The Implication of the Tsunami on the Tourism Industry of Phuket, Thailand - Research Paper

Introduction

Tourism is an industry that continues to operate in environments that are filled with uncertainty. The vulnerability of the industry has well been documented as it continues to experience crisis and disasters. Such a tragedy occurred during the 2004 Tsunami, which severely affected tourism in different parts of the world. One of the tourism destinations that was influenced by the Tsunami was Phuket, a mountainous and rainforested island that is one of Thailand's famous tourist attraction beaches. Phuket, an island known to have a thriving tourism industry, witnessed the death of many people as well as the destruction of property. Undoubtedly, the disaster had an adverse effect on the islands, tourist numbers, infrastructure as well as resources

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Reduction in Tourist Numbers

The 2004 Tsunami resulted in a significant decrease in the number of tourists, who visited the Phuket in the following months. According to Karatani (2008), immediately after the Tsunami hit the island, tourists began leaving them in huge number. Karatani (2008) states that there was chaos at Phuket International Airport since tourists wanted to go the region as fast as possible. It was evident that the tourists wanted to go the island quickly as they created disorder by refusing to allow the injured to be flown out first for specialized treatment. Some tourists insisted that they wanted to board flights with their wounded relatives who had been given priority while others merely decided to disregard the preference given to the injured. The chaos persisted for more than two days that airport officials had to provide the tourists with blank tickets and let them board their flights without going through passport control (Karatani, 2008). The figure below shows the rate at which tourists left the island during the period. The data represented the number of tourist from four countries: Japan, Australia, Sweden and Germany who fled the country.

Figure 1: Time Series Data for the number of Tourists that left the Island ((Karatani, 2008).

It shows that there was an influx of rumors and misinformation by the media over the general state of Phuket particularly in Japan. Mass media in Japan reported that Phuket had been entirely destroyed by the earthquake (Karatani, 2008). For instance, they even went to the extent of reporting destruction from a beach called Khao Lak in Patong while claiming it was Phuket, thus exaggerating that the island had suffered complete destruction. Even worse, when the media outlet moved to report damage in other areas such as Ache in Indonesia, they did not amend the erroneous reporting. The occurrence resulted in a protracted decrease of tourist numbers from Japan to the region (Karatani, 2008). The occurrence, therefore, amended travel plans of some tourists to the area with the majority of them being Japan tourists as shown in the survey results below.

Figure 2: The Impact of the Tsunami on Travel Plans to the affected areas adapted from Karatani (2008)

According to Henderson (2005), Japanese tourists may have failed to proceed with their holiday to the island since they tend to be generally risk-averse. On the other hand, Asians were unable to travel since they were primarily thought to be superstitious.

Losses in Revenue

Besides the reduction in tourist numbers, the Tsunami also resulted in the loss of revenue for the industry. According to ADPC (2014), the Tsunami led to the destruction of assets in six of Thailand's provinces including Phuket. The direct action of the Tsunami led to a decline of occupancy rates of hotels on the island, which contributed to losses that the tourism sector losses. Biggs, Hall, and Stoeckl (2012) state that prior to the Tsunami, Phuket had a formal sector of dive tourism. Due to the calamity, the industry experienced a loss of revenue for an average of 64 working days per every enterprise that had ventured into the business.

Biggs, Hall, and Stoeckl (2012) further state that the sector experienced another loss of hotel occupancy rates as well as airline booking revenues. The loss was a consequence of a 67.2% reduction in the number of tourists that arrived at the province for tourism in the first six months of 2015. Before the Tsunami, the industry had 85 dive businesses. However, the Tsunami led to an occurrence where 16 of these of these businesses had to scale down their activity in response to low demand. Furthermore, eight of the dive business completely shut down their operations (Biggs, Hall and Stoeckl, 2012).

According to Henderson (2005), for the following days after 26th December, the little revenue that hotels earned was from hotel rooms, which were occupied by the tourists who were awaiting repatriation. The hotels were also fortunate to have their room booked by a few journalists who had come to cover the events that occurred. While the hotels were experiencing reduced sales of their services, they also experienced cancellations for reservations that had been made. Some tourist who still wanted to visit was advised by the authorities not no travel over since their presence would have hindered rescue programs. Henderson (2005) further states that hotels continued experiencing cancellations for reservations that had been made up to March 2005. The situation was further worsened by the fact that they had to refund booking fees that had been pre-paid. According to Sharpley (2005), even though 80% of hotels in Phuket were not damaged, hotel occupancy averaged 10% as far as 60 days after the disaster.

