshaping demand. Tourists are increasingly seeking local culture, nature and wellness experiences, while solo travel and independent trips are gaining ground over traditional organised tours.

In 2025, 29 provinces recorded fewer overnight visitors than in 2019, including Bangkok, Phuket, Chiang Mai, Songkhla, Trat, Udon Thani, Khon Kaen and Sukhothai. Seventeen of them were down by more than 10%.

Room supply expands faster than overnight demand

Competition is becoming more intense as accommodation supply continues to grow faster than the number of overnight visitors.

Thailand had about 876,000 hotel and accommodation rooms in the first half of 2026, up 3.4% from the end of 2025 and 11.7% from 2019.

Room numbers increased in 64 provinces, while new supply is continuing to enter the market across different price categories, particularly in major destinations including Bangkok, Phuket, Surat Thani and Chiang Mai.

KResearch estimated that the average number of overnight visitors per room fell from 249 in 2019 to 228 in 2026, increasing pressure on some operators to compete on price.

Alternative accommodation is adding further competition.

AirDNA data cited in the report showed about 50,000 rental units available in Bangkok, Phuket, Chonburi, Chiang Mai and Surat Thani as of October 2026, equivalent to about 10% of registered hotel and accommodation rooms in those markets.

The properties recorded average occupancy of about 60% over the preceding 12 months.

KResearch expects Thailand’s average daily room rate to fall about 0.8% in 2026 after rising by just 0.1% in 2025, as weaker foreign demand and slower growth in domestic tourism encourage operators to use pricing to attract guests.

2027 outlook remains uncertain

KResearch expects foreign arrivals in 2027 to range between 31 million and 33 million, representing anything from a 1% contraction to 5% growth from 2026.

Long-haul markets in Europe and the Middle East require particular attention because the forecast assumes geopolitical tensions do not spread further and significantly disrupt travel routes.

Domestic tourism is projected at between 205.5 million and 208 million trips, up 0.5%-1.8%.

Nationwide hotel occupancy could range from 69.58% to 71.69%, representing a decline of as much as 2% or growth of up to 1%.

Operating costs are another risk. Variable costs account for about 40%-45% of total expenses depending on the business model and could rise with energy prices, electricity bills, transport costs, food and hotel supplies, as well as online travel agency fees.

For hotels with high fixed costs and limited liquidity, weaker occupancy combined with rising expenses could reduce profitability further and lead to additional closures or business sales.

Regulation, sustainability and climate add pressure

Operators also face changes in regulation and sustainability requirements.

Thailand’s proposed Accommodation Act would broaden regulation to newer accommodation formats, including homestays, hostels, boutique hotels and sharing-economy properties, while introducing regulation based on business size and risk.

KResearch said the changes could improve consumer protection but also raise competition and compliance pressures.

Environmental, social and governance standards are also becoming more important, particularly for European travellers and corporate customers. Operators without recognised sustainability credentials could face disadvantages in marketing through online travel platforms.

Climate volatility presents another challenge through higher electricity and water-management costs, disaster insurance premiums, food prices and physical risks such as flooding. It is also encouraging more last-minute bookings as travellers wait to assess weather conditions before committing to trips.

KResearch advised operators to diversify their customer markets and revenue sources rather than relying on price competition alone.

Options include targeting domestic travellers, developing co-working spaces, cafés, meeting services and long-stay packages, while adopting technology, renewable energy and locally sourced materials to control costs and improve resilience.

For new hotel investment, the research house recommended carefully assessing local room supply, the mix of target customers and sustainability considerations before proceeding.