Thailand Tourism Report Q2 2008

2007 Tourist Arrivals Underperform Final 2007 tourist arrival figures released by the Tourism Authority of Thailand (TAT) confirmed that tourism arrivals did slow in 2007. In total, 14.5 million tourists visited the country in 2007, representing y-o-y growth of 6.6%. While still representing positive expansion of the sector, this rate of growth is well below recent trends. The reasons for this slowdown are many: ongoing political uncertainty throughout 2007 following a military coup in late 2006 deterred some tourists from visiting. In addition, the deaths of three people following bomb explosions in Bangkok on New Year's Eve 2006 provided a further disincentive, while on the external side, an economic slowdown in the US helped to reduce tourist inflows.

On the positive side, these effects should dissipate in 2008, providing the opportunity for the rate of arrivals growth to pick up once again. Following elections in December 2007 a civilian government has returned to power and been recognised by the military, paving the way for a political normalisation.

Moreover, there have been no further bomb attacks in major tourist centres, although the insurgency in the south of the country continues. As such, the remaining negative factor is the slowdown in the US, and renewed arrivals from Europe and the Asian region should go some way to compensating for this. The Thai government is projecting tourist arrivals of 15.7 million in 2008, representing growth of 8.3. This is in line with our revised 2008 target, where we are forecasting arrivals of 15.6 million, before rising to 16.8 million in 2009.

Political Normality Resumes After over a year of military government and associated concerns regarding the future of the country's political system, democratic elections took place on 23 December 2007. Although the elections were won by supporters of former prime minister Thaksin Shinwatra - whom the military overthrew in the 2006 coup - the military accepted the result, since to do otherwise would have risked widespread social protest and international opprobrium. The new government took office in 2008, at the head of a fragile coalition.

Thaksin himself returned from exile in February 2008 and is likely to attempt to overturn his ban from politics. However, all parties within the coalition are well aware that too strenuous an effort to return Thaksin to politics risks reviving the socio-political tensions that characterised much of 2006.

Accordingly, political manoeuvres will be made cautiously, meaning that there should be little risk of an upsurge of social unrest.

New Minister Sets Tourism Priorities New Minister for Tourism and Sports Weerasak Kowsurat has outlined the new government's future strategy for the tourism industry, which is to be implemented in co-ordination with the TAT. Building on existing trends, he emphasised the importance of increasing high-end tourism and attracting higherspending visitors, as well as simply focusing on increasing tourist arrival numbers. In addition, the ministry plans to carry out an evaluation of Thailand's most popular tourist destinations and resorts, using a 'SWOT' analysis to rank each evaluation. A further strategy will then be released once these results have been analysed.

Special Focus: Southern Insurgency Continues Despite speculation that the tenure of the military government might herald a shift in policy towards the disturbed southern region, little change was in fact initiated. Since early 2004 the three southern provinces of Yala, Pattani and Narathiwat have experienced bouts of significant unrest, which are often ascribed to Islamist secessionists seeking to win independence for the region. This conflict has claimed nearly 3,000 lives since 2004 and is characterised by the use of co-ordinated bombings, as well as direct attacks on police and military bases.

Initial suggestions that the military government might attempt to open negotiations with the insurgent groups - who are primarily seeking autonomy or independence - were abandoned, as it became clear that neither side had any real incentive to begin talks. Instead, the military government followed the policy of the previous Thaksin government in launching security initiatives in the south as a means of shoring up domestic support. In June 2007 the military launched a programmes of security sweeps on southern areas in the provinces of Yala, Pattani and Narathiwat, as part of Operation Defend the Southern Border. The security operation was intended to reduce violence in these areas ahead of the December elections.

However, although there have been some improvements, such as a decrease in bomb attacks on military patrols, levels of violence have not decreased significantly.

BMI has for some time warned of the possibility that militants could attempt to strike targets in Bangkok or in key tourist areas to pressure the government, and there were widespread concerns that the Bangkok bomb attacks of New Year's Eve marked an escalation of the insurgency. However, no group has yet claimed responsibility for the attacks, and there have been no further suggestions that the insurgency has spread. Indeed, to target areas such as Bangkok or major tourist sites would be counter-productive for the insurgents, since this would strengthen public opinion against the secessionist movement.

Instead, the insurgents are continuing to target only areas in the south, which are not major tourist destinations. This regional concentration of activity lends weight to belief that the southern insurgents were not responsible for the New Year's Eve bombings, and should reduce fears of an expansion of the southern bombing campaign across the country in the medium term.

However, the strength of the insurgency remains a low-level threat and will continue to act as a drag on the performance of Thailand's tourist sector. Although the south is relatively tourist-free, heavily publicised bomb attacks in the south would have negative implications for Thailand's tourism sector as a whole. In this regard, a series of 28 coordinated explosions in the south on 20 February 2007 demonstrated that the insurgents retain a strong military capability. A worrying sign for the tourism sector is that the attacks were apparently designed to coincide with Chinese New Year, which generally attracts inflows of tourists from Malaysia and Singapore to Thailand's southern provinces. Although the bulk of Thailand's tourism arrivals are from outside Asia, a downturn in regional arrivals could act as a drag on the sector. Furthermore, the bombs targeted recreational tourist-friendly areas such as karaoke bars and hotels, which served to attract more publicity to the bombings.