Henderson (2005) further states that the loss of revenue situation was further amplified by the fact that despite hotel occupancy rate being projected to be between 85% to 92%, for January and February, they were 12.5% and 15% for the two months. The occurrence meant that had any business made expenditures in advance in anticipation of recouping the investment during the period, they undoubtedly suffered losses. Henderson (2005) also reports that Korean, Russian and Chinese charter flights to the destination were canceled further plunging airlines into financial uncertainty.

Henderson (2005) states that loss of revenue could also be manifested in the way marketing initiatives had to be continuously revised and redone. Besides, due to the low room bookings, hotels could no longer charge high season rates, and they had to provide bargain rates to attract tourists.

Destruction of Infrastructure

In addition to losses in revenues, Phuket's tourism industry also experienced the destruction of its infrastructure. According to ADPC (2014), the industry suffered damage that required it millions of Baht to reconstruct, replace or repair. For instance, the repairment of the 100 hotels affected by the Tsunami in Phuket would have costs a 3.1 billion Baht. The figure below shows a summary of the estimated cost of repairs, replacement, and reconstruction of assets directly and indirectly linked to the tourism industry in Phuket.

Figure 3: Estimated Cost of Repairs adapted from ADPC (2014)

Gains in the Informal Sector

Surprisingly, Phuket's informal sector within the tourism industry experienced some gains during the period. According to Biggs, Hall, and Stoeckl (2012), firms in the industry's informal sectors reported a higher income than their counterparts in the formal sector. They also did not experience sustainability challenges unlike firms in the formal sector. The occurrence was attributed to the fact that compared to companies in the formal sector; those in the informal sector did not have high capital requirements. They, therefore, did not require a steady and continuous flow of income to make their businesses sustainable (Biggs, Hall and Stoeckl, 2012). Thus, while companies in the formal sector undertook cost reduction strategies such as firing employees, it was less likely that informal sector jobs would be lost.

Another implication that the Tsunami had on the informal sector was that for the first time it gained a positive perception of the usefulness of social capital and government support. According to Biggs, Hall, and Stoeckl (2012), after the tsunami, firms in the informal sector realized that government support provided an enabling environment for their businesses to thrive. The occurrence was a contradiction to previous occurrences where small and medium-sized enterprises report that lack of government support is a norm, which creates an impediment to their operations. It was, however, considered that the positive perception was due to the fact that minute amounts of support have a more significant impact on smaller business compared to larger ones.

Furthermore, the tsunami caused a scenario where the informal sector thrived more than the formal sector through the reception of social capital. The reason was that locals managed most of the informal sector business. The factors meant that they would benefit from Thai-family networks which provide support at times of complicated social and financial problems. Due to the fact that most formal enterprises were owned and managed by foreigners, they did not receive much social support hence making them report dismal performance.

Conclusion

Phuket's tourism industry was adversely affected by the 2004 Tsunami with the exception of one beneficially. For instance, the Tsunami resulted in a significant reduction in the number of tourists, who visited the Phuket in the following months. Secondly, in addition to the reduction in tourist numbers, the Tsunami also resulted in the loss of revenue for the industry. The occurrence was a result of a decline of occupancy rates of hotels on the island, which contributed to losses that the tourism sector losses. Also, Phuket's tourism industry also experienced the destruction of its infrastructure. The industry experienced damage that required it millions of Baht to reconstruct, replace or repair. Surprisingly, Phuket's informal sector within the tourism industry experienced some gains during the period. For instance, firms in the industry's informal sectors reported a higher income than their counterparts in the formal sector. They also did not experience sustainability challenges unlike firms in the formal sector. Also, it gained a positive perception of the usefulness of social capital and government support. Lastly, the tsunami caused a scenario where the informal sector thrived more than the formal sector through the reception of social capital.

References

ADPC. (2014). The Economic Impact of the 26th December 2004 and Indian Ocean Tsunami in Thailand. Retrieved from https://www.adpc.net/igo/category/ID628/doc/2014-a17Hxl-ADPC-Tsunami_impacts_in_Thailand.pdf

Biggs, D., Hall, C. M., & Stoeckl, N. (2012). The resilience of formal and informal tourism enterprises in disasters: reef tourism in Phuket, Thailand. Journal of Sustainable Tourism, 20(5), 645-665.

Henderson, J. C. (2005). Responding to natural disasters: Managing a hotel in the aftermath of the Indian Ocean tsunami. Tourism and Hospitality Research, 6(1), 89-96.

Karatani, Y. (2008). Tourism Industry Losses and Recovery Process from the Indian Ocean Tsunami-A Case of the Affected Tourist Destination in Southern Thailand. The 14th World Conference on Earthquake Engineering.Sharpley, R. (2005). The tsunami and tourism: A comment. Current issues in Tourism, 8(4), 344-349.