State of the Tourism Industry in Cambodia in 2023: Opportunities and challenges

The tourism industry in Cambodia is one of the key drivers of its economy, accounting for approximately 12% of GDP and employing over 600,000 people pre-pandemic, of which 60 per cent were women (source). The country is home to a wealth of cultural and natural attractions, including the world-famous Angkor Wat temple complex, as well as stunning beaches, rainforests, and national parks.

Overall, the state of the tourism industry in Cambodia in 2023 is positive. The sector is recovering from the COVID-19 pandemic and is expected to continue to grow in the coming years. In recent analysis, we find Cambodia’s economic prospects to be quite promising, with a forecasted growth rate of 5.5% in 2023 and a further uptick to 6.0% in 2024. This growth trajectory is underpinned by several key factors, as highlighted in the report released by the Asian Development Bank (ADB). (source)

However, the tourism industry in Cambodia and its key stakeholders could do more to diversify the industry and attract higher-spending tourists. In this article, we discuss the state of the tourism industry in Cambodia, as well as the opportunities and challenges facing the sector in the post-pandemic era. For more in-market information, view our business and investment resources here or contact us today.

What is the state of the tourism industry in Cambodia in 2023?

Jyotsana Varma, ADB Country Director for Cambodia, said that despite prevailing global economic challenges, Cambodia’s economy demonstrated resilience in 2022, primarily attributed to the ongoing recovery in the tourism sector. Varma points out that Cambodia’s economic outlook is favorable, characterized by robust growth, a narrowing current account deficit, and a controlled inflation rate projected at 3.0% in 2023 and 4.0% in 2024. (source)

The Asian Development Outlook (ADO) for April 2023 underscores the pivotal role of the tourism sector, which is expected to grow by an impressive 7.3% in 2023, followed by a slightly moderated growth rate of 6.8% in 2024. To maintain this positive trajectory, the report emphasizes Cambodia’s commitment to increasing green investments, a strategic move aimed at unlocking long-term growth potential.

In reviewing Cambodia’s economic performance in 2022, the ADO report reveals an estimated growth rate of 5.2%. This growth was primarily driven by rising external demand for Cambodian products and tourism services. The revival of demand in sectors such as food, accommodation, local trade, transport, and communications contributed significantly to this growth. Notably, international visitor arrivals saw a remarkable rebound, surging from approximately 200,000 in 2021 to about 2.3 million in 2022 as travel confidence was restored. (source)

However, it’s essential to acknowledge certain challenges and considerations. The report anticipates a deceleration in the growth of exports, particularly in the garment, footwear, and travel goods sectors, due to subdued external demand in key markets like the United States and Europe. Nevertheless, Cambodia’s industrial sector remains on a positive trajectory, thanks to policy reforms and trade agreements. Industrial output is expected to grow by 5.8% in 2023, accelerating to 7.8% in 2024.

Meanwhile, the construction sector’s growth is expected to remain relatively sluggish, while agriculture is projected to grow by 1.1% in 2023 and 1.2% in 2024, with a particular boost from crop production for exports.

What will be the challenges for the tourism industry in Cambodia in 2023?

In terms of potential risks, factors such as weaker growth in the United States and Europe, high levels of private debt, fluctuations in tourist arrivals and foreign direct investment, elevated energy prices, and potential disruptions in agriculture due to extreme weather events will play a big role in the future of the tourism industry in Cambodia in 2023 and beyond.

How can the tourism industry in Cambodia diversify its offerings?

As Cambodia strives to diversify and expand its tourism industry beyond the iconic Angkor Wat and the constraints of a short peak season, it can draw valuable insights from the experiences of neighboring countries in Southeast Asia. Let’s explore how regional success stories, such as Indonesia, Malaysia, and Thailand, have diversified their tourism offerings and how Cambodia can apply similar strategies.

What lessons can the tourism industry in Cambodia learn from regional nations? 

Looking beyond just the ‘honeypot’ of Angkor Wat, there are a number of lessons Cambodia can learn from its neighbors in the ASEAN.

Indonesia:

With its vast archipelago, it has successfully diversified its tourism portfolio by promoting ecotourism and celebrating its rich cultural diversity. Cambodia can follow suit by highlighting and promoting its stunning natural landscapes, such as the Cardamom Mountains, Bokor National Park, and Ream National Park, as well as its diverse culture, museums, and traditional villages. Indonesia has also encouraged public-private partnerships to develop tourism infrastructure and services. Cambodia can collaborate with private enterprises to create new attractions, accommodations, and experiences. This collaboration can be incentivized through mechanisms like tax breaks.

