Thailand’s Tourism Sector Loses Competitive Edge as Regional Rivals Outpace Growth

 

Over 59% of operators warn Thailand is falling behind regional rivals like Vietnam as tourism contraction drives a long road to recovery.

 

While global travel faces macroeconomic headwinds, including the Middle East conflict and rising fuel surcharges, data from a University of the Thai Chamber of Commerce (UTCC) survey reveals a deeper structural crisis: 59.1% of Thai tourism operators feel Thailand is lagging behind regional rivals.

 

Reflecting on these macro challenges, Thanavath Phonvichai, president and chief advisor to the Economic and Business Forecasting Center at the UTCC, noted that while the overall Thai economy is projected to expand by 2.2–2.5% in 2026, driven by electronics, AI, and exports, the tourism sector continues to face severe headwinds.

 

 

Foreign tourist arrivals for 2026 are projected to drop to 31.5 million—down roughly 4.5% from approximately 33 million—missing initial targets.

 

"Next year, we still believe tourism will recover, but reaching 34 million visitors carries risks because today Thailand does not compete as prominently with other countries as it did in the past," Thanavath stated.

 

 

 

The Vietnam Surge and Regional Diversion

The changing landscape is starkly visible across core tourist markets. While Russian tourists to Thailand remained virtually flat (-0.1%), Russian arrivals to Vietnam skyrocketed by 160% due to Vietnam’s 45-day visa policy and expanded direct flights.

 

Similarly, outbound Malaysian and Indian travellers are choosing Vietnam over Thailand. Meanwhile, South Korean tourist arrivals to Thailand fell by 25.4%.

 

Skyrocketing fuel surcharges made long-haul flights to Thailand 2.4 times more expensive than short-haul trips to Japan, a trend compounded by a weak Japanese Yen.

 

Over 60% of business operators believe it will take until 2031 or later for Thailand to return to its pre-COVID peak of 40 million tourists.

 

 

Commenting on these shifting dynamics, Wichian Kaewsombat, director of the Trade Strategy Institute, highlighted how regional competitors are capitalising on Thailand's stagnation: "We must look back at why competitor countries are able to draw more tourists even though Thailand still has great tourism resources and services. If this situation continues without adding direct flights or improving cost value, Thailand risks losing these markets in the long run."

 

 

 

Domestic Challenges and Bottlenecks

While 48.1% of operators blame external factors such as war and fuel prices, nearly 47% point to domestic limitations that Thailand directly controls.

 

Inconsistent visa rules, border checkpoint delays, flight seat shortages, and unresolved safety concerns—including scammers and grey-money operations—are actively undermining foreign visitor confidence.

 

 

Elaborating on these findings, Umakamol Suthonsurat, assistant director of the UTCC's Economic and Business Forecasting Center, pointed out that 52.2% of surveyed operators acknowledge Thailand's competitiveness has improved compared to three years ago, yet 59.1% feel Thailand remains inferior when stacked against active regional competitors.

 

She added: "When considering the reasons for the decline in foreign tourist arrivals during the first nine months, 48.1% cited uncontrollable external factors like war, while 25.3% pointed to domestic constraints including flights, visas, border checkpoints, and safety, and 21.7% noted travellers turning to competitor destinations."

 

Specific regional bottlenecks include:

• Malaysian Border Bottlenecks: Tourist arrivals from Malaysia fell by over 500,000 (-15.2%), driven primarily by system transition delays at the new Sadao border checkpoint, lingering flood recovery in Hat Yai, and security warnings following southern border incidents.

• Indian Visa Flip-Flopping: Frequent shifts in visa policy for Indian travellers—initially reducing stay periods from 60 days to 15 days before adjusting to 30 days—created widespread market confusion and cancellation rates of roughly 20%.

• Chinese Safety Perceptions: Despite Chinese tourist numbers growing 15.2% from a low base, safety concerns lingering from scammer news and safety warnings issued by the Chinese Embassy continue to suppress a full market recovery.

 

 

Industry Demands and Government Action

To reverse this downward trend, over 50% of operators have outlined urgent priorities for the government.

 

The top operator demands focus on increasing flight seats and charter flights, resolving border checkpoint issues at Sadao, establishing stable and consistent visa policies, and cracking down on grey money and nominee businesses.

 

Industry leaders stress that Thailand must pivot toward enhancing travel convenience, securing direct flight routes, and restoring safety confidence if it hopes to protect its market share and economic viability in the years ahead.