BANGKOK — Thai Airways is trying to lure passengers from outside Asia with free domestic flights. Hotels on the resort island of Phuket are offering a fourth night free. And mountain lodges up north are offering free golf and spa pampering.

Facing its worst crisis in years, Thailand's tourism industry is going to great lengths to drum up business that has plunged thanks to political upheaval, the global recession — and now swine flu fears.

Foreign traveller arrivals have fallen 16 percent so far this year, while hotel occupancy across the country has dropped to 44 percent, down from 66 percent last year. Luxury hotels in Bangkok have even lower occupancy rates.

"I don't see any positive factors," said Kongrit Hiranyakit, head of the Tourism Council of Thailand. "Oil prices are increasing, influenza is spreading all over the world. Political protests are bad for the country's image."

He expects the tourism industry will lose about 200 billion baht ($5.6 billion), down by more than a third from about 540 billion baht last year.

To offset the drop-off in visitors from abroad, Thailand is promoting domestic tourism — and hotels are offering rock-bottom discounts to Thai residents. The government is extending a holiday next week to get Thais on the road. It has also cut airport landing fees and offered low-interest loans to small businesses catering to tourists.

But many fear recovery is a long way off for the industry that employs 2.5 million people and is a pillar of the economy, which has already slid into a recession.

So far, the slump has not led to big job losses, but many hotels have put employees on temporary leave without pay. Thai hotels and restaurants had 100,000 fewer seasonal workers in March than they did in February.

"There's been a push to hold on to people," said Dale Lawrence, communications director of the Bangkok-based Pacific Asian Travel Association. "Thailand has learned from past crises that if they let too many people go they are desperately short of trained people when the industry recovers."

For tourists who do visit the "Land of Smiles," there are plenty of good deals.

Thai Airways is offering its inbound passengers from Europe, North America, Australia and New Zealand a free round-trip domestic ticket through October.

Budget carrier AirAsia is selling tickets from Bangkok to points around the country for as little as $10 for trips after October.

As part of a nationwide campaign called "Amazing Thailand Grand Sale," Bangkok's glitziest shopping malls are slashing prices on many goods by 20 to 70 percent.

High-end hotels are offering extra incentives rather than cutting rates.

The Peninsula Hotel in Bangkok is offering a special package that includes a 3,500-baht ($100) bar and restaurant credit — and a free second night at any Peninsula hotel around the world.

The Mandarin Oriental Dhara Dhevi, a five-star resort in Thailand's mountainous north, includes a free round of golf and an 80-minute spa session with a two-night stay — but that still costs around $1,200 per couple.

Thailand's image as an easygoing tropical getaway has been marred by political upheaval.

The troubles started last November when anti-government protesters shut down Bangkok's two airports for a week, stranding thousands. Then in April, a rival group of demonstrators broke into a summit of Asian leaders in the beach town of Pattaya and later clashed with riot police in Bangkok's streets, leaving two dead.

The turmoil has calmed down and most of the country is quiet — save flares of violence in the Muslim insurgency in the far south of the Buddhist-dominated country. But the recent outbreak of flu in the region has added to the gloom.

Thailand has reported three swine flu deaths and some 1,300 cases, most of whom have recovered. The tally is one of the highest reported in the region but less than Australia's 3,500 swine flu cases and a fraction of the 21,000 in the United States.

"Visitors to Thailand from neighboring countries, while not bothered by politics, may be scared off by swine flu," Kongrit said. "Asian tourists are quite afraid to travel."

Business is normally slower from June through October because of rainy season, but this year is particularly sluggish.

The luxury hotels seem to be hit hardest, with many in Bangkok reporting occupancy of around 40 percent.

"Business is as bad as ever," said tailor Nuttha Lertthasanawong, sitting in her shop across from the top-flight Mandarin Oriental Hotel. Before the slump, 50 customers, primarily from Europe, would order suits on any given day.

Now, "some days just two people come in — and they are just looking around," she said.

Budget travel hasn't suffered as badly, with beer stalls and hostels along Bangkok's Khao San Road and other havens for backpackers still bustling.

"We are still fully booked every day and are offering no special deals," said Bern Poednie of Julie's Guest House in the northern city of Chiang Mai.

Authorities are hoping that Thai vacationers will help fill the gap by travelling around the country.

"The panic of the flu has made a lot of Thai people nervous to travel overseas," said Suraphon Sawetsaranee, deputy governor of the government-run Tourism Authority of Thailand. "Taking vacation is a way to get away from the economic and political crises."