Malaysia:

Malaysia first began expanding its market by targeting niche markets such as medical tourism and culinary tourism. Cambodia can identify and develop niche markets that align with its strengths, such as wellness and spa tourism, adventure tourism in the Cardamom Mountains, or culinary tours showcasing its unique cuisine. Malaysia then promoted cultural festivals, such as Thaipusam and Hari Raya Aidilfitri, to attract tourists worldwide. Cambodia can promote its own cultural festivals and events, like the Water Festival or Bon Om Touk, as cultural attractions that draw visitors outside of peak season.

Thailand: 

Thailand has successfully rebranded itself as a year-round destination, showcasing different regions and activities throughout the year. Cambodia can follow this approach by shedding the traditional peak season label and promoting activities suited for each season, as mentioned earlier. Furthermore, investing in infrastructure, like Thailand’s extensive network of airports, can improve accessibility to different parts of Cambodia. Thailand invests heavily in marketing campaigns that highlight its diverse attractions. Cambodia can allocate resources to robust marketing efforts showcasing its year-round appeal and unique offerings, much like Thailand’s successful campaigns.

Incorporating these strategies, Cambodia can diversify its tourism industry and extend its appeal beyond Angkor Wat and the traditional peak season. By embracing its natural beauty, cultural richness, and vibrant F&B scene, Cambodia can position itself as an all-year-round travel destination, stimulate economic growth, and provide opportunities for its people. Specific initiatives, such as promoting festivals, niche markets, and infrastructure development, can be instrumental in achieving this transformation. The lessons from its regional counterparts offer valuable guidance on Cambodia’s path to unlocking its tourism potential.

How much has the tourism industry in Cambodia grown?

The sector is only second to the garment sector with the largest number of women employed. In terms of hotels and accommodation, as of 2020, a total of 1,028 hotels provide 44,428 rooms residing in 25 provinces across Cambodia.13 Another accommodation type is the guesthouse, in which 2,755 units are divided into 35,791 rooms are available for tourists.14 As the tourism industry grows and demand for accommodation spike over the year, the number of hotels and guesthouses also increase. In 1998, there were only 216 hotels and 147 guesthouses. It shows a growth rate of 386 percent and 1.740 percent for hotels and guesthouses, respectively. (source)

How has the tourism industry in Cambodia recovered following COVID-19?

The COVID-19 pandemic had a devastating impact on Cambodia’s tourism industry, with international visitor arrivals plummeting by over 90% in 2020. However, the sector has since begun to recover, with international arrivals reaching over 2.3 million in 2022, (source) an increase of over 1,000% from the previous year.

The recovery of Cambodia’s tourism industry is expected to continue in 2023, with the government forecasting international arrivals to reach 4.5 million. This growth is being driven by a number of factors, including the relaxation of travel restrictions, the increasing availability of flights to Cambodia, and the government’s ongoing promotion of the country as a tourist destination.

How has the government helped with the recovery of the tourism industry in Cambodia?

The government has taken proactive steps to initiate both short and long-term strategies aimed at revitalizing the tourism industry. These measures encompass a range of initiatives designed to support tourism-related businesses and bolster the sector’s overall resilience.

Among the measures implemented are tax and fee exemptions, along with financial support and loans extended to businesses operating in the tourism sector. Furthermore, there have been concerted efforts to facilitate vaccination campaigns for employees within the tourism industry and to enhance their capacity. Infrastructure development also forms a vital component of these recovery initiatives.

For example, a policy granting monthly tax exemptions to all hotels and guesthouses in Siem Reap was introduced in February 2020. This tax exemption policy, which specifically targets tourism-related accommodations, has been extended until March 2023, providing continued relief to the sector.

Additionally, in May 2022, the government launched the Tourism Recovery Co-financing Scheme (TRCS), amounting to $150 million. This financial support is derived from a $75 million contribution by the Royal Government of Cambodia (RGC), channeled through the Small and Medium Enterprise Bank of Cambodia (SME Bank), complemented by an equal $75 million contribution from Participating Financial Institutions (PFIs). Under this scheme, enterprises in the tourism sector impacted by the COVID-19 crisis have the opportunity to apply for loans from select financial institutions partnering with SME Bank. These loans come with concessional interest rates, further aiding the sector’s recovery.

The government is also investing in tourism infrastructure, such as roads, airports, and hotels. This investment is helping to make Cambodia more accessible and attractive to tourists. For example, the government is currently constructing a new international airport in Siem Reap, the gateway to Angkor Wat (read more)

To provide a structured framework for the revival of Cambodia’s tourism, the government has devised the Roadmap for Recovery of Cambodia Tourism during and post COVID-19. This roadmap serves as a comprehensive guide, with the overarching objectives of fortifying the tourism sector in the aftermath of the pandemic, mitigating adverse effects, and establishing Cambodia as a secure and appealing destination in the post-pandemic era.

