Thursday, October 25, 2012

Tourism In Thailand


 Thailand Tourism Report Q3 2012 which is based on 
covers tourism market in Thailand such as tourist arrivals, tourist expenditure, Airlines, gasoline product price, investors, tourism infrastructure, accommodation, ecotourism and etc. 

It includes 5-year forecasts to 2012. Although macroeconomics was partly mentioned in this report, only microeconomics will be discussed in my essay.
Thailand Tourism Report (2012, p. 11 & 29) stated that “The government hopes to raise annual economic growth in the country to 8% and supporting the tourism industry is an essential part of this strategy.”  & “…Consequently, the government has been looking to promote other forms of tourism in inland and coastal regions, such as ecotourism.”
Why is the government supporting tourism industry as an essential part of raising economic growth?

number of tourists arrivals in millions  

In the world, with the record of $26.3billion of international tourism receipt, Thailand has become one of the top 15 tourist countries.


Looking at the table above, there were 15.84 million of tourists visiting this country this year which indicates many people, from different countries, demand to visit Thailand with different purposes, using different types of transportation and they eventually spend a lot on the round-trip ticket to Thailand as well as staying in this country.

 Then, what is the most important thing that influences tourism consumer demand behavior?
It is income! When people travel other countries they need money to buy tickets, to prepare their belongings, to buy food and to pay their accommodations to stay. This money comes from their own pocket, which is their income. Therefore the higher income the consumers have, the greater demands for tourism they have compare to the lower income of people.

The demand for tourism is luxury good, as the demand of this good is income elastic.
For example, countries in Europe are considered as countries with high income, and this is the reason there are many European tourists in Thailand.

Now, let’s see what happens when the price of the tickets to Thailand remains the same but the income of tourist increases?

graph of tickets demand

Suppose the price of the air ticket was $1000 and 15 tickets were sold in an hour. As the income increases from $1000 to $1500, 20 more tickets were sold in an hour.
The formula can be used to calculate the income elasticity of demand.

Income elasticity of demand
=(percentage change in quantity demanded)/(percentage change in income)
=(((35-15)/((15+35)/2)×100))/(((1500-1000)/((1000+1500)/2)×100))=80/40
=2%
The change in quantity demanded is 35-15=20 tickets. The average quantity ticket is (15+35)/2=25 tickets. So the quantity demanded increase by 80 percent.
The change in income is 1500-1000=500 tickets and the average income is 1000+1500/2=1250 tickets. So the income increases by 40 percent.
The income elasticity of demand for tickets is 2, which is greater than 1, which proves that demand for tickets is income elastic. When the demand for ticket is income elastic, the percentage of income spent on those tickets increases as income increases. The more tourists buy the tickets to Thailand, the more goods and services will be purchased by these tourists.

Speaking of elasticity of demand, closeness of substitute can be discussed here.

The closer the substitute for a good or service, the more elastic is the demand for it.
Thailand is not the only country that provides the tourism. Every country does.
As it is shown in the graphs, if the price of the airline tickets in Singapore is raised from P1 to P2, the demand for the tickets decreases from Q1 to Q2.
And the tourists will choose another country; Thailand to go which the price of ticket is cheaper. Therefore, the demand curve shifts from D0 to D1, as the demand for Thailand tickets increase.

The reasons Thailand has more tourists are that the price of goods and services are comparably cheap and the differences in currency of money. The Europeans receive salary in Euro, but when they visit Thailand, they can buy more there with the same amount of money which actually benefits them. They always enjoy cheaper price with their higher rate of income.

Another reason Thailand has many tourists is due to its nature beauty. This country has 320 national parks with over 1000 cultural sites. The government promotes friendly ecotourism such as Sukhothai Nature Park, Ko Phi Phi Isalnd, Phang Nga Bay in order to increase revenue of income. And tourists, especially Europeans who love nature will accept this promotion.

When we say “promotion”, it means the government actually spends the huge amount of money in inland and coastal region. So when that amount of money is spend, the government expects to receive much more return from those mentioned region in growth in employment, income, and tax revenue. Let’s say 300-room hotels in Bangkok were knocked down to rebuild 3000-room hotels.

Looking at the graph above, when 300-room hotel was replaced with 3000-room hotel, more employees are needed to manage the hotels compare to previous hotel. Previously, only 50 employees were needed to manage the hotel but 500 employees are needed now to operate 3000-room hotel. Moreover, the hotel side needs 10 times as many bed linens, supplies, equipment and whatever that needs to operate this hotel than previous hotel. This amount spent gives the employees of hotel the opportunity to have income and this amount also gives the revenue to the suppliers who produced the products to this hotel. These income and revenue which is earned by employees and suppliers are spent in these regions again, and it also increases others’ income.

However, will it really help Thailand to increase the economic growth by tourism industry in the future?
Although, right now, it may seem the country will get benefit from tourism industry, loss will be followed soon.

When many tourists are visited in the country, there is high possibility of damage in culture as well as in nature resources. Young generations will be affected by the different cultures from the tourist, for example, in clothing, music, and food, moral and so on. Also, it is very difficult to preserve her beautiful nature when many people use it. The more government promote ecotourism, the more tourists’ visits, the faster damage will be brought. It can’t be guaranteed that every single tourist would take care of nature resources. There might be some people throwing rubbish anywhere disrupting natural habitat in jungle or Nature Park. More tourists will create more pollution in this area. Furthermore, safety can’t be kept any longer; who knows which tourists are addicted to drugs and alcohol? And who knows which tourists who are rich will be attacked by local people? Many problems will be occurred.

Overall, in my opinion Thailand is already too much exposed for tourism therefore the government should control the limitation of tourism, not put too much support on it.

2 comments:

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