The rise of China as a tourism source market is proving a significant strain on destinations, especially in Southeast Asia. The rapid increase in the number of Chinese travelers has proved especially challenging for developing nations. Thailand is one of the most obvious examples. The country is the most popular overseas destination for Chinese travelers, excluding Hong Kong and Macau, and expects to attract an impressive 10 million Chinese travelers this year.

Thailand expects to attract 10 million Chinese tourists this year

The majority of these travelers will ultimately be middle-class, lower-spending travelers. The low prices and proximity of Thailand make it an ideal budget getaway for Chinese tourists, especially in Southern China. Recently released data from the China Tourism Academy and Ctrip puts the average spending per Chinese international trip at $886 in 2017. Based on these numbers, this would put the potential spending by Chinese tourists in Thailand this year in the range of $8.86 billion.

That’s not a small figure by any means, but it masks the costs associated with this revenue. Such a large number of inbound tourists puts significant strain air and road infrastructure and can lead to substantial waste issues. Moreover, these kinds of costs are generally assumed by locals, who must deal with crowded streets, long queues, and littered streets. Externalities like these likely present little cost to tour operators and other tourism stakeholders.

These are costs that virtually all major tourist destinations confront, regardless of the source market in question. Like many others, the Thai government is attempting to maintain the number of Chinese tourists that come to Thailand, but increase the amount of spending per trip.

Thailand finds itself in the enviable position of picking and choosing what kind of tourists it wants

These efforts have thus far borne little fruit. Thailand attempted to crack down on so-called “zero-dollar” tours back in 2016. The Thai government’s crackdown led to arrests and the impounding of busses and other property. However, many of the tour operators have been acquitted. The tours remain a big problem as many tour operators simply flout the restrictions placed on tours and “forced shopping.” Much of the difficulty in reducing the prevalence of zero-dollar tours has centered on what firms qualify as “tour operators” and to what extent the practices of these tours are consumer abuse or just marketing.

Such tours are incredibly cheap but notorious for bussing Chinese tourists around to retail spots and restaurants that overcharge tourists. There even have been instances of tour operators abusing travelers for not spending enough and evading taxes to improve margins further. These businesses are often Chinese-owned and are a means to help tour operators recoup costs associated with the cheap tours. It’s unclear to what extent the money spent on such trips actually goes to Thai businesses, but locals are forced to bear all of the costs associated with them. Chinese tourist arrivals towards the end of 2016 took a substantial dive but were still higher overall compared to 2015.

Thailand’s restrictions on zero-dollar tours were unsuccessful, but it may not matter

Fortunately, it seems that the number of Chinese free independent travelers (FITs) coming to Thailand is on the rise and currently represents somewhere around 60 percent of all Chinese tourists. With the increased popularity of such travel in the China market, the successful enforcement of tour regulations by the Thai government may not be as significant of an issue.

Still, the Thai government is pressing forward with plans to attract more “high-end” Chinese travelers and attempting to connect local Thai tour companies with the Chinese source market. The Tourism Authority of Thailand (TAT) has organized familiarization trips for 50 travel companies in the Association of Thai Travel Agents (ATTA) to China to four second and third-tier cities; Jinan, Shijiazhuang, Zhengzhou, and Wuhan, which will happen later this month. TAT will also be promoting exclusive, high-end tour packages in China as part of these efforts.

It’s a challenging undertaking overall, but given that Chinese tourists are increasingly sophisticated and experienced, the marketing of high-end, tailored tour packages may prove fruitful. However, ultimately these efforts depend heavily on fundamental changes in the tastes and preferences, and travel know-how, in the China market.

Many Chinese travelers, with little experience, simply are unaware what such “zero-dollar” tours entail and lack the language skills or awareness of resources that can help them plan their own travel or find a quality tour. The prices for zero-dollar tours were incredibly low in their heyday, often priced as low as 1,000 yuan ($157.91). The average price for Thai tours in the China market is now somewhere in the range of $789 to $947 (5,000 to 6,000 yuan). The lower cost of these tours masked the low-quality of accommodation and more expensive retail and dining options forced upon customers.

Chinese tourists are increasingly aware of the pitfalls of zero-dollar tours, which is good news for Thailand

The changes in the China market are significant and will undoubtedly reduce many of the negative externalities associated with Chinese tourism going forward. However, over-dependence on a single market also bears with it its own risks, in the event of an economic slow-down or political dispute, Chinese tourism could fall dramatically. China currently provides around a quarter of all international tourists in Thailand.

It’s for this reason that TAT is also stepping up efforts to increase tourism from ASEAN countries, Australia, and India. Fortunately, Thailand already has a strong tourism brand, albeit somewhat tainted by its association with sex tourism. Attracting more tourists from developed countries, notably Australia and South Korea, should be relatively easy and helps Thailand diversify its source markets.

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