Competition drives down hotels' earnings

At a glance, Thailand's hotel industry has staged a big improvement over previous years when the country was beleaguered by a series of bad news, mainly political unrest and then the floods last year.

About 10.5 million foreign tourists visited the Kingdom during the first half of this year, up 7.6 per cent year on year, led by 1.1 million Chinese nationals, according to the Tourism Authority of Thailand. The agency plans to boost its forecast for full-year 2012 to 20.5 million arrivals generating revenue of Bt846 billion for the Thai economy. Even while facing risks from the worsening financial crises in Europe and political uncertainty at home, amid other negative factors, the statistics look impressive, and this should mean handsome profits for the hotel industry, which generates 30 per cent of Thailand's tourism revenue. However, because of the large supply of rooms, hotels cannot raise room rates, and compared with hotels in neighbouring countries, Thailand's are operating with the lowest average rates. According to data from the Pacific Asia Travel Association (PATA), Thailand was the most outstanding destination in Southeast Asia in the first half. Of 36.79 million visitors to the region, Thailand attracted 10 million, even as the global financial crisis made long-haul travel from Europe and North America less attractive. In the period, Singapore drew 5.92 million tourists, Malaysia 9.43 million and Vietnam 3.36 million. Based on data from STR Global, accumulated by PATA, in 2011, against the US$140 (Bt4,400) average daily rate (ADR) of hotels in Southeast Asia, Thailand's was the lowest in the region at $107. By comparison, Singapore, topping the list, showed ADR of $228. Malaysia's ADR was $111, Vietnam's $130, and Cambodia's $125. Singapore, though fetching the highest average room rate, also enjoyed the highest occupancy rate, at 84 per cent in 2011, against 63 per cent in Thailand. Singapore's occupancy rate rose even higher, to 86 per cent, during the first five months of this year. The high number of rooms in Thailand may be a contributing factor. According to the National Statistical Office, in 2009, Thailand had 303,154 rooms operated by 5,420 hotels and guest houses. Of that total, 58,586 rooms were in Bangkok. The more rooms, the more competition in terms of pricing. On revenue per available room (RevPar), which defines hotels' financial success, Singapore's jumped from $158 in 2010 to $192 in 2011 and $222.5 in the first five months of this year. In 2011, Thailand's RevPar was $67, compared with $55 in the previous year. Hotel operators in Thailand and throughout the Asia-Pacific region are optimistic on the outlook of the industry. According to the Tripadvisor Industry Index, 71 per cent of operators in the region believe their properties will be more profitable. According to Tripadvisor, the world's largest tourism website, Thailand is expected to be be ranked third in the world in terms of hotel-related job creation. Its survey showed that 31 per cent of hotel operators here planned to recruit more workers in the next six months, followed by 30 per cent in Malaysia. However, higher returns will be ensured only with proper rules in place. Thai Hotels Association president Surapong Techaruvichit acknowledged that though the average occupancy rate of Thai hotels increased by about 10 per cent in the first seven months of this year, room rates will not change much because of oversupply, particularly from unregistered hotel and guest-house operators. He urged the implementation of strict zoning. Bali, a long-time tourist destination, is now carrying out a feasibility study on a zoning system. With 62,000 rooms that enjoy an average occupancy rate of 60-65 per cent, Bali foresees that more investment will arrive after the Asean Economic Community is implemented in 2015. Without controls, this could cause environmental problems to the island, without generating true returns for the people. Will Thailand follow in its footsteps soon?

Sourced: nationmultimedia