Thailand’s tourism sector has entered a critical phase as small and mid-sized hotels face mounting pressure from a sharp dip in Chinese tourist arrivals. In response, the Thai Hotels Association (THA) is preparing a comprehensive proposal to the Finance Ministry seeking tax reform that would ease the financial strain on local accommodation businesses and help ensure the long-term sustainability of the country’s tourism industry.
A major challenge confronting these hotels is the collapse of group travel from China. For years, China stood as Thailand’s largest inbound market, but changes in travel habits, combined with pandemic-related disruptions, have triggered a significant drop in arrivals. Many smaller hotels in popular destinations such as Bangkok, Phuket and resort islands report plunging occupancy—sometimes falling by 40 to 50 percent—and struggle to cover fixed overheads including salaries, utilities and building maintenance.
Under the current legislation, the Land and Building Tax Act requires taxation based primarily on the value of the land and property, irrespective of business performance. For small hotels, this means paying high levies even in months of low or no revenue. The THA President argues that the existing tax base fails to reflect genuine business conditions, leaving many hoteliers vulnerable. In light of this, the association is advocating a hybrid tax model wherein hotels could be taxed based on actual business income rather than solely on property value.
The newer model aims to combine the traditional land tax mechanism with an income-based component. This change would allow hoteliers to align tax payments more closely with real economic performance, offering much-needed flexibility and fairness. Such a reform is seen as instrumental to preserving the viability of smaller properties, which in turn supports broader regional tourism. Smaller hotels often form the backbone of destination ecosystems, catering to niche travellers, spreading tourism outside city centres and creating employment for local communities.
Tourism remains one of Thailand’s key economic engines, contributing significant employment and generating substantial foreign exchange. The recovery of international arrivals since the height of the pandemic has been uneven, with markets from Europe and the Americas rebounding more rapidly than China. With the Chinese traveller market slower to return, the gap places particular strain on hotels reliant on that segment. The THA warns that without targeted relief, some hotels may be forced to close or reduce offerings, which could diminish Thailand’s diversity of accommodation and impact destination appeal.
By easing the tax burden, policymakers can help smaller hotels regain competitiveness. This could enable them to invest in facility upgrades, enhance guest experiences, offer more competitive rates, and thereby attract a wider range of travellers. As travellers increasingly seek authentic, boutique-style stays, smaller hotels are well placed to deliver unique experiences—but only if they are financially stable.
From a regional development perspective, supporting small hotels enhances tourism resilience and helps distribute tourism benefits beyond major hubs. Many of these properties lie in secondary or tertiary destinations, where economic impact spreads more directly into local communities. Stable accommodations in such areas enable domestic and international tourists to explore less-visited provinces, reducing pressure on overcrowded hotspots and promoting a more sustainable visitor footprint.
In parallel with tax reform, Thailand’s broader tourism agenda continues to evolve. National agencies are focusing on market diversification, promoting new source markets, elevating sustainability credentials and extending the length of stay. Within this complex landscape, small-hotel viability becomes a critical enabler. If the foundations of bed-capacity and accommodation quality weaken, efforts to reposition Thailand as a premium and sustainable destination may falter.
The proposed tax changes also dovetail with growing global trends that emphasize sustainable tourism growth. When small properties remain viable, they can more readily adopt eco-friendly practices, engage with local supply chains and craft culturally rooted guest experiences. These attributes are increasingly sought by modern travellers who value authenticity and sustainability. By easing financial strain, the tax reform could unlock broader investment in green retrofits, local artisan partnerships and community-based tourism initiatives.
For hotel owners, the reform proposal represents hope. Many have been navigating volatile business conditions amid rising competition, increased operating costs and ever-shifting visitor patterns. The ability to match taxation with income would provide a more stable environment in which to plan renovations, marketing and staffing. It would also reduce the risk of sudden closures that can hurt destination reputation and economic stability in local communities.
The THA is engaging closely with government stakeholders to advance the hybrid tax model, underscoring that protecting small hotels is not only a matter of fairness but an essential component of tourism policy. Governments that recognise this interplay between tax policy and tourism resilience stand to gain from stronger destination competitiveness and broader economic gains.
In summary, Thailand’s tourism recovery hinges not just on attracting more visitors but on maintaining a robust and inclusive hotel ecosystem. The tax burden currently borne by small hotels appears misaligned with market realities and may undermine long-term tourism growth. The Thai Hotels Association’s push for reform is timely and strategic, offering a pathway to greater equity, sustainability and competitiveness in Thailand’s hospitality sector. If adopted, the proposed changes promise to strengthen smaller hotels, support regional tourism infrastructure and position the country to thrive in the evolving global travel landscape.
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