Australian tourists in Phuket should be wary of extortion gangs, some of which are in cahoots with local police.
Australian Ambassador James Wise and his British counterpart, Mark Kent, have joined a Thai Ministry of Tourism campaign to tackle tourist scams on Phuket.
Up to 25,000 Australians visit Phuket each month, with Christmas and New Year the peak of the tourism season.
The main scams involve taxi and jet-ski operators in Phuket and the seaside resort town of Pattaya.
Mr Wise said travellers needed to be on their guard when they hired jet-skis or motorcycles.
"Consider the implications if it is stolen or damaged. Foreigners are commonly detained by police until compensation, often thousands of dollars, is negotiated between the parties."
Mr Kent said travellers should be cautious in "crowded markets, tourist sites, bus or train stations and festivals".
"It is best to avoid isolated neighbourhoods, shortcuts, narrow alleys and poorly lit streets, especially late at night," he said.
Larry Cunningham, Australia's honorary consul in Phuket, said scams and criminality had increased to such an extent that expatriates wanted to leave the island.
Mr Cunningham said young travellers were specially targeted by gangs and on occasion by local police.
In one incident, a young Australian man was involved in a minor traffic accident when riding a rental bike. He was told by police an injured man's condition was serious and was forced to pay thousands of dollars in compensation.
An investigation found the Thai man had minor injuries.
Mr Wise said travellers should have comprehensive insurance before setting off from Australia.
"If you can't afford travel insurance, you can't afford to travel. Medical costs in Thailand can run into many thousands of dollars," he said.
But even insurance may not be enough.
In June, a 27-year-old New Zealand man, Sean Kenzie, was badly injured in a motorbike accident. Despite paying for insurance before travelling, the coverage excluded medical expenses arising from motorbike accidents.
An appeal was called on to help him pay a $A20,000 medical bill for injuries including a split liver, punctured lungs, broken ribs, as well as surgery to reattach shoulder muscles and jaw bones.
Mr Cunningham was blunt: "Don't hire a motorbike - period."
Diplomats warned travellers never to hand over their passport as a guarantee to a hiring company.
"If a dispute arises, it can be extremely difficult or impossible to recover you passport until compensation is settled," Mr Wise said.
Lutzi Matzig, managing director of Indochina tour operator Asian Trails, says a concern in Phuket is overcharging by taxis.
"The local taxi mafia who grossly overcharge the tourists - charging them 500 baht ($A16) for a trip which should cost 20 baht or 50 baht ($A0.65 to $A1.60). The local taxi mafia is pretty bad in Phuket," Mr Matzig said.
Australians have also been warned to be cautious about attending full moon parties where criminals and corrupt police prey on young travellers.
"Australians have been arrested, assaulted, raped, injured or died as a result of incidents at full moon parties, often because they have drunk too much, taken drugs or had their drinks spiked," Mr Wise said.
In 2011 ,the Australian Department of Foreign Affairs and Trade (DFAT) reported 69 deaths in Thailand.
Reports say an average of 50 Australians die each year in Phuket due to natural causes, traffic accidents and accidental drug overdoses.