An 80% rise in energy costs in the United Kingdom and similar rises in Europe with inflation at a 40-year high may well be good reasons this year for holidaymakers in western countries to fly off on an extended vacation to Thailand, the ultimate warm weather destination, despite higher airfares. With foreign arrivals now moving up towards 2 million a month, there is room for hope among Thailand’s economic planners that the country’s very valuable and critical foreign tourism industry may be finally on the rebound with one London-based think tank focused on international travel predicting the industry will be employing over 3 million more people by the end of 2025.
Thailand’s Finance Minister Arkhom Termpittayapaisith sounded upbeat on Wednesday when he heralded a weaker baht as a boon to the country’s tourism and export dependent economy. He suggested such a course may be with us well into 2023. It comes as new figures now show that Thailand could see up to 12 million visitors in 2022 with the number of arrivals currently approaching 2 million per month. It comes as a travel body in London suggests that Thailand could see 3.5 million more people working in the foreign tourism sector in the kingdom by the end of 2025. Higher energy costs, inflation and higher airline tickets are believed to be putting off some travellers while others are looking forward to saving money by avoiding high electricity and living costs at home while holidaying relatively cheaply in Thailand.
On Wednesday, at a meeting of finance ministers ahead of the Asia-Pacific Economic Cooperation (APEC) summit in November in Bangkok the Minister of Finance Arkhom upgraded the potential growth rate for the kingdom in 2022 to between 3% and 3.5% in line with the latest projection from the Bank of Thailand’s Monetary Policy Committee at the end of September which forecasted a 3.3% growth rate.
Last week, the International Monetary Fund projected 2.8% growth for the year.
It is not clear what the basis for the more optimistic outlook by Thai officials is, but figures just released show that the kingdom welcomed 6.4 million visitors up to October 9th last compared to only 4.3 million in the first eight months of the year.
2.1 million arrivals over a 5-week period to October 9th means that with better flight connectivity, Thailand will see over 2 million visitors a month
This means that the country saw 2.1 million visitors over a 5-week period which equates roughly to 1.7 million visitors a month.
Thailand could still be on course to welcome 11 to 12 million visitors in 2022 with increased flight connectivity in the later months of the year and stronger demand, particularly from higher spending western markets.
The problem for Thailand in the middle of this year, however, has been that despite a promising start with tourist spending well, many of those arriving in the later months were from Asia and the Middle East which has driven down average per capita spend by 11.5% to 14.5%.
On Wednesday, Minister of Finance Arkhom Termpittayapaisith told reporters that Thailand now welcomed a depreciating baht as he forecasted US interest rates will continue to go up while Thailand planned to adhere to its gradual approach to interest rate rises depending on the strength of the economic recovery.
Minister tells reporters Thailand is less susceptible to foreign capital outflows than other countries
Regarding the danger of capital outflows, the Finance minister was sanguine about this threat saying enigmatically that Thailand was less susceptible to the phenomenon.
This week, the Bank of Thailand Assistant Governor Mr Piti Disyatat told analysts that the central bank, however, was somewhat concerned about the impact of a lower baht on Thai inflation moving forward.
The top official pointed out that 75% of Thai imports are priced in US dollars.
The bank fears that inflation may remain heightened although the headline rate fell back in September to 6.4% from 7.9% in August.
Its target rate for the economy is 1% to 3% which it had said up to recently, would be reached by the second half of 2023.
Inflation in Thailand this year has been driven primarily by oil prices, not rising consumer demand
Officials at the bank have constantly pointed out that Thailand’s inflation has been stoked this year primarily by higher oil and energy prices as opposed to being driven by raised consumer demand while a rise in interest rates with private sector debt already highly leveraged, ran the greater risk of slowing down badly needed economic growth.
Many analysts have also pointed out that the fall in the value of the baht against the US dollar has not been matched with falls against other key currencies strongly linked with Thai foreign tourism such as the euro, the pound sterling and the Australian dollar.
On the other hand, there is growing evidence to suggest that the foreign tourism industry worldwide is recovering but the problem for Thailand remains flight connectivity and the price of airline tickets to fly to the kingdom seen by many westerners, traditionally, as a cheaper holiday destination.
Airline ticket fares to Thailand rise by 40% with higher prices from the United States, this is expected to ease in 2023 with more flights available
Airlines and economic data sources such as Mastercard Economics are reporting a dramatic rise in demand for flights across the world this year with reports suggesting that the average ticket price has risen by 40%.
The average return ticket price from points of origin such as cities in Europe or London have all risen this year with the cheapest economy seats now on offer being $800 return to Bangkok based on multiple flights and connections with seats booked long term coming in at a price of $700.
Flight connections for the United States are even more expensive with the cheapest and most sought-after economy fares coming in at $1,000.
Thailand is hoping that a weaker baht going into 2023 coming with increased flight connectivity and consequently cheaper flights could see the number of foreign tourists rising again towards pre-pandemic levels with the country targeting 20 million visitors for 2023 or half what was seen in 2019, something which would be boosted by a reopening of the Chinese market and the end of virus restrictions in that country and also in Japan which have impeded efforts to create more flight connections between Bangkok and the world.
World Travel & Tourism Council predicts a rise in foreign tourism economic earnings for Thailand by 2025 with over 3.5 million jobs created
This week, the World Travel & Tourism Council said that it expected that the foreign tourism industry in the Asia Pacific will be fully recovered by 2023 and indeed that the potential is there to see the industry contribute 32% more to the regional economy than before the pandemic.
The body expects foreign tourism to grow by an average annualised rate of 5.8% from next year and over the next decade.
The non-government organisation, headquartered in London, predicts that an extra 3.5 million jobs will be created in Thailand’s industry over the next three years to the end of 2025.
It is difficult to accept such claims given the current disruption and hardship caused to potential travellers particularly in the United States, Australia, New Zealand, United Kingdom and Europe by higher inflation and continued disruption and insecurity brought on by the Russian-Ukraine War.
Cheaper to holiday in warm weather in Thailand than pay sky-high energy bills and inflated prices at home
There is evidence to suggest that segments of the foreign tourism industry are behaving differently at this time with higher-earning sectors seeing stronger spending in what the industry terms ‘revenge spending’ caused by pent-up demand due to the pandemic while those at the margins have had their travel plans and days in the sun disrupted.
On the other hand, given the rising cost of energy in western countries right now in this unprecedented era, with electricity and energy costs soaring by up to 80%, it may well be cheaper for many of these holidaymakers to fly to Thailand despite the extra fare costs.