How did the tranquil road turn out to be a Mecca for travelers? On the brink of Thailand's economic boom in 1982, the Thai Government issued its policy to commemorate Bangkok's bicentennial anniversary and celebrate the Buddhist calendar's lucky year "2525", by launching festive ceremonies in Bangkok to bring in tourist dollars. Tourists poured in from around the world, causing Bangkok's hotels to overflow with bookings. The most spectacular festivities were performed in the Grand Palace.

Some backpackers, unable to get an overpriced room, successfully convinced local residents on Khao San Road to rent out vacant rooms in their houses, reasoning that, in return, the guest house owners could earn some extra income and it was convenient for them to travel to their destinations. The guest house business generated more profits than any amateur entrepreneur ever expected. Before long, more guesthouses, restaurants and souvenir shops sprouted along the road in full bloom.