Industry leaders and central bank all warn that foreign tourism must return to avoid a collapse

February 19, 2021 at 12:59 am
by Joseph O' Connor
in Economy, Foreigners, More News from Thailand, Thailand
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Uncertainty looms as the Thai government, like its counterparts across the world, is facing an economic crisis that is growing with economic projections for GDP growth tumbling as uncertainty reigns over how this virus will be brought under control, the speed and efficacy of vaccination campaigns and how quickly business can get back to normal. Especially so for the country’s already devastated foreign tourism industry with fears growing that it may never recover what has been lost.

The Thai government is facing lower growth projections as it scrambles to get its Covid-19 vaccination programme underway with increasingly urgent warnings that the country’s devastated tourism industry is on the verge of collapse. From the opposition benches in parliament to the central bank, from struggling airlines and to hotel operators, the message is clear and daunting. As it stands, it looks like the window of opportunity to reopen Thailand this year is closing, a situation bringing with it both grave economic implications and untold human misery for millions.

industry-central-bank-warn-foreign-tourism-collapse — The President of the Thai Hotels Association, Marisa Sukosol Nunbhakdi, has warned that the tourism industry in Thailand and hotels face collapse if the kingdom is not reopened to foreign tourism. It comes as the Bank of Thailand has highlighted the issue as critical to Thailand’s medium-term economic prospects as analysts begin to downgrade GDP projections for this year as downside risks grow amid heightened uncertainty as to how long this crisis will persist in hindering economic progress.

As the Thai government faces a censure motion in parliament this week, one opposition MP drew the government’s attention to the loss of ฿250 billion a month to the country’s economy caused primarily by the enforced closure of its borders to normal foreign tourists on short stays.

This was not just political point-scoring. The Prime Minister, Prayut Chan ocha, himself admitted before MPs that the economic challenge this year was immense as the kingdom continues to battle against an invisible enemy which has thrown the world into chaos.

Foreign tourism distributes money to a large number of less well off Thais on the ground

Foreign tourism accounts, both directly and indirectly, for 20% of GDP but crucially, it pumps money directly into the economy and the hands of tens of millions of less well off Thais.

It is a crucial economic engine that cannot be replaced by government handouts and even new industries.

Government’s difficult challenge as Bank of Thailand emphasises the importance of foreign tourism

On the other hand, the government has set public health as its primary concern. The increasingly complex situation with virus variants and a lack of data on the effects of vaccination campaigns has left not just the Thai government but all those in power around the world in a quandary as ministries haemorrhage money and financial losses mount across global economies.

The Bank of Thailand has just this week, underscored again the crucial importance of the industry as it identified the reopening of the sector as crucial right now for the kingdom’s medium-term economic prospects and any possible return to healthy growth levels.

Tourism infrastructure grown up over 60 years is now facing collapse and may not come back

The President of the Thai Hotels Association, Marisa Sukosol Nunbhakdi, has raised the alarm by revealing in a powerful appeal for action, that the industry’s infrastructure, as it has been known over the last 60 years, is nearly close to collapse.

She highlighted the desperate lengths hotel employers are going to in order to keep key staff employed while waiting for the door to open again to foreign tourists arriving freely.

Ms Marisa estimates that, already, 50% of the hotels in Thailand are shut while the rest are going to extreme lengths to minimise losses.

This includes placing staff on minimal pay, enforced time off and even allowing staff to live in the hotels to survive.

Big Bangkok hotels have lost hundreds of millions of baht as they cut staff wages since March 2020

Even Thailand’s largest hotels, in Bangkok, are pulling in their belts with many of the larger concerns, regulars for visiting foreigners, estimating their losses since March last year, in terms of hundreds of millions of baht in income lost from their topline.

One 52-year-old hotel worker, Ploy, who works at one of the city’s largest hotels in the centre of Bangkok, told the Thai Examiner her salary was halved last year and now, it has been halved again.

She is also worried that working night shifts may further reduce her meagre income. She must budget for a taxi home each night to the suburbs of the city.

The single woman is now surviving while working and living nearly in poverty, even by Thai economic standards, on less than ฿5,000 per month.

Hotel staff need customers to earn a living

This was the point made by the Thai Hotel Association chief this week when she highlighted that many of these staff members rely on customer service charges and tips to make up their income in normal times.

