In the past decade, the hostel industry was popular in Thailand especially in Phuket due to the growth of tourism. The heritage shophouses in Phuket Old Town were turned into hostels to serve backpackers and other tourists fascinated with local culture. However, the outbreak of COVID-19 caused an economic crisis in the tourism industry, causing the industry in Phuket to become sluggish. This paper aims to find the factors in the shutdown of some Phuket shophouse hostels during the pandemic, resulting in the deterioration of the heritage buildings and the deserted old town. The research method is to survey the number of operating and closed heritage shophouse hostel operations in Phuket Old Town. The social and economic issues were analysed by using in-depth interviews of selected hostel owners, relevant people, and secondary data. The study found that restrictions on tourism imposed by the relevant authorities causes a shortage of budget to run the business and renovate the properties. The closed shophouse hostels cannot get the government support because they had not registered for a hotel license. To get a hotel license, the hostels must renovate the buildings according to the relevant Ministerial Regulations. However, the regulations did not consider the existing elements and structures of heritage buildings; they affect the values and authenticity of the buildings and the Old Town, prompting the deterioration of these places. As a result, to preserve architectural and historic values of Phuket shophouses and to keep the building in use, a new approach of adaptive reuse in hostels should be provided following the relevant regulations for the safety and comfort of the building users, and the local activities.