Thai Tourism Feels Fallout of Riots

As the Thai government launches a campaign to woo back tourists after recent rioting here, its world-renowned hospitality industry is facing another threat: stiffer competition from neighboring countries working to increase their visitors.

Thailand's tourism industry is suffering from the recent two-month-long antigovernment protests, which ended on May 19 with 88 people dead and some of the capital's most popular shopping areas in flames.

Hotels across the country are reporting less than 50% occupancy after many tourists changed their holiday plans to avoid the trouble.

The Thai travel business has a history of bouncing back from crises. It did after the 2003 outbreak of Severe Acute Respiratory Syndrome, or SARS, the 2004 tsunami that hit Phuket and nearby beach areas and a 2008 protest that shut Thailand's main international airport for days.

This time, however, the rebound could be weaker and take longer.

"It's much worse this time because people saw the city burning" after battles between antigovernment Red Shirt protestors and the military, said Apichart Sankary of the Association of Thai Travel Agents. "This has never happened before."

International tourist arrivals and revenue could fall between 10% and 20% this year, analysts said, depending on whether the protests flare again.

Such a decline would present serious problems for the country's economy, which relies on tourism for roughly 6% of gross domestic product and for more than 15% of its jobs.

Current woes also could affect a number of international brands developing properties in Thailand, including Starwood Hotels & Resorts Worldwide Inc., which plans to open in October a St. Regis hotel in the central Bangkok area recently occupied by protesters.

Thailand also will have to deal with stronger competition from its neighbors. Singapore now has two casinos, at Resorts World Sentosa and Marina Bay Sands. Singapore had its best April ever, as tourist arrivals rose 20% from a year earlier, to 938,000. Malaysia also is in the middle of a strong push to bolster its tourism industry, including allowing more international carriers to fly into its airports.

Singapore and Kuala Lumpur are hubs of fast-growing, low-cost carriers, making both places ideal as springboards into the region. AirAsia is based in Kuala Lumpur, while Tiger Airways uses Singapore as its hub.

"Instead of making Bangkok their first stop, long-haul travelers could choose Singapore or Kuala Lumpur," said Annuar Aziz, an analyst at Credit Suisse in Kuala Lumpur. "You spend a few days at the new resorts and casinos then you say, 'Let's go to Angkor Wat.' "

Mr. Annuar expects tourist arrivals to slide in Thailand this year and continue to climb in Malaysia. Visitor arrivals in Singapore could rise more than 20% for all of 2010, he estimates, and nearly double over the next six years.

People within the tourism industry in Thailand say they intend to fight back. The government is planning to make more than five billion baht ($150 million) available to tourism-industry businesses in low-interest loans with two-year grace periods. it also intends to waive visa fees for some countries and lower the landing fees for airlines.