Finance for hotels is drying up, no firm basis for the business anymore to get bank facilities

Ms Marisa warned that the situation for the sector in 2021 is far more grave than 2020 as businesses have already eaten up reserves with no firm prospect for when their businesses will be able to make ends meet.

She explained that most smaller or even larger enterprises can no longer rely on banks.

‘When we seek loans, banks always request our business plan or the period we can earn a profit, but under these circumstances, hotels don’t really have a clue when the business will get back to normal,’ she explained. ‘We need support from the government, or else we could see the whole tourism industry collapse before things get back to a better shape.’

Bank of Thailand joined by other economists in emphasising the downside faced by the country

The message from the Bank of Thailand to the government comes from its influential Monetary Policy Committee which is still predicting 3.2% growth this year and 5.5 million foreign tourist arrivals.

These figures have already been questioned. The National Economic and Social Development Council, just days ago now, suggested that only 3.2 million visitors will come and reduced its growth projection to 3%.

On Wednesday, the Kasikorn Research Centre came out with a 2.6% projection but warned that foreign tourism may not return to Thailand at all this year and so, the economy will be dependent on further government supports amid continued uncertainty.

The only bright star on the horizon is a pickup in export demand.

‘External factors that could affect the pace of border reopening include travel restrictions from China and virus mutations that could reduce vaccine efficacy,’ the research arm of Kasikorn Bank explained.

Vaccination programme critical to economic recovery

The Bank of Thailand Monetary Policy Committee minutes focused on the ability of the government to roll out a vaccine programme, the ability to curb potential outbreaks in the future and the prospects for foreign travellers to be able to travel outward and the country’s ability to develop a more sophisticated screening capability while allowing the industry to resume.

It notes that in November, before the second wave, Thailand’s unemployment rate, normally close to zero, was at 2% down slightly from 2.1% in October with 783,760 people unemployed.

Millions facing hardship, even tougher times ahead

However, the policy committee noted that at least 4.7 million people, at the same time, were already experiencing hardship with a significant loss of income.

The bank estimated that 1.2 million of these workers may be on the verge of losing their employment altogether or forced to accept even further cuts.

‘These include daily-hired and self-employed workers in non-farm sectors, as well as workers in the hotel industry. Among these workers, around 1.2 million could become unemployed or underemployed,’ the bank noted.

Airline industry flying very low

Meanwhile, things are even worse in the airline sector with Thai Airways due to present its survival plan to the Central Bankruptcy Court next week amid steep job cuts.

There are now real doubts about the flagship carrier as planners strive to hatch a deal agreeable to all creditors and one that produces a viable future.

Its up and coming rival before the Covid-19 crisis, Thai Air Asia, has also found itself fighting to say in the air as the firm, a joint venture between Thai investors and Malaysia’s Air Asia, has already laid off 75% of its staff without pay as the airline struggles with only 25% of its fleet in the air on a reduced schedule of flights.

Thai Air Asia banking on soft loans says Chairman

Tassapon Bijleveld, the Executive Chairman of Thai Air Asia, expressed deep concern in January and is holding on to see if soft loans promised by the government materialise over the coming weeks.

There is talk of some facility being made available through the Export-Import Bank of Thailand with a suggestion that the government is waiting until after the censure motion is seen off in parliament to move ahead.

‘We really have no idea about the details of the proposal from Exim Bank and don’t know when the cabinet will mull this issue. It’s like we’re walking with blind eyes during the crisis now,’ he revealed.

International flights down by 99.1% as 65% of subsidised domestic plane tickets left with no takers

The company is dealing with a 99.1% drop in international flights and a 27.1% fall-off in domestic activity for the last quarter which has been followed by an even greater crisis as flyers in the domestic market, whose confidence which was returning, was shot by the second wave resulting in 65% cancellation rates in the opening weeks of the year.

Even government subsidies, which last year saw 6 million hotel nights paid for by the taxpayer, cannot help to get flyers back off the ground with only 35% of the offers being taken up even with the subsidies ramped up to ฿3,000.

Domestics flyers are simply staying at home and if moving about, are opting for short trips by car.

The environment created by this crisis is now also settling on top of people as a factor in itself which has seen consumer confidence decline month by month since March last year.

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About the Author

Joseph O' Connor

Joseph Anthony is an expat from Ireland who has lived in Thailand for the last decade. He has worked extensively in the media including editorial positions in Ireland and Thailand. He is focused on economic and business stories in Thailand as well as the expat lifestyle.

All posts by Joseph O' Connor