Resort island looks to diversify after Covid-19 cripples tourism
Phuket has been forced to take on board a difficult lesson: that it shouldn’t have clung to tourism as its single, dominant cash cow.
The country may have managed to flatten the Covid-19 curve, but the economic curve risks going into freefall.
Tourism has been one of the hardest-hit sectors and Phuket businesses, which rely almost exclusively on foreign arrivals, dread to estimate when the current economic crisis, one of the worst in recent memory, will bottom out.
TOURISM HIT HARD
Phuket may have been the victim of its own success. Firmly positioned as a world-class destination, the island province has earned substantial revenue from foreign visitors, many of them with deep pockets.
So when a destructive disease like Covid-19 forced border closures and ground flights to a halt, Phuket’s income slowed to a trickle and the local economy risks total meltdown.
The sheer scale of economic damage to Phuket caused by the pandemic has revealed a systemic void in the province’s preparedness to effectively counter or mitigate a sudden nosedive in the industry.
The sector employed 323,219 people locally before Covid-19 struck early this year, generating 245 billion baht in the annual gross provincial product, according to provincial governor Narong Woonsew.
He said a whopping 80% of the province’s economy relies on tourism. The damage so far to the province’s tourism sector brought about by the outbreak is estimated at 160 billion baht.
The figures present real cause for concern. Tourists visiting Phuket this year are forecast to shrink to five million, substantially down from last year’s figure of 14.4 million. Of those five million tourists, 1.5 million will be Thais.
NEW GROWTH DRIVERS
Mr Narong has said the major slump in tourism has prompted a rethink of the province’s economic advancement strategy.
“After the government ordered the closure of our skies, Phuket’s tourism revenue was wiped out,” he said.
And even when the tourism sector in Phuket finally resumes the full extent of its business under “new normal” practices, there will have to be a paradigm shift in the way the province figures out where it will derive its income.
Mr Narong explained that in the medium and longer term, the provincial office and tourism companies are looking to diversify and promote a variety of sectors as new drivers of the province’s growth.
Six sectors have been earmarked; marinas, education, health and wellness, tuna exports, seafood and gastronomy as well as sports and events businesses.
“These will be our new economic engines which will function alongside the conventional tourism businesses,” the governor said.
Chernporn Kanjanasaya, chairwoman of Phuket Industry Council, said inter-sector councils and associations, including those representing the chamber of commerce, local tourism enterprises, hotels, real estate businesses and urban developers have come together to plan these new income generators.
“The new revenue drivers will not replace the conventional tourism businesses but build on top or add value to them. Tourism, after all, is a long-established industry with the resources and capability to sustain Phuket’s economy well into the future,” believes Ms Chernporn.
However, the province must be better equipped and more resilient to crises and that can be achieved by having a broader portfolio of industries to offset the economic risks, she warned.
BIG REVENUE GENERATORS
The chairwoman said Phuket is home to five marinas, 38 seaports and one deep-sea port. About 1,500 yachts and cruise ships call on the province each year on average.
She said the marina business brings in tourists with high spending power and infrastructure developments are needed to attract large cruise ships to visit the province.
Around 3,600 people visit aboard yachts annually. They spend an average of 60 days in Phuket, earning the province 21.6 billion baht.
For education, the province is looking to create internationally accredited study programmes to increase enrolments of foreign students. Phuket, which is currently the location of 12 international schools, has set a yearly revenue target of 2.1 billion baht from 3,600 students.
In terms of tuna exports, the future looks bright, said Ms Chernporn. Phuket has both state-run and privately owned wharves where more than 200 boats from Japan, Taiwan and the United States arrive to buy top-grade tuna at high prices. The exports are worth 1.3 billion baht a year.
Also, the gastronomy industry is a lucrative cash spinner which capitalises on the island province’s unique food culture at its 1,977 restaurants. The annual turnover of the sector is estimated at 91 billion baht with more room to grow in the future.
Ms Chernporn said the geography and weather in Phuket are ideal for organising sports, social and commercial events, adding that wedding arrangements alone give a 1.6-billion-baht boost to the local economy per year.
“We’re studying each sector in minute detail. Right now, the most ‘up and coming’ sector is sports and events which can help accelerate economic recovery for Phuket.
“It will be the forefront of tourism stimulus efforts starting next month and in September,” said Ms Chernporn.
She said each prospective growth driver will have a sub-panel tasked with identifying any legal hindrances to it realising its full potential. The sub-panel will be made up of government officials and members of the business community.
The six sub-panels will present their findings to the government and ask for its help in amending troublesome regulations. For example, legal restrictions imposed by 17 different agencies may be a setback to promoting marinas.
Also, the education sector cannot be a magnet for overseas students unless certain visa requirements are relaxed to allow students and their parents to stay in Thailand longer than 90 days.
In addition, tuna exports cannot expand if illegal, unreported and unregulated fishing is not completely tackled, she said.