the tone of the commentary around tourism has changed from ‘we’re doing well because of tourism’ to something more along the lines of ‘we’re just holding on because of tourism’. They are clearly getting worried, as well they might, because it’s the tourist-oriented stores and shopping malls that have been the big revenue drivers in the post-Covid years. The Ministry of Tourism and Sport reported that nearly 20 per cent of tourist spending in Thailand is on retail merchandise and almost another 25 per cent is on food and beverage. International arrivals were down more than 7 per cent, year on year, in the eight months through August, making the 2019 figure of just under 40 million arrivals look like a distant dream. Indeed, the government has now cut its forecast for the year to 33 million international visitors, and the initial goal of attracting about $110 billion of tourist spending looks more likely to be something like $80 billion. Meanwhile, Vietnam, a relative minnow in the tourism business, has been enjoying 20 per cent growth and Malaysia’s arrival numbers are up by about the same percentage.  Of course, it isn’t just the headline number that matters, it’s who is coming through the door because different nationalities have different spending propensities. Unfortunately for Thailand, it’s the flow of free-spending Chinese that has slowed to a trickle. Expected to number almost 7 million this year, on current projections it will be fortuitous for the Thais if they can pull in even 5 million. It’s led the Thai Retailers Association to press the government to market the country more aggressively as a shopper destination. Although spending in tourism-oriented stores and malls is still generally at a higher level than those dependent exclusively on the locals, retailers’ revenue growth is being driven to a large degree by new openings, while weak same-store sales results are at least a partial reflection of weaker numbers in the tourist cities.  The large chains are holding on…for the moment The country’s largest retail chains with store fleets well spread out across the country are in a good position to fortify themselves against lower tourism numbers.  Thailand’s largest retail/wholesale conglomerate by revenues, CP Axtra, which operates the Makro and Lotus’s chains, says that its sales to HoReCa (Hospitality, Restaurant, Catering) customers are still 31 per cent of its total, unchanged from a year ago, and that its best-performing stores were still aligned with locations exposed to tourism. Even so, in the first half, its same-store sales growth was flat for both the wholesale and retail businesses. Meanwhile, at Thailand’s second regional retail giant, Central Retail, same-store sales also trended negative in all three of the broad sales segments it reports in: food, hardlines and fashion. The company states that its tourism mix is stable, and that fashion sales to tourists are still growing. The third of Thailand’s big retail chains, Big C, likewise reported negative growth for the first half in its retail business, which it attributes partly to falling tourist arrivals that affect its locations in Bangkok and other well-trod tourist destinations.  Why are tourist numbers falling? Thailand’s economy is extremely tourism-dependent, but this year’s drop, not yet of epic proportions but shaping up that way, has been driven by multiple factors that have coalesced into a perfect storm.  There are, of course, the usual gory traffic accidents, bar brawls and foreigners mysteriously falling from upper-floor balconies at all times of day. In the first week of July, there were two of these ‘falls’ on the same day, one in Pattaya and one in Phuket. It has become so common that whole discussion threads have formed around the phenomenon on online forums.  Lately, the news bites have taken on an even nastier ring: in August, two Malaysian tourists were set on fire by a local ex-boxer while sitting on the steps of Big C’s marquee hypermarket mall in downtown Bangkok.  But other factors have played a part, too: heightened international tensions and a proppy Chinese economy have contributed, as did the Myanmar earthquake that rattled buildings in Bangkok and was the subject of viral videos that made their way around the world. Worse still, hostilities broke out with neighboring Cambodia, and tourists are not particularly partial to being near war zones.  Should retailers be worried about the long run? As Thailand struggles to assure visitors that the country is safe, neighboring Vietnam and Malaysia are enjoying their own mini-booms in international arrivals. Are the negative numbers for Thailand just a blip, and is a resurgence in the offing?  There is some news that may alter the structure of the tourism industry by attracting more families and possibly wealthier visitors. For example, the negative sentiment around recreational use of cannabis may abate as the government’s current regulatory campaign takes hold. Moreover, the hostilities with neighboring Cambodia are now mostly out of the headlines. However, the problems associated with safety will persist as long as the government is perceived to be ineffective in combatting things like violent crime and some of the world’s most dangerous roads. Alternative tourist destinations in Southeast Asia will continue to look more attractive to many. Luckily for retailers, though, Thailand is gaining a deserved reputation as a major Asian shopping destination, thanks to its outstanding real-estate platforms, its advanced digital infrastructure, and its rich offering of global and local brands.  So even if tourism arrivals don’t leapfrog pre-Covid times anytime soon, retailers and shopping-center operators can still attract greater value from the visitors that do come. If the bad news keeps coming, they will need to.