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Major flooding during Thailands monsoon season, particularly between October and December, has weighed on tourist arrivals. Tourism Ministry Secretary Suwat Sittilor said in December that arrivals in November had fallen by 18% year-on-year (y-o-y), as the floods affected some of Thailands major tourist sites. Sittilor warned that the damage to the industry could cost up to US$825mn, and this could yet rise further.

The flood damage is particularly concerning for Thailand as tourist arrivals had been rebounding strongly in 2011, as a result of improving political stability. In the year to October, y-o-y arrivals growth had been growing at nearly 20%, positioning Thailand well for a strong recovery. Despite the damage to infrastructure, we believe that the floods will provide only a short-term interruption to Thailands strong recovery, boding well for continued arrivals growth in 2012.

Flood Damage Hits Bangkok and Southern Areas

The monsoon season floods hit a number of key tourist areas, particularly in the centre. Bangkok was affected, although not so much in the central tourist sites. However, the city experienced some difficulties getting supplies in and out of the area, deterring tourists from visiting. The international airport in Bangkok remained operational but the old Don Muang terminal (now primarily for domestic flights) was flooded, making transport around the country more difficult. Major tourist resorts such as Phuket, Krabi, and Chiang Mai in the north were relatively unaffected, allowing direct flights to access these destinations. However, journeys transiting the central parts of the country were heavily disrupted.

Thai Airways Cancels Joint Venture With Tiger Airlines

In December, national carrier Thai Airways announced that it was cancelling a planned joint venture with Singapore-based low-cost Tiger Airlines. The new low-cost airline would have been called Thai Tiger, with Thai Airways holding 49.9%, Tiger Airlines 39% and 10% by Ryan Asia Limited. The cancellation was attributed to the new airlines failure to gain the required approval to operate from the government. However, it may also have been due to a growing unwillingness by Thai Airways to participate in the venture, as it was launching several other airline projects at the same time. Thai Airways appears to have decided that a better strategy is to build up its own low-cost carrier, Nok Air, and to this end increased its ownership in Nok Air to 49% in October 2011.