Thai hospitality sector fragile as closures jump 42% in first nine months

Thailand’s hotel and accommodation sector remains in a fragile state despite entering the traditional high season, burdened by intensifying market competition, surging operational costs, and accumulated financial losses, according to a report by Kasikorn Research Center (KResearch).

Data from the Department of Business Development (DBD) revealed that during the first nine months of 2026, new business registrations in the hotel and accommodation sector slowed down with 779 new entrants, while business liquidations surged by 42% year-on-year compared to the same period in 2025, reaching 148 closures.

The report noted that foreign tourist arrivals have yet to fully recover to pre-pandemic levels.

However, the continuous addition of room inventory has sparked fierce price competition, leaving vulnerable operators who are carrying heavy losses with no choice but to fold.

Across the country, approximately 15,000 hotel and accommodation establishments employ more than 430,000 workers.

Small-scale operators make up 98% of these businesses, and many are suffering severe liquidity shortages.

Supamit Kitjapipat, President of the Chiang Mai Tourism Business Association, stated that while some hotels have permanently shut down, others have opted for temporary seasonal closures during the low season to cut costs.

He added that foreign visitor behavior has shifted significantly, particularly among Chinese travelers, who are increasingly moving away from large tour groups toward smaller, independent travel groups.

Labor costs now account for 25% to 30% of total operational expenses, forcing several operators to reduce headcount or implement unpaid leave schemes to keep their businesses afloat.

Naree Suneta, President of the Hostel and Small Accommodation Association of Thailand, painted a grim picture, noting that despite entering late October, the traditional kick-off for peak season, many hostels remain quiet. Occupancy rates in major tourist hubs have dropped by 30% to 40%.

Local operators are also facing heightened competition from foreign business operators, who often enjoy cost advantages.

Another major headwind is the rising cost of travel, particularly airfares. Elevated flight prices have prompted some tourists to delay their trips to Thailand or choose lower-cost regional destinations like Vietnam.

To prevent further distress, industry leaders are urging the government to step in with targeted relief measures.

Proposals include easing access to credit lines to boost liquidity, accelerating the enactment of the Accommodation Act, reviewing the proposed foreign tourist fee, and taking steps to reduce overall travel expenses to bolster Thailand's regional competitiveness.

KResearch projects that the hotel sector will continue to face headwinds in 2027 due to geopolitical tensions impacting global tourism recovery and driving up operating costs.

Foreign arrivals are forecasted at 31 million to 33 million, with close attention needed on long-haul markets such as Europe, the Americas, and the Middle East.

The struggle is not isolated to the hospitality trade. The DBD figures show that total business liquidations across all sectors nationwide exceeded 13,000 during the first nine months of the year.