Restaurant industry faces crisis as domestic spending drops, Chinese tourists vanish

[misskit]

Reports from the Department of Business Development show that over 60% of new restaurants fail within the first year, a sharp rise from 40% just a few years ago.
Restaurant owners are struggling to survive amid declining domestic spending and a sharp drop in Chinese tourist arrivals. Thailand's economic recovery appears sluggish and uncertain. With consumer purchasing power dwindling and costs rising, many food businesses are bracing for closures.


Chinese tourists — once a key customer base — have nearly disappeared. Meanwhile, Russian and Middle Eastern tourists are spending more cautiously. Major food chains have responded by diversifying and lowering prices, but many are still battling daily increases in operating costs, with some reporting food cost burdens as high as 40%.


This crisis isn’t new. Business owners say the signs of problems began long before 2025 — the so-called year of economic reckoning. In fact, some claim the slow decay began post-COVID in 2023, with recent years feeling like a continuous economic "cremation."


The restaurant industry, in particular, has been hit hard. With low barriers to entry, the sector sees frequent churn. Reports from the Department of Business Development show that over 60% of new restaurants fail within the first year, a sharp rise from 40% just a few years ago.

Ruay Mai Yood’s Group executive Chutima Pruengmethangkoon, who runs Korean BBQ chain “Nice Two Meat U,” says the biggest struggle isn’t for owners — it’s for consumers. Thai people have depleted their savings, and with no strong sign of economic recovery, even middle-to-upper class customers are cutting back. Spending per head has dropped, and value now means more than low prices — it requires cleanliness, good service, and great taste.


To adapt, the group launched lower-priced options like "Kestiew" and noodle shops selling dishes for under 30 baht and as low as 9 baht. The strategy: daily affordability and rapid payback — 3 to 4 months to break even.


“This period is tougher than post-COVID. Many restaurants will shut down, but some will thrive. Every industry is hurting, but the sharpest pain is in consumers’ pockets. High living costs, rising expenses, and little disposable income — it’s all hitting at once,” said Chutima.


Rising costs are another blow. Pork prices, for instance, remain high, severely impacting BBQ-style eateries. Chutima reported raw material costs now make up 30% of their expenses.

This aligns with previous comments by food entrepreneur Thanapong “Tor Penguin” Wongchinsri, who noted raw material costs now reach 35%, with rent at 20%, labor at 15–20%, and delivery platform fees up to 30%, leaving restaurants in the red before even opening their doors.


Raising prices is not viable. Consumers can no longer justify 150-baht coffee or 100-baht rice dishes. With thinner margins and falling purchasing power, the risk of failure looms large for both small vendors and big brands.


Traffic in malls has also dropped sharply. Most consumer activity now occurs only on weekends or holidays. Thanapong predicts that large chains will soon expand beyond malls, intensifying competition in areas previously dominated by small businesses.


“Many small restaurants — like small fish facing a sea full of whales — will be crushed. And that's before facing the coming wave of massive Chinese food chains, which are expected to enter Thailand at tsunami scale in 2025,” Thanapong added.

The hope that tourism might save the industry is fading. Chinese arrivals have dwindled to near-zero. While Russian and Middle Eastern tourists are still visiting, their spending is down too. Foreign tourists no longer spend like they used to.


In response, giants like Minor Food Group (operator of The Pizza Company, Swensen’s, Dairy Queen, Sizzler, Burger King, etc.) have also adapted. Despite steady same-store growth and rising foot traffic, Chief Business Development Officer Anupon Nitiyanant admits the F&B market is fiercely competitive. New foreign brands and popular street food outlets are pulling customers out of malls.


Minor Food is focusing on customer volume growth over high individual spend, launching more accessible brands such as “The Steak & More” — a value steakhouse positioned to complement rather than compete with Sizzler. The focus is on mass volume and repeat visits, aiming for long-term brand sustainability.


“It's not about raising the average bill anymore. The future of restaurant branding lies in increasing traffic — attracting more diners who come, share their experience, and return. That’s how sustainable growth is built,” said Anupon.


Ultimately, success won’t be determined by size alone. Restaurant operators must adapt constantly. With costs fixed and price increases limited by weak demand, the challenge lies in adding value. Restaurants need to innovate, specialize, and transform their offerings before being forced out of the market — especially in an economy with Southeast Asia’s lowest GDP growth and little stimulus in sight.

Restaurant industry faces crisis as domestic spending drops, Chinese tourists vanish

[taxexile]

restaurants, especially the ones serving tourists, are struggling/failing simply because they are all lazily using the same poor quality cheap ingredients sourced from their local macro warehouse. every menu is the same, and every dish tastes the same. shopping mall chain outlets are the worst, be it a thai, japanese, korean or chinese restaurant

there is no shortage of good eateries in all price ranges using locally sourced ingredients and prepared from scratch by people that understand flavour and spices as opposed to the microwave operators heating up pre prepared packages in the chains, but they are not to be found in the malls.

[Stumpy]

restaurants, especially the ones serving tourists, are struggling/failing simply because they are all lazily using the same poor quality cheap ingredients sourced from their local macro warehouse. every menu is the same, and every dish tastes the same. shopping mall chain outlets are the worst, be it a thai, japanese, korean or chinese restaurant

Life in Hua Hin eh? Been there...seen that, will give it a big pass.

Tourist locations aside, Once you get out of those shithole tourist dumps like Pattaya, Hua Hin and sections of BKK restaurants are doing well. They aren't catering to tourists and tripling the prices for a simple dish and its all fresh from a local market.

[cyrille]

It's always been a tough business, and never more so than for anyone with foreigners as a substantial part of their market here in CM.

I hesitate to use the word 'tourists', because the number of western residents upping sticks over the last five years must also be considerable.

The future is inevitably more Asian regarding tourism.

[taxexile]

jamie "stumpy" oliver

They aren't catering to tourists and tripling the prices for a simple dish and its all fresh from a local market.

.... and that's exactly my point.
so thank you for the endorsement.

but why you felt the need to spitefully vilify cities like hua hin, bangkok and pattaya for providing facilities for visitors and income for locals is beyond me.

perhaps mixing with your local chickenheads and bugmunchers suits your style and personality more than being around the varied, worldly and certainly more interesting mix of folk that are to be found in the larger conurbations.

but as they say, and as you make perfectly clear..... you can take the bumpkin out of isaan, but you can never take isaan out of the bumpkin.

[Shutree]

I hesitate to use the word 'tourists', because the number of western residents upping sticks over the last five years must also be considerable.

I did not know that. Why are people moving on and where are they going?

About 12 years ago I visited Chiangmai from overseas as a tourist with my Taiwanese then-girlfriend. She was vegetarian and we found a few really good vegetarian restaurants around town.

[nidhogg]

Life in Hua Hin eh? Been there...seen that, will give it a big pass.

Tourist locations aside, Once you get out of those shithole tourist dumps like Pattaya, Hua Hin and sections of BKK restaurants .

Cannot speak for Hua Hin as not really ever been there. But there are amazing restaurants in both Pattaya and Bangkok.

[taxexile]

great food can be found in every city, town or hamlet in the country ........ and the local pages on f'book or line will tell you where they are.

(but there are times when only a big mac and a doughnut will do.)

[cyrille]

Cannot speak for Hua Hin as not really ever been there. But there are amazing restaurants in both Pattaya and Bangkok.

That is true.

I used to agree with headworks (?) on that point.

If you know your way around Pattaya the food options are very good indeed.

[cyrille]

Oh, and of course anyone talking down the culinary merits of BKK is talking tripe.

And entrails do nothing for me.