Research from Galaxy ASEAN indicates a decline in oil prices from their peak this year, which is contributing to a simultaneous recovery in the tourism markets of both China and Thailand.

Key Findings and Outlook

Tourist demand in Thailand is showing signs of recovery, with forecasts for inbound visitor numbers surpassing earlier market expectations. The industry's growth momentum is steadily improving, with a clear trend of increasing tourist traffic. Additionally, the expansion of airline capacity in Thailand provides support for medium-term industry growth. The recent drop in oil prices from their annual highs is reducing travel costs, creating a synchronized recovery in both the Chinese and Thai tourism sectors.

Tourist Arrival Forecasts Exceed Expectations

The forecast for Thailand's inbound tourists in 2026 has been revised upward to 33 million, matching the previous year's level and exceeding earlier market predictions. This positive adjustment is driven by several factors: a de-escalation in Middle Eastern tensions is boosting global travel sentiment, reducing flight disruptions, and stabilizing airfare prices. Concurrently, demand from European source markets remains robust, and the recovery in Chinese tourist arrivals is progressing faster than previously anticipated.

Sustained Recovery in Tourist Traffic

Data for the first five months of 2026 shows Thailand welcomed a cumulative 14 million inbound visitors, representing a 2% year-on-year decline. However, the underlying trend points to a continuous and positive recovery. While arrivals in April, the month most impacted by Middle Eastern conflicts, fell by 7% year-on-year, May saw a significant rebound with a growth rate of +4%. Tourist flows from Europe and the Middle East have also recovered in tandem; after year-on-year declines of 17% and 57% respectively in April, arrivals from these regions in May were largely on par with the previous year's levels.

The recovery among Chinese tourists is showing encouraging signs of stabilization. Monthly arrivals from China have remained above 400,000 visitors for each of the first five months of 2026, significantly higher than the low point of 297,000 recorded in March 2025. Cumulative arrivals from China through May 2026 have grown by 18% year-on-year. Although the recovery remains gradual, the most challenging period for the industry is believed to be over, with further improvements in visitor numbers expected in the coming months.

Airline Capacity Expansion Supports Growth

Starting in 2026, Airports of Thailand (AOT) is set to increase investment in airport infrastructure. This initiative is expected to alleviate capacity bottlenecks at key entry hubs, providing long-term benefits for Thailand's tourism sector. Current projects include upgrades to ground operations at Suvarnabhumi Airport to enhance flight turnaround efficiency and accommodate more routes, and the installation of an Instrument Landing System (ILS) at Phuket Airport to improve flight handling capacity during peak hours. Furthermore, Thai Airways International (THAI) is expanding its fleet to increase flight frequency on popular routes and launch new international services.

Lower Travel Costs Fuel Synchronized Recovery

Geopolitical factors pushed fuel costs higher in the first half of the year, causing temporary disruptions to global air travel. However, with the recent marginal decline in international oil prices, inbound tourist traffic to Thailand has continued to recover. The domestic Chinese market is also benefiting; following a reduction in domestic fuel surcharges in July, passenger traffic during the summer travel season has steadily increased, indicating solid underlying demand for domestic travel. The decrease in overall travel costs is further expected to stimulate demand for outbound travel from China to Southeast Asia, creating a mutually reinforcing recovery pattern between domestic and outbound tourism.

Sector Perspective

The outlook is positive for the ongoing marginal recovery in Thailand's tourism industry, a trend that is also seen as beneficial for the domestic Chinese tourism sector. The upcoming IMF and World Bank Annual Meetings in Bangkok in the second half of the year are anticipated to further boost local tourism activity. Domestically, the retreat in oil prices from their yearly highs, combined with strong summer travel demand, highlights the resilience of the domestic travel market. Outbound travel from China to Southeast Asia and other regions is also expected to show concurrent improvement.

Key Risks to Consider

Potential risks include a prolonged conflict in the Middle East and a slower-than-expected recovery in Chinese tourist arrivals.