Thailand Faces a Growing Challenge in 2026 as Vietnam and Japan Surge Ahead in Regional Tourism, Pushing Thailand to Reassess Its Strategy

Thailand, long regarded as a powerhouse in Southeast Asia’s tourism industry, is facing a period of reckoning in 2026. While Asia’s overall tourism demand is booming, Thailand’s competitive edge is starting to fade. Neighbouring countries such as Vietnam and Japan have upped their game, and Thailand is struggling to maintain its dominance. With increasing competition and changing traveller preferences, Thailand must urgently evolve its strategies to maintain its position as a leading global destination.

Rising Regional Competition: A New Era of Tourism

For decades, Thailand has been the go-to destination in Southeast Asia, drawing millions of international tourists annually. However, the dynamics of regional travel are shifting. Countries like Vietnam and Japan are increasingly capturing the attention of international travellers, particularly in the post-pandemic era. While Thailand continues to see strong demand, its share of the growing regional travel market is shrinking.

A significant factor in this shift is the changing behaviour of Chinese travellers, who have historically been one of Thailand’s most valuable tourism segments. Chinese outbound travel is expected to return to pre-pandemic levels by 2025, but Thailand’s portion of this growth is dwindling. Instead, travellers are opting for destinations perceived as safer, more affordable, and better connected—qualities that neighbouring countries like Vietnam now offer in abundance. As such, Thailand’s reliance on past success is being challenged by faster-moving competitors who are better aligned with current market demands.

The Infrastructure Deficit: Thailand’s Growing Weakness

Infrastructure has become the key competitive differentiator in the tourism sector. In this area, Thailand is beginning to fall behind. While the country has traditionally relied on its sheer size, world-renowned hospitality, and bustling tourism hubs, these strengths are no longer enough to keep up with regional competitors who are making rapid strides in their infrastructure.

Take Vietnam, for example. The country has rapidly expanded its airport network, with the upcoming Long Thanh International Airport set to open near Ho Chi Minh City in 2026. This will not only alleviate congestion but also significantly improve Vietnam’s capacity to handle increasing international flights. In contrast, Thailand is grappling with capacity constraints at its main airport, Suvarnabhumi, and progress on vital projects, such as rail and regional airport expansions, has been slower than expected.

Moreover, Vietnam’s focus on decentralisation—developing airports and tourism infrastructure in secondary cities—has allowed the country to tap into previously underserved markets. This approach is providing more affordable and less congested alternatives for tourists, spreading the economic benefits of tourism across the country. Thailand, however, remains heavily reliant on a small number of mature destinations, including Bangkok, Phuket, and Pattaya. This concentration leaves the country vulnerable to overtourism and economic imbalances across regions.

The Safety Perception Gap: A Growing Challenge

Thailand’s reputation as a safe destination is increasingly under scrutiny. Safety, once a secondary concern for travellers, is now a major factor in destination selection, especially among Chinese tourists. High-profile incidents involving foreign visitors have harmed Thailand’s image, with even isolated cases having an outsized impact thanks to the reach of social media. In comparison, countries like Japan and Vietnam have made significant investments in public safety measures, strengthening their reputations as secure places to visit.

Thailand’s fragmented approach to safety has left gaps in public confidence. While there are efforts to improve safety standards across destinations, the lack of consistency and visible investment in this area has created opportunities for competitors to capitalise on. In today’s competitive tourism market, safety is no longer a peripheral issue—it is central to attracting high-spending tourists, particularly those from regions like China where safety concerns are paramount.

Value for Money: Thailand’s Pricing Dilemma

Another area where Thailand is facing pressure is in value for money. Historically, Thailand’s strong tourism demand allowed it to maintain higher hotel rates and other associated costs. However, the market has become more price-sensitive in the post-pandemic world. In this new environment, value has become a key deciding factor for travellers.

Vietnam, for instance, offers a similar range of attractions but at significantly lower hotel rates, making it an attractive alternative for budget-conscious tourists. Additionally, the increasing development of second- and third-tier cities in Vietnam has expanded the country’s tourism offering while keeping costs low. Japan has also benefitted from a weaker yen, making it an affordable destination for regional tourists. Thailand’s higher costs—particularly in well-known destinations—now pose a challenge, especially as more competitive alternatives emerge in the region.

Key Steps Thailand Must Take to Stay Competitive

In order to reclaim its place at the forefront of regional tourism, Thailand must take proactive steps to adapt to changing market conditions. Three key priorities should guide the country’s strategy in 2026:

1. Accelerating Infrastructure Development

To keep pace with its competitors, Thailand must fast-track its infrastructure projects. This includes expanding airport capacity, modernising rail systems, and improving urban transport links. The goal should be to make travel within Thailand more seamless and efficient, providing an experience that meets the expectations of modern tourists.

2. Strengthening Safety Measures and Communication

Thailand must make safety a top priority. This involves not only improving safety standards but also communicating these efforts effectively to international markets. A coordinated, nationwide approach to safety will help restore confidence, particularly among travellers from China, who prioritise safety when choosing their destinations.

3. Promoting Regional and Lesser-Known Destinations

To combat overcrowding in Thailand’s main tourism hubs, the country must focus on promoting second- and third-tier cities and regions. A more decentralised approach will help distribute the economic benefits of tourism more equitably and provide new, less-explored destinations for travellers. Investments in lesser-known areas will reduce pressure on hotspots like Bangkok and Phuket while creating fresh opportunities for economic growth.

Rebuilding China’s Trust: A Focused Approach

Despite the growing competition, the Chinese market remains one of the largest drivers of global tourism. Thailand must therefore take a targeted approach to recapture its share of Chinese travellers. This will require competitive pricing, tailored products, and strategic partnerships with airlines to offer more convenient flight options. Thailand should also broaden its appeal by showcasing cultural, historical, and off-the-beaten-path attractions, offering more than just beach tourism.

Conclusion: The Path Forward for Thailand’s Tourism Sector

Thailand’s tourism sector is at a crossroads. While the country remains a major player in the region, its traditional model of tourism—built on volume, brand recognition, and hospitality—is no longer enough to maintain its competitive edge. The future of Thai tourism will be shaped by how quickly the country can modernise its infrastructure, elevate safety standards, and provide better value for money. The decisions made in 2026 will be crucial in determining whether Thailand can reclaim its leadership position or whether faster, more agile competitors will take the lead in Southeast Asia’s tourism race.

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