With over 600,000 closures, Thai restaurant industry in the midst of a crisis

The closures are primarily attributed to a combination of economic slowdown, intense competition, rising costs, and weakened consumer spending.

In a recent interview with Thansettakit, Thaniwan Kulmongkol, president of the Thai Restaurant Association, highlighted the urgent need for restaurateurs to transform their business models to survive in the challenging landscape.

"Many restaurants have been unable to adapt to the changing market dynamics. Those clinging to traditional business models are finding it increasingly difficult to compete with more modern rivals and manage costs effectively, leading to losses and eventual closure. This inability to evolve their offerings to meet consumer demands has proved to be a significant hurdle," she said.

A prime example is a major shabu-suki restaurant chain, once highly successful, now battling intense competition from newer, more affordable establishments that better cater to consumer demands.

The situation has become particularly worrying for larger restaurants and those reliant on social gatherings such as retirement parties. Bookings for such events have decreased significantly, causing a substantial drop in revenue.

Even high-end and award-winning restaurants, including those with Michelin stars, have seen their revenue plummet by 40%. This has forced many to dip into personal capital to keep their businesses afloat.

Despite these challenges, TTB Analytics projects the overall restaurant market in Thailand to be worth 669 billion baht in 2024, indicating potential amidst the intense competition.

Data from the Ministry of Commerce shows that in the first seven months of 2023, there was an 11.27% increase in the establishment and dissolution of restaurant businesses compared to the previous year. 

Lineman Wongnai reported that over 100,000 new restaurants opened in the past year, a 13.6% increase, bringing the total number of restaurants in Thailand to 680,190. However, about 50% of restaurants closed within the first six months.

While overall purchasing power has declined, Thai people still maintain their habit of eating out, particularly working-class individuals who value a comfortable dining experience. However, economic pressures have led consumers to opt for more affordable options.

To navigate the current crisis, Thaniwan urged restaurateurs to embrace technology, such as online marketing, inventory management, and online ordering. Differentiating themselves through unique food offerings or attractive atmospheres is also crucial for attracting customers.

Effective cost control and a deep understanding of consumer behaviour are essential for developing products and services that resonate with the market, she said.

While the future of the restaurant industry presents significant challenges, Thaniwan remains optimistic about its long-term prospects, driven by the food consumption habits of Thailand's 60 million population and the influx of foreign tourists.

"With Thais consuming at least three meals a day and international visitors seeking authentic Thai cuisine, the restaurant business remains in demand. Entrepreneurs who can adapt and innovate will be well-positioned to thrive in the long run," she said.

Looking ahead, the restaurant industry is expected to see significant changes, including:

• Alternative ingredients: Plant-based, insect-based, and lab-grown food
• Sustainable packaging: Reducing environmental impact
• AI-powered innovation: Personalised menus and other services
• Delivery and takeaway: Catering to changing consumer lifestyles.

Despite the current challenges, the restaurant industry in Thailand remains resilient, buoyed by the country's population of 60 million and a growing influx of tourists eager to sample Thai cuisine. 

Thaniwan believes that entrepreneurs who can adapt and innovate will be well-positioned to seize opportunities and achieve sustainable growth in this dynamic market.