Thailand’s hotel industry is facing pricing pressure in 2025 after four consecutive years of rate hikes that nearly doubled the average room rates since 2021, according to Tris Rating.
In its latest Industry Spotlight report, Tris forecasts 33.1 million foreign tourist arrivals this year, marking a 5.6% decline from 35.5 million in 2024. The projection indicates a slowdown primarily driven by a significant drop in visitors from key Asian markets such as China, Malaysia, and South Korea, which have traditionally been Thailand’s main sources of tourists.
The Ministry of Tourism and Sports reported that in the first eight months of the year, foreign arrivals fell by 7.2% compared to the same period last year, totaling 21.9 million visitors.
Credit: Bangkok Post
This year, declines in tourist arrivals have been partly mitigated by a notable increase in visitors from India. India has now emerged as one of Thailand’s top five source markets, supported by strong connectivity with over 15 direct flight routes to Bangkok and Phuket.
Long-haul markets have also shown resilience, with US visitors increasing by 7.4% year-on-year and European tourists rising by 15.6% so far, reinforcing Thailand’s reputation as a preferred summer holiday destination for Europeans, especially on the Agoda platform for the second straight year.
However, Tris Rating highlighted a potential risk stemming from the recent Thailand-Cambodia border conflict. If the situation escalates significantly or persists for a long period, it could adversely affect both domestic and international tourism.
In 2024, hotel occupancy rates reached levels higher than those before the pandemic, driven by pent-up demand and strong domestic tourism. Yet, this momentum is unlikely to continue in 2025, as declining international arrivals and cautious consumer sentiment tend to offset the growth in local travel. To maintain market share and occupancy amid these challenges, hoteliers are opting to lower room rates. Consequently, Tris forecasts occupancy rates will remain flat or slightly decline this year.
The report also noted that the post-pandemic boom, fueled by pent-up demand, has started to reverse due to decreasing international visitor numbers, especially from China, coupled with a rising supply of hotel rooms. While regions like Central and Southern Thailand continue to be key contributors to revenue through room rates, increased competition has led to rate erosion. High-end hotels in Bangkok, in particular, are increasingly relying on unpublished promotions and selective discounts to sustain occupancy during off-peak seasons.
Shift Away from Chinese Tourists
The rating agency projects that Chinese tourist arrivals will fall to around 4.6 million this year from 6.7 million in 2024, reflecting a 35% decrease in the first seven months. Chinese travelers are exploring alternative destinations, such as Japan, which has experienced nearly 70% year-on-year growth, benefiting from yen depreciation and a preference for shorter trips. Vietnam has also seen a surge in Chinese visitors, with a 78% increase year-on-year.
The report suggests that if Chinese arrivals to Thailand do not recover to expected levels after Chinese National Labour Week in October, this could indicate a lasting shift in Chinese travel habits.
Similarly, Maybank Securities (Thailand) expects revenue per available room (RevPAR) at seven listed hotel operators to decline by 3% year-on-year in the third quarter, slightly better than the 5% decline seen in the second quarter. They anticipate RevPAR remaining in negative territory in the final quarter, pressured by weak demand from short-haul markets, increased room supply in Bangkok—up 7% year-on-year and 3% year-to-date—and ongoing hotel renovations, according to analyst Boonyakorn Amornsank.