During the second quarter of every year, travel-related businesses normally undertake more marketing campaigns to induce Thais to travel domestically because this period coincides with the summer school break and many long public holidays. This year is no exception as even more aggressive marketing strategies have been used to attract more Thais in an attempt to offset the shortfalls in foreign inbound tourists during the low season. In addition, the government has introduced tax incentives and various activities to promote domestic travel every month.
It is expected that domestic travel should improve during 2Q15 given a more favorable domestic environment than that seen during the same period of last year, but growth may be milder because some consumer segments continue to be pressured by the weak economic recovery.
We at KResearch expect that Thais will make around 35.10 million domestic excursions during 2Q15, increasing 4.6 percent YoY, which would be substantially higher than the 1.4 percent YoY growth reported for 2Q14, thus helping spur THB177 billion in expected cash flows, rising 4.1 percent YoY, versus the 0.8 percent YoY growth reported for 2Q14.
Our projections take into account a number of factors, including an improved domestic environment versus that seen in 2Q14. Normally, second quarter domestic tourism is busier than the first quarter, but the sluggish economy and high household debt have dampened the spending of some consumer segments, so 2Q15 domestic travel may grow only slightly higher than that of 2Q14.
Over the remainder of this year, close attention must be paid to domestic economic conditions that remain volatile and household debt that continues to undermine consumer spending, thus likely hurting domestic travel now and into the high season. Another factor that must be monitored is the Ministry of Finance's proposal to raise the ceiling on domestic travel expense for personal income tax deductions during this tax year to a maximum of THB30,000, versus the current THB15,000. If approved by the Cabinet, that initiative would help promote domestic tourism substantially. However, travel-related businesses may need to align their strategies vis-à-vis current conditions to attract specific segments, e.g., leisure and MICE tourists, while maintaining good service quality.
A tourist undertaking overnight or one-day trips to more than one destination per excursion and can thus count as more than one excursion a year.
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