As summer approaches, Southeast Asia’s tourism-dependent countries, like Thailand and Vietnam, face increasing challenges due to soaring costs and complications arising from the conflict in Iran. Elevated jet fuel prices and uncertainties surrounding ceasefires are leading to flight cancellations and higher ticket prices, jeopardizing the region’s peak tourist season.
Despite efforts, the tourism industry in Asia struggles to rebound from the COVID-19 pandemic. The current conflict affects global energy supplies, hitting Asia particularly hard and first. Rising costs at gas stations and grocery stores are causing families to rethink travel plans, leading to fewer visitors at popular destinations.
“With gasoline prices rising and tourism declining, how can we make money?” asked Siv Pech, a tuk-tuk driver in Siem Reap, home to Cambodia’s historical Angkor Wat temple complex.
Tourism is crucial for many developing countries, contributing significantly to GDP in nations like Thailand and Vietnam, and supporting jobs in Cambodia. It also brings essential foreign currency to import-dependent economies such as the Philippines and Nepal.
The impact of war-driven spikes in oil prices is felt across tourism businesses. Fuel imports, especially from regions reliant on the Strait of Hormuz, have become increasingly costly. The survival of tourism businesses until travelers return is uncertain, according to Jitsai Santaputra from The Lantau Group.
Travel Costs Rise Due to War in Iran
Jet fuel shortages and increased costs have forced airlines like Vietnam Airlines, AirAsia, and Cathay Pacific to adjust flight schedules. European carriers face similar challenges. Airspace closures in the Persian Gulf and intermittent airport closures have disrupted layovers for Asia-bound flights. This has led to longer, costlier routes and higher airfares.
Cathay Pacific’s fuel surcharge has significantly increased for both medium-haul and long-haul flights. This reflects the persistent high levels of jet fuel prices, creating cost pressures as travelers book flights closer to their departure dates due to increasing unease.
“Jet fuel prices remain at highly elevated levels,” said Lavinia Lau, Cathay’s chief customer and commercial officer.
Travel writer Sandra Awodele had planned to travel to Asia this summer, with a focus on Thailand. She encountered prohibitive airfares, disrupting her plans.
On the ground, rising fuel costs are affecting drivers in Southeast Asia. Tuk-tuk driver Pech reports a drastic decrease in income due to fuel expenses, impacting his daily earnings and livelihood.
Potential Slowdown in Tourism This Summer
Tourism is a major economic sector in Southeast Asia, accounting for a significant portion of economic activity. Moody’s Analytics predicts a reduction in economic growth due to the conflict, with factors like higher production costs, consumer prices, and weaker external demand from trade and tourism playing a role.
“The conflict will weigh on growth mainly through higher production costs and consumer prices,” said Albert Park, chief economist at the Asia Development Bank.
Higher airfares and declining travel confidence can affect household livelihoods and public revenues. In times of economic crisis, travelers tend to opt for less expensive accommodations, destabilizing the entire industry.
Tourism’s importance is evident as nations like Thailand face declining visitor numbers. The impact on businesses reliant on tourism, such as Cambodia’s restaurants, is significant, with reported drops in visitor numbers affecting revenue.
Sokha Sambo, owner of a restaurant in Siem Reap, describes challenges stemming from rising prices for LPG used in cooking, affecting profitability and employee salaries.
The tourism department in Siem Reap reports a sharp decrease in visitor numbers, exacerbating the economic strain across the region.
“This has greatly affected all of us,” said Sambo.
The conflict in Iran continues to pose a significant threat to the recovery of tourism-dependent economies in Southeast Asia.
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