requently because of family connections with the locals. There is a steady flow of customers coming and going, and Raffa knows every one of them on a first-name basis. His wife, Fah breezes around managing the bar and its employees, while Raffa himself, an affable 60-something Perth native who is in good enough shape to double as a bouncer if there’s any trouble, circulates among the customers. But although Raffa and Fah aren’t worried about their business, they are worried about their forthcoming three-week holiday in Western Australia: if their flights on Thai Airways are cancelled, they will get a refund on the flights but will still be on the hook for thousands of US$ in hotel bookings. So they are anxious for Thai to secure fuel. The China–Japan stoush offers hope While Raffa and Fah’s sports bar is so far unaffected, tourism in Southeast Asia is in a huge state of flux as visitor numbers from Europe, the Middle East and other long-haul origins dry up, and authorities attempt to plug the gap in losses from the Middle East conflict by targeting the Chinese and Japanese, who themselves have been urged by their respective governments to avoid each other. The China–Japan conflict is due to a nasty little spat between the two neighbours over Taiwan, aggravated further by a maritime incident involving the seizure by Japan of a Chinese fishing boat in February. So, as the Chinese and Japanese, who typically like to visit each other’s country and have a penchant for spending big, look elsewhere, tourist-hungry Southeast Asian countries are beginning to benefit from the fallout. Could this be a chance to make up for the catastrophe taking place in Iran? And how permanent will the changes be? The answer has implications for retailers in the region beyond just total numbers: the origin of tourists matters, too, and Chinese and Japanese tourists spend more than those from other origins. They stay in the swisher hotels and resorts and spend in the luxury boutiques. Thailand’s been naughty, but is this a second chance So far, many of the diverted Chinese and Japanese tourists are heading to Singapore, Malaysia and Vietnam. Thailand is still not reaping a big benefit. Even before the Middle East conflict, the country was in a tourism slump, with arrivals dropping 7 per cent in 2025 due to a perception that the country isn’t safe. This, in turn, is partly due to yet another conflict: the ongoing border fight between Thailand and Cambodia. There have been other safety worries for the Chinese too, such as the kidnapping of their nationals and various scams, which have put Thailand in their bad books. In response, the Tourism Authority of Thailand (TAT) has been its usual energetic self, coming up with marketing campaigns to alter perceptions, and just as energetically spending the beginning of the year spruiking its forecast for a dramatic recovery. Arrivals would be up more than 10 per cent, and the horeca and retail industries would be hopping again. But that forecast isn’t ageing well. Raffa’s place is something of an exception because it has little competition, a great location, proximity to major hotels, and because so many of the customers are personal friends of the owners – friendships that Raffa and Fah have built painstakingly over a long period of time. But at most restaurants and retail stores with significant foreign tourist customer bases, business has dropped off with an eerie suddenness, beginning about three weeks ago. Conversations with local proprietors and reports by major retailers suggest that after a good start to the year, the beginning of March saw a turn for the worse. This wasn’t just a steady downward drift – it was like falling off a cliff. For most small businesses, cash flow is tight, and even a brief adverse shift can have a significant impact. The unfriendly skies Thai Airways itself has so far increased fares by 10–15 per cent, but a prolonged conflict will strain jet fuel reserves and lead to further price increases and/or cancellations. This particularly affects travellers from Europe and the Middle East, two of Thailand’s principal sources of visitors: arrivals from those two regions plunged almost 20 per cent in the first week of March. Particularly vulnerable to a disruption in the European market are resort cities like Phuket. Retailers are apoplectic: according to Thailand’s Ministry of Tourism and Sport, nearly 20 per cent of what tourists spend in Thailand is on retail merchandise, and another 25 per cent on food and beverages. Not everyone is unhappy to see the Thais suffer, though. Among them are the Vietnamese, Cambodians and Malaysians, who each saw tourism growth of around 20 per cent last year, partly at the expense of the Thais, due to superior safety perceptions. The large conglomerates: holding on grimly Thailand’s larger retail chains are hanging in there for the time being – they are clearly worried. The country’s biggest retail/wholesale conglomerate by revenue, CP Axtra, which operates the Makro and Lotus’s chains, reports that its horeca customers are holding steady at a little over 30 per cent of Makro’s sales, but that may no longer be true as tourist numbers decline. Meanwhile, at another of Thailand’s retail conglomerates, Central Retail, same-store sales across its food, hardlines and fashion categories have been declining for 18 months, and the current situation won’t make things any better. The third of Thailand’s big retail chains, Big C, also reported negative growth in 2025, blaming falling tourist arrivals that affected its key Bangkok and other tourist destinations. ASEAN’s chance to shine Although there will be a correction when the conflicts resolve themselves, and things will revert to a semblance of pre-conflict normality, this is a big opportunity for the Asean nations to reap a harvest of visitors from China and Japan and, particularly for Thailand, a chance to find favour again and polish up its bad safety reputation. Further reading: Why SM believes it can tap into the Philippines’ obsession with malls