Phuket has a reputation for pristine beaches, abrasive tuk tuk drivers, increasingly high crime rates and being the most expensive place in Thailand. This post attempts to answer why cost of living in Phuket is higher than anywhere else in Thailand.
It’s commonly reported that Phuket is 30-40% more expensive than the rest of Thailand. Hotels, house rentals, food and groceries are all said to be higher on the Island but nobody really seems to know why.
It should be noted at the outset that how expensive Phuket is, depends largely on whether you are a tourist or expat, and the standard of living you expect to have. It is still quite possible to live cheaply in Phuket.
Transportation Costs
One justification sometimes offered is that because Phuket is an Island, logistical and transportation costs are higher. That might make sense if goods had to be brought in via boat; however, Phuket is very well connected to the Thai mainland via bridges, so everything can be bussed in the same way it is in the rest of Thailand.
Perhaps its peripheral location could still be a factor behind high prices on the Island. The majority of manufactured goods need to be brought in from Bangkok which is 830 km away. Following that logic however, Trang and Had Yai should be more expensive than Phuket but they aren’t.
The reason Phuket has become so expensive is actually down to a combination of factors that need to be viewed together to make some sense.
International Reputation
Phuket has an international reputation as a tropical Island paradise. Ask anyone where the world’s best tropical Islands are and the answer will probably include Seychelles, Maldives, Fiji, Hawaii, Bali and Phuket. It’s up there at the top and since it has the name people are going to want to visit.
Even the Bali Bombings that killed 202 people didn’t keep the tourists away for very long, nor did the 2004 Tsunami which claimed 259 lives from Phuket.
The international demand for tropical beach holiday destinations far outstrips supply, and since the world population is getting larger but the planet isn’t, that’s a trend that is likely to continue.
Add to that the uncharacteristically Thai efficiency of the Thailand tourism authority in promoting Phuket as a holiday destination in addition to all the local hotels that have deals with travel agencies around the world and it’s safe to say that barring a civil war in Thailand, the tourists will keep coming.
Changing Trends
The type of tourist coming to Phuket has also changed. Arabs, Iranians, Indians, Russians and Chinese are all coming here in larger numbers. This is more than enough to offset a decrease in numbers from the traditional European tourists.
Greed / Business Sense
A basic principle in business is to charge for your product or service what the market will bear. You basically want to charge as much as you can without cheesing customers off to the extent that they’ll go down the road and buy the same product elsewhere and never come back to you. So the very short answer as to why Phuket is so expensive is that businesses are just charging as much as they can get away with.
High Property Prices
Also, with Phuket being an Island where physical land is less available than elsewhere, commercial property prices are higher than average. It’s only normal that businesses will pass the mark up onto the customers.
Corruption
Another cost that needs to be accounted for is bribery. It’s pretty much universally claimed that the local police are on the take. Whether it’s the tailor who wants to keep an illegal immigrant or two on the job, the bar that wants to stay open a couple of extra hours, or the hotel that wants to pump a little sewage into the bay, someone’s palm needs to be greased. Legal or not, this is a burden that businesses elsewhere aren’t obliged to carry, and represents another cost ultimately passed on to the customer.
Captive Market
Once tourists have landed in Phuket after paying for the flight and hotels and see things are more expensive than expected they are pretty much stuck with it. They can’t get a refund and go somewhere else, so they might as well enjoy it while they are here and if that means spending more than expected they’ve not much choice but to do it, after all it’s a tropical Island paradise!
Add to that many tourists only stay on the Island for a week which is not long enough to figure out how much you are spending in your own currency, so with a carefree holiday mentality alot of people just pay whatever.
Thai Mentality: Live in The Moment
Ok, so Phuket is a rip off but won’t that hurt its reputation in the long run? Probably not, because there are 7 billion people in the world and most of them are from China, so if there were only Chinese tourists in Phuket from now on, and they only came once each, there will still be more than enough visitors for the Island.
Let’s assume that this is going to hurt Phuket’s reputation long term. Can a business owner unilaterally lower their prices and see today’s profit dwindle in order to help the Island’s reputation ten years down the line?
Government Intervention
The government wouldn’t impose lower prices even if it could, because that would lead to lower tax revenues for them. So even though many people can see the current trajectory of Phuket is not sustainable long term, there is too much money involved for things to be reversed.
The sad truth is that everything comes to an end. If you are a long term expat or visitor to Phuket that remembers quiet and clean beaches, friendly people and cheap prices, those days are gone. You need to ask yourself what you moved to Phuket for, and if it isn’t there anymore it’s time to start looking for alternatives to Phuket.
