Tourism in Southeast Asia Faces Challenges Amid Rising Prices and War Impact

The tourism-dependent economies of Southeast Asia are facing significant challenges as summer approaches. Countries like Thailand and Vietnam are grappling with escalating prices and complications arising from the war with Iran. The peak tourist season is endangered as soaring jet fuel costs and ceasefire uncertainties lead to flight cancellations and increased ticket prices.

Asian tourism has not fully rebounded from the COVID-19 pandemic. The effects of the war are now impacting global energy supplies and prices, hitting Asia particularly hard. Families worldwide are cutting back on travel due to rising expenses at gas stations and grocery stores. Popular tourist spots are seeing fewer visitors.

“With gasoline prices rising and tourism declining, how can we make money?” asks Siv Pech, a 58-year-old tuk-tuk driver in Siem Reap, Cambodia, underscoring the economic challenges faced by those reliant on tourism.

Tourism provides a vital economic lifeline for many developing nations, contributing significantly to GDP in countries like Thailand and Vietnam, as well as supporting millions of jobs in Cambodia. It also brings in essential foreign currency for import-reliant economies like the Philippines and Nepal.

The ongoing conflict is influencing the survival of tourism businesses, according to Jitsai Santaputra of The Lantau Group, an energy consulting firm. The industry first faced COVID-19, and now the war brings additional hardships.

Impact on Air Travel

Shortages and rising costs of jet fuel have pushed airlines such as Vietnam Airlines and Cathay Pacific to reduce flights or modify schedules. Early airspace closures in the Persian Gulf and intermittent Gulf airport closures have disrupted key layover locations, prompting longer and more costly flight routes.

Airfares have surged. Cathay Pacific’s fuel surcharge for medium-haul flights increased significantly, affecting travelers’ decisions. Lavinia Lau from Cathay notes that consumers are booking closer to departure dates, signaling heightened unease.

On the ground, in Southeast Asia’s tourism-dependent regions, rising fuel costs are affecting taxi and ride-hailing app drivers. Pech, the Cambodian tuk-tuk driver, has seen his earnings dwindle as fuel expenses eat into his income.

Economic Slowdown

Tourism accounts for a large share of economic activity in the region. An analysis by Moody’s Analytics suggests the conflict may reduce economic growth across Asia-Pacific by 0.1 to 0.4 percentage points in 2026. Albert Park, the chief economist at the Asia Development Bank, emphasizes that higher production costs and consumer prices are affecting growth.

The United Nations Development Program highlights that higher airfares and diminished travel confidence can impact household livelihoods and public revenues in tourism-centric economies. Travel often becomes the first expense cut during economic downturns, according to Le Tuyet Lan, who manages properties in Vietnam.

Tourism Industry Under Strain

The tourism industry in Thailand, a major hub, is seeing a decrease in visitors. In neighboring Cambodia, businesses are also feeling the strain of rising costs. Sokha Sambo, who runs a restaurant in Siem Reap, is struggling to manage her budget due to inflated costs of cooking gas.

Visitor numbers to Siem Reap fell significantly, impacting local enterprises. “This has greatly affected all of us,” says Sambo, pointing to the broader economic repercussions faced by the community.