The roadmap unfolds in three distinct phases:

• Phase 1: Crisis Management in the New Normal Phase and Planning for Recovery (2020-2021): During this initial phase, the focus was on navigating the challenges posed by the pandemic and laying the groundwork for future recovery efforts.
• Phase 2: Recovery of the Tourism Sector in Cambodia in the Post-COVID (2022-2023): This phase, currently underway, is dedicated to the active rejuvenation of Cambodia’s tourism sector, aiming for a robust and sustainable revival.
• Phase 3: Preparation for the New Future of the Tourism Sector in Cambodia (2024-2025): In this final phase, the emphasis will be on future-proofing the tourism industry, ensuring its resilience, and positioning it for long-term growth and success.

These phases collectively form a strategic roadmap that guides Cambodia’s efforts to revitalize its tourism industry, adapting to the evolving landscape shaped by the challenges of the COVID-19 pandemic.

What is the government planning for the future of the tourism industry in Cambodia?

The Ministry of Tourism (MoT) has launched a new strategic initiative titled ‘Uniting for a Collective Vision,’ with the goal of elevating Cambodia’s global standing as a premier tourism destination.

Minister of Tourism Sok Soken articulated that this strategic endeavor aims to streamline and amplify efforts toward transforming Cambodia into a globally competitive, sustainable, and inclusive tourist destination. (source).

Soken emphasized that adopting a shared language and mindset to plan, execute, and monitor this initiative will yield five significant advantages. 

Firstly, it fosters ‘clarity of purpose,’ ensuring comprehensive comprehension of the strategy’s essence, objectives, and action plan across all ministries. Secondly, it promotes ‘unified decision-making’ by employing a common language, leading to more efficient and effective decision-making processes grounded in a unified analytical framework.

Thirdly, it encourages ‘strengthened collaboration’ by establishing a platform for open dialogue and robust feedback, harnessing collective expertise and diverse perspectives within the ministry. Fourthly, it focuses on ‘trust-building,’ as shared language and information cultivate a sense of trust and alignment, enabling the team to rely on one another and enhance overall work performance.

Lastly, it targets the ‘synchronization of projects and activities,’ optimizing resource allocation, minimizing redundancy, and ensuring that endeavors complement each other.

How is the tourism industry in Cambodia developing in 2023?

While Cambodia’s tourism industry is recovering, there is still room for improvement. One of the key challenges facing the tourism industry in Cambodia is the need to diversify its offerings. Currently, the majority of tourists to Cambodia visit Angkor Wat and other cultural attractions. However, the country has much more to offer, including beaches, rainforests, and national parks.

The Cambodian government is working to promote these new tourism destinations, but more needs to be done to make them more accessible and attractive to tourists. For example, the government could invest in developing new infrastructure and tourist facilities in these areas.

Another challenge facing Cambodia’s tourism industry is the need to attract higher-spending tourists. Currently, the majority of tourists to Cambodia are budget travelers. However, the country has the potential to attract more high-end tourists by developing luxury resorts and spas, as well as offering more unique and experiential activities.

How can the tourism industry in Cambodia better capitalize on new tourism trends?

There are a number of ways in which the tourism industry in Cambodia could better capitalize on opportunities. Some of these are: 

• Focus on sustainable tourism. Sustainable tourism is a growing trend, with more and more travelers looking for ways to reduce their environmental impact. Cambodia can capitalize on this trend by developing sustainable tourism products and services, such as eco-lodges and community-based tourism programs.
• Promote Cambodia’s unique culture and heritage. Cambodia has a rich and unique culture and heritage, which can be a major draw for tourists. The tourism industry in Cambodia could do more to center the tourism industry in Cambodia around this culture and heritage through marketing campaigns and international events.
• Develop new and innovative tourism products and experiences. Cambodia needs to develop new and innovative tourism products and experiences to attract more visitors and keep them coming back for more. For example, there could be further development of new hiking trails in national parks, or create new cultural festivals.
• Improve tourism infrastructure and services. Cambodia could improve its tourism infrastructure and services to make it easier and more enjoyable for tourists to visit the country. For example, more investment could be channeled into developing better roads and transportation networks, and improving the quality of hotels and restaurants.
• Target specific tourist markets. Cambodia needs to target specific tourist markets with its marketing campaigns. For example, the tourism industry in Cambodia could target high-end tourists by developing luxury resorts and spas, or target eco-tourists by promoting sustainable tourism products and services.