Mastercard published a survey that warned that Thailand was becoming too reliant on Chinese tourists to keep its important tourist industry afloat. In 2014 Thailand attracted 4.6 million Chinese visitors. For that year one in five tourists in Thailand were Chinese. Why is this a problem and will the trend continue?
Obviously, over-reliance on any one country for tourists is a problem. In economic terms a country is safer with a diversified economy. When one sector dips not all is lost. It’s about not keeping all your eggs in one basket.
Tourism accounts for 8.5% of Thai GDP. This sounds like a small part of the economy, however, the respected economist Friedrich Schneider estimates that 40.9% of Thailand’s real GDP in 2014 was provided by the ‘shadow economy’. This means the black economy – drugs, prostitution, gun sales and organised crime. It also refers to the legions of small operators in the tourist sector who don’t pay taxes. The little man who scrapes by offering services for tourists doesn’t declare any of his or her earnings to the government. From the other side of the fence, the government is doing very little to clamp down on small-time tax dodging. Thailand has always been very much a ‘live and let live’ society that turns a blind eye to what are seen as minor infringements of the law. The police who enjoy ‘tea’ see the shadow economy as an important part of their income.
The problem is that Chinese tourists visiting such hotspots as Pattaya City, Phuket and Koh Samui don’t put much money into the legitimate or shadow economy of Thailand.
Typically, Chinese tourists book cheap package tours in China. These are all-inclusive tours that provide all food, transport and accommodation during the holiday. In Pattaya over-sized tour buses clog up the main arteries of the city. The tourists inside are on a 24 hour schedule. They are rushed from one activity to the next, spending little to nothing as they go.
Although the Chinese are as morally imperfect as any other nation, they tend to use their new travel freedoms to travel with their family. It is thus no surprise that the Chinese embassy in Bangkok has received several complaints from Chinese citizens being forced to watch sex shows in Pattaya.
The truth is that there is a monopoly on Chinese tourism in Thailand. Those Thai operators favoured by Chinese tour companies zealously guard their income stream, and use this power to illicit payments to steer their Chinese charges to shops, shows and restaurants. It is all tightly controlled. The Chinese tourist yuan is not shared around very much; there is little trickle down benefits for the shadow and real economy for Thailand.
It might be a blessing in disguise for Thailand that the Chinese economy is slowing down, and that several of its leaders have been exposed for hypocrites using off-shore companies to hide their vast fortunes. Thailand is best served by a diversified economy and a diversified tourist sector. They could also do something about reducing the size of the shadow economy.
The best way going forward for tourist dependent businesses in Thailand is to take a leaf out of Srithanu in Koh Phangan‘s book. They have seen that the local yoga school was doing OK, and since then it has developed a brand as a great place to study yoga. Now the area has loads of yoga schools and is doing very well. Niche, branding, value.