Laos’ primary international airport, in the capital of Vientiane, has just doubled the size of its international terminal in an effort to become less reliant on overland tourists from neighboring countries. Last year the airport attract fewer than 1 million international visitors, and the new expansion will be able to accommodate 2.3 million international arrivals.  The expanded terminal, therefore, will likely not be fully utilized for some time, but the Laotian government expects the number of international visitors using the airport to double in five years, with China as the most obvious source market for the rapid growth in international tourism.

Laos isn’t a major international tourism destination, especially compared to neighbors like Vietnam and Thailand that both attract foreign tourists in excess of 10 million each year. In fact, the number of tourists traveling to Laos contracted dramatically in the last two years.  However, the country is slowly coming around to the industry, and is making major investments to realize its tourism potential.

The country attracted around 639,000 Chinese visitors in 2017, and China was Laos’ only growing source market in 2017. But only 13.8 percent of these visitors arrived by air; the rest used the land border in the north to cross into the country. In the long run, international bus and train connections arrivals won’t attract the kind of high-spending, leisure tourists Laos needs to jumpstart its tourism industry.

The number of international visitors to Laos has declined over the past two years

In 2017, Laos attracted 3.86 million international tourists, a decline of 8.73 percent year-on-year. 2016 also saw a drop of 10 percent year-on-year, from 4.68 million to 4.24 million. One possible source of this decline was the political instability in neighboring Thailand, Laos’ biggest tourism source market, following the 2014 coup d’état. However, visitors from Vietnam, the country’s second largest source market, also declined.

China is the obvious hope for an increase in tourism to Laos, but attracting more affluent Chinese travelers requires an updated and expanded air travel infrastructure. Vientiane was served by only seven international airlines in 2016, but now has connections served by 15 foreign airlines. Of the 16 international destinations with connections to the city, half are in China.

Three of the eight airlines that introduced routes to Vientiane in 2016 are Chinese–China Southern Airlines, Hainan Airlines and Sichuan Airlines. China Eastern Airlines, which entered the market earlier, currently operates 12 weekly flights to Kunming and three more to Nanning. Lao Airlines also serves five cities in China.

China is the obvious source of new international tourists for Laos, but the country will need better air connections

In addition to the added flights, China has become Laos’ major investor. As part of its Belt and Road Initiative, a high-speed railway is set to open in 2021, linking China’s southeastern Yunnan Province with Vientiane. While the rail link could be an economic boom, some residents, particularly those in Luang Prabang, worry that it could disrupt life in their quiet towns.

The good news is that Laos has many of the fundamentals to develop a robust tourism industry. While the landlocked country doesn’t have the benefit of tropical beaches like Vietnam and Thailand or casino resorts like Cambodia that attract many Chinese tourists, it nonetheless has a wealth of natural attractions in its mountain wilderness. Moreover, the country has multiple world-renown historical sites, with the UNESCO World Heritage Site of Luang Prabang being the most famous.