Key points
- Thailand’s longstanding position at the forefront of Southeast Asian tourism is facing mounting pressure as Indonesia approaches the region’s top travel market ranking, Malaysia records strong visitor growth, and Vietnam expands its international appeal.
- Growth is expected to slow in 2026 as the effects of higher fuel costs spread through the travel industry.
- The Visit Malaysia campaign has brought renewed attention to the country’s destinations, placing its tourism ambitions alongside the expansion efforts underway elsewhere in Southeast Asia during this year.
Thailand’s longstanding position at the forefront of Southeast Asian tourism is facing mounting pressure as Indonesia approaches the region’s top travel market ranking, Malaysia records strong visitor growth, and Vietnam expands its international appeal. The competition is unfolding as higher airfares and shifting travel patterns place fresh strain on tourism businesses across the region.
Image Credit: Thailand Hotel News
As the final quarter of 2026 begins, neighboring destinations are strengthening their presence through marketing campaigns, improved connectivity, and expanding tourism infrastructure. These developments, examined in this Thailand Tourism and Hotel News report, are creating a more competitive environment for Thailand’s hotels and resorts. Although the kingdom remains a major destination, its rivals are gaining ground across several important measures of tourism performance.
The Slip from the Summit: Indonesia’s Historic Surge
Indonesia is projected to overtake Thailand as Southeast Asia’s largest travel market in 2026, according to Phocuswright Research. Thailand finished 2025 with $17.9 billion in gross travel bookings, just ahead of Indonesia’s $17.7 billion, leaving a narrow gap between the two countries.
The forecast comes after gross bookings across the regional markets covered by Phocuswright increased 6% to $63 billion in 2025. Growth is expected to slow in 2026 as the effects of higher fuel costs spread through the travel industry.
Phocuswright reported that the United States–Iran war pushed up jet fuel prices, prompting airlines to introduce surcharges and raise fares. Some low-cost carriers also reduced routes, adding pressure to destinations dependent on affordable air connections.
Indonesia’s large domestic market is supporting its position as expensive flights encourage travelers to holiday closer to home. Domestic travel is also gaining importance in Malaysia, while Thailand has introduced incentives to encourage local trips as inbound demand weakens.
The pressure is extending to accommodation. Phocuswright expects regional hotel gross bookings to remain flat at $28.4 billion in 2026, with higher airfares, route cuts, bargain hunting, and additional hotel supply weighing on performance.
The Volume King: Malaysia Steals the Crowds
Malaysia recorded 42.2 million international visitors in 2025, an increase of 11.2% from the previous year. The total was also 20.4% above its 2019 level, giving the country considerable momentum heading into its Visit Malaysia 2026 campaign.
Thailand, meanwhile, welcomed approximately 33 million international tourists in 2025. However, Malaysia’s larger headline figure includes overnight tourists and excursionists, who visit without staying overnight. The two totals therefore represent different categories of arrivals rather than a direct comparison of overnight tourism.
Malaysia’s strong regional connections remain central to its tourism business. Cross-border access from Singapore and Thailand supports frequent visits, while entry arrangements for major source markets have helped strengthen its appeal among Asian travelers.
Shopping, dining, cultural attractions, and family holidays form part of a broad tourism offering. Malaysia is also competing for medical travelers and business events, including meetings, incentives, conferences, and exhibitions, widely known as MICE.
These activities generate demand across accommodation, healthcare, transport, and food services. Business events and medical visits can also support travel outside the busiest holiday periods, broadening the customer base available to hotels.
The Visit Malaysia campaign has brought renewed attention to the country’s destinations, placing its tourism ambitions alongside the expansion efforts underway elsewhere in Southeast Asia during this year.
The visitor surge has reinforced Malaysia’s regional profile, although the inclusion of day-trippers means its headline arrival total does not translate directly into hotel stays. Overnight demand and visitor expenditure remain separate measures of the sector’s performance.
The Rising Dragon: Vietnam’s Aviation and Revenue Juggernaut
Vietnam welcomed nearly 21.2 million international visitors in 2025, setting a national record. Official figures showed an increase of 20.4% from 2024 and 17.8% compared with 2019, highlighting the strength of its recovery and subsequent expansion.
The total placed Vietnam ahead of Singapore and Indonesia in international arrivals, while remaining below Thailand. Alongside inbound growth, Vietnam served approximately 137 million domestic tourism trips, providing a substantial additional source of demand for destinations and accommodation businesses.
Total tourism revenue reached approximately one quadrillion Vietnamese dong, equivalent to roughly $38 billion to $40 billion, depending on exchange rates.
That figure covers broader tourism activity and is measured differently from the gross travel bookings reported by Phocuswright.
Vietnam also moved ahead of Thailand in scheduled airline seat capacity during July and August 2026. In July, Vietnam recorded approximately 7.4 million seats, compared with Thailand’s 6.9 million. Indonesia remained the region’s largest aviation market on that measure.
The ranking changed again in September, when Thailand returned to second place. The monthly movements underline the increasingly close competition between the countries as airlines adjust schedules and respond to operating costs and demand.
Vietnam’s beach destinations, including Phu Quoc, Da Nang, and Nha Trang, continue to strengthen the country’s resort offering. Expanding accommodation choices and air connections are increasing their visibility among travelers considering alternatives to established Thai destinations.
Thailand’s Counter-Offensive: Fighting with Everything
Thailand is pursuing longer stays, higher visitor spending, and a broader range of tourism experiences as competition intensifies. Wellness, premium accommodation, food, and cultural activities feature prominently in efforts to maintain the kingdom’s appeal.
Visa policy has also remained an important part of the tourism agenda. Thailand previously expanded its visa exemption scheme to 93 countries and territories, but authorities approved revisions during 2026 that changed the direction of that earlier liberalization.
A July government announcement outlined shorter exemptions and revised eligibility, with implementation tied to publication in the Royal Gazette. The measures reflected economic and security considerations, alongside concerns about misuse of entry privileges.
Separately, the Destination Thailand Visa offers eligible applicants stays of up to 180 days per entry. The program targets remote workers and people undertaking qualifying activities, including certain cultural and medical pursuits, supporting demand for extended visits.
Major development proposals have encountered setbacks. Thailand’s Cabinet withdrew the casino entertainment complex bill in July 2025 following political difficulties and public opposition. The withdrawal interrupted plans to add casino resorts to the country’s tourism offering.
Airport development remains another part of Thailand’s longer-term tourism ambitions. Greater capacity and smoother connections could support arrivals, while established hotels face continuing pressure to maintain facilities and service amid increasingly competitive regional offerings.
The New Era of Southeast Asian Travel
Indonesia’s booking forecast, Malaysia’s visitor growth, and Vietnam’s expanding arrival base are reshaping Southeast Asia’s tourism landscape. Their gains come as rising travel costs and changing airline schedules complicate the outlook for destinations across the region.
Thailand remains a major tourism center, but the competition is broadening. For the country’s hospitality industry and the communities it supports, the next phase will depend on sustaining visitor demand, delivering attractive experiences, and keeping established destinations competitive as neighboring countries continue to expand their appeal.
References:
https://www.asiamyway.net/articles/malaysia-thailand-tourism-long-haul-demand/
