RESEARCH ECONOMICS May 16, 2019 Tourism: Still a reliable driver of growth? • The number of visitors to Thailand has grown rapidly from 14.1m in 2009 to 38.3m in 2018 (Chart 1). As a result, tourism has become ever more important as a driver of Thailand’s GDP growth, accounting for 12.3% of GDP in 2018 compared to only 5.3% in 2009 (Chart 2). According to the World Travel & Tourism Council (WTCC) report, the total contribution of travel and tourism to GDP is forecast to rise by 5.6% per year to 28.2% of GDP in 2028. Moreover, the industry is an important source of employment, with total contribution of travel and tourism to employment was 15.5% of total employment in 2017 (5,834,000 jobs) − this figure is forecast to rise to 22.3% of total employment in 2028. Consequently, this underlines the increasing importance of the tourism sector to the Thai economy. Chart 1: Number of visitors to Thailand Chart 2: Thailand’s tourism revenue to GDP Persons mn % 45 14 12.3 11.9 40 38.3 11.2 35.6 12 10.6 35 32.5 29.9 10 9.3 30 8.9 26.5 8.0 24.8 8 25 22.4 6.9 5.9 20 19.2 6 5.3 5.5 15.9 15 14.6 14.1 4 10 2 5 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Ministry of Tourism and Sports Source: Ministry of Tourism and Sports, CEIC The dizzy rise of the Chinese tourist arrivals • It was hard to imagine that, only a decade ago, in 2008 only about 0.8 million Chinese visited Thailand while the number rose to over 10 million in 2018 (Chart 3). This undoubtedly played a crucial role in the opening up of the U-Tapao international airport by the Thai government to accommodate the influx of Chinese tourists. In addition, a new hi-speed rail link between the three major airports −Suvarnabhumi, Don Muang and U-Tapao − will be operational by 2025 according to the Eastern Economic Corridor (EEC) office in order to further improve connectivity between the three airports. • As of 2018, the number of visitors from China accounted for 27.5% of total visitors, followed by the distant second group from Malaysia with a 10.7% share (Chart 4). On the whole, the number of Chinese visitors slightly exceeds the number of ASEAN tourists in 2018 while both groups, together, account for more than 50% of total visitor arrivals. Chart 3: Number of Chinese Tourists in Thailand Chart 4: Breakdown of total tourist arrivals (2018) Persons mn Middle East 2.9% 4.2% 1.9% 12 3.8% 10.5 USA 9.8 10 Russia 8.8 5.2% 7.9 8 South Asia 6 Malaysia 27.5% 10.7% 4.6 4.6 East Asia (ex. China, ASEAN) 4 2.8 Europe (ex. Russia) 2 1.7 13.7% 0.8 0.8 1.1 ASEAN (ex. Malaysia) 16.2% 0 China 13.8% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Others Source: CEIC Source: CEIC See disclaimer at the end of report | RESEARCH • Given the rising importance of Chinese tourists to the Thai economy, it is worth seeing a bigger picture that Thailand as a destination attracts only about 7% of total outbound tourists from China in 2018− well below the top three destinations for Chinese outbound tourists: Hong Kong (34.1%) Vietnam (22.1%) and Macau (16.9%) (Chart 5) . In 2018, the number of outbound tourists from China was 149.7m, much higher than the 2014 figure of 107m (Chart 6). The fact that the number of Chinese tourists has been growing at a rapid pace as China’s economy continues to grow suggests the number will rise even further in the near future. Chinese outbound visitors will underpin the tourism sector, not just in Thailand but also in other countries in the region too. Chart 5: Breakdown of Chinese outbound tourism by Chart 6: Number of outbound Chinese tourists destinations (2018) TW SG KR Persons mn 1.8% 2.3% 3.2% 160 149.7 JP 140 130.5 5.6% 117 122 120 Others 107 HK 7.0% 100 34.1% TH 80 7.0% 60 40 MO 20 VN 16.9% 0 22.1% 2014 2015 2016 2017 2018 Source: CEIC Source: CEIC Tourism in Thailand • According to the WTCC report, the breakdown of the tourisms spending for Thailand in 2017 is as follows− 88.2% leisure and 11.8% business. Therefore, Thailand should aim for more business tourists to boost spending per head per day. The tourist spending per head per day in Thailand has risen from 4011 thb in 2009 to 5404 thb in 2018 (Chart 7). There is room for the authority to boost total revenues by targeting quality tourists instead of trying to maximize headline visitor arrival figure. • If we rank the top 5 tourist spending by countries, we see that China makes up for 29% of total revenue, followed by Russia 5.8%, US 4.2%, South Korea 4% while Malaysian visitors only account for 5.7% of total revenue (Table 1). The share of tourist revenue is in sharp contrast with the Malaysian tourists which represent a 10.7% share of tourist arrivals. Chart 7: Tourist spending per head per day in Thailand Table 1: Top five visitor receipts by nationalities THB 6,000 5,404 5,238 5,142 4,809 4,616 5,000 4,393 Country Share of total tourism revenue 4,187 4,142 4,011 4,079 4,000 China 29.0% 3,000 Russia 5.8% Malaysia 5.7% 2,000 USA 4.2% 1,000 South Korea 4.0% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: National Statistical Office Source: Ministry of Tourism and Sports Economics - 2 | RESEARCH • For Q1 2019, the number of visitors to Thailand only rose by 1.8% YoY, a sharp slowdown from 8.4% a year ago, which, together with the changing composition of inbound tourists, led the tourism revenue for Q1 2019 to edge up only 0.4% (Chart 8). The government has targeted the visitor arrivals for 2019 to be 41m. In response to a slowdown in tourism, the visa fee waivers has recently been extended for another six months to the end of October 2019 as this appears to help support a rebound in the number of Chinese tourists. In addition, the number of Indian visitors rose sharply since the introduction of the visa fee waiver in November 2018 (Chart 9) . • In our view, tourism may hit a wall in the near term as the world economy is set to slow against the backdrop of escalating trade tensions between the US and China. Weakness in the world economy will obviously be a drag on tourism and spending. As such, we expect a slowing of visitor arrivals in 2019. That said, we are bullish for the longer term prospect of tourism as a key growth driver for Thailand. Chart 8: Tourist arrival and Tourism revenue growth Chart 9: Indian tourist arrival growth %YoY Total Revenue Total Tourist Arrival %YoY 25 40 21.7 34.7 20.2 35 Visa fee waiver started th 20 18.5 on 15 Nov 18 30 15.5 24.9 15 25 22.3 13.1 13.4 19.9 20.2 20 16.9 15.3 10 9.0 14.1 8.2 8.4 15 12.8 7.7 12.1 10.9 5.8 5.1 10 8.5 5 4.3 6.7 5.5 4.0 2.0 1.9 1.8 5 1.4 0.4 0 0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Jul-18 Apr-18 Oct-18 Jun-18 Jan-19 Jan-18 Feb-19 Mar-19 Feb-18 Mar-18 Aug-18 Sep-18 Nov-18 Dec-18 May-18 Source: Ministry of Tourism and Sports Source: Ministry of Tourism and Sports Burin Adulwattana Chief Economist/Strategist [email protected]/ +66 2 230 2657 Boochita Pitakard Research Associate [email protected] Economics - 3 | RESEARCH DISCLAIMER Bangkok Bank Public Company Limited The information contained in this report has been obtained from sources believed to be reliable. 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