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Phuket hotels fighting for their lives as domestic tourism fails to support the island

Bill Barnett

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Phuket hotels fighting for their lives as domestic tourism fails to support the island | The Thaiger
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In the wake of last weekend’s ministerial talkfest and discussions with local industry players on the island, Bill Barnett paints a bleak picture of a tourist island in freefall. All the shops, restaurants and hotels can’t remain empty, or merely keep their doors open with a handful of domestic customers, forever.

Phuket’s hotel industry is reaching breaking point and drastic economic support from the government will be needed for it to survive the high season. The warning from a slew of industry leaders who fear the island has reached a crucial turning point.

In the wake of the controversial “Phuket Model” international travel reopening scheme, reality is biting back as hotels in Thailand’s leading resort island are unable to sustain operating viability based on domestic tourism.

According to the Airports of Thailand, passenger arrivals at the aviation gateway have plunged 65% year-on-year from January through July of this year.

Phuket hotels fighting for their lives as domestic tourism fails to support the island | News by The Thaiger

What is clear is that the 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break-even or even be cash-flow positive with only domestic demand. This realistically could set the scene for 50,000 job losses in the hotel sector this year if there’s no support forth coming or international visitors are not allowed in.

One of the green shoots is the Alternative Local State Quarantine program, with over 60 island properties applying. While this program is meant to emulate the ASQ program in Bangkok, given there are no direct international flights to Phuket, the government needs wider support of a return of international travellers at a local level and implement inter-ministerial coordination before it could materialise. But this may take months.

Anthony Lark, President of the Phuket Hotels Association that represents 78 hotels in Phuket said: “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”

Phuket hotels fighting for their lives as domestic tourism fails to support the island | News by The Thaiger

With tourism being the lead economic indicator in Phuket data newly released by hospitality consulting group C9 Hotelworks reveals the Covid-19 impact on the hotel development pipeline with 69% of hotels now being delayed or put on hold. Looking at the economic consequences, at the end of 2019, there were 1,758 licensed accommodation establishments on the island and today incoming projects stand at 58 hotels, representing a 19% rise in supply with 16,476 additional rooms planned.

C9 Hotelworks Managing Director Bill Barnett said: “Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry. The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline. This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels remaining incur losses day in and day out.”

In terms of updating the Phuket hotel situation on the ground, there continues to be much controversy and a lack of national and local consensus over the proposed “Safe and Sealed’ sandbox long-stay program. While a stark warning was issued last week by the Bank of Thailand over the potential disruption to the heavily tourism-dependent country, the fate of Phuket’s coming high season remains very challenged.

Citing a way forward C9’s Bill Barnett commented: “Any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, but the more critical issue is how hotels can fight for their lives in the current state of limbo.”

Phuket hotels fighting for their lives as domestic tourism fails to support the island | News by The Thaiger

Speaking about Phuket’s current situation Anthony Lark added: “Firstly, greater proactive dialogue between the public and private sector has to be undertaken. We can’t simply say we are now in unknown territory forever. Steps must be taken and a single voice formed.

“Secondly, the Bank of Thailand has to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. Tourism is a human endeavor and without protecting and nurturing our Thai workforce there will be no recovery.”

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27 Comments

27 Comments

  1. Avatar

    Perceville Smithers

    September 8, 2020 at 7:29 am

    Who didn’t see this coming?

    • Avatar

      J West

      September 8, 2020 at 8:38 pm

      Thailand has priced itself above global alternatives, economic/supply/demand should prove a valuable roadmap towards a future for Phuket tourism. If the industry can only support itself by gouging foreigners it cannot survive….period. Time for a rethink. Time for a realistic consolidation. Thai industry must move to meet the market.

  2. Avatar

    Gary

    September 8, 2020 at 7:34 am

    Other countries are now being pushed into realising that you cannot just put your head in the sand and hide from this virus, it
    seriously effects only a very small part of the population and even then not fatally, it must be learnt to lived with, back to normal with sound guidelines for the vulnerable.

    • Avatar

      Don R

      September 11, 2020 at 1:09 pm

      Indeed. The virus isn’t going away. The heavy-handed response strategy we’re seeing is not supported by science, but an invention of the media. The longer this goes on, the more damage they do to young and poor people. Really sad stuff.

      • The Thaiger & The Nation

        The Thaiger & The Nation

        September 11, 2020 at 2:55 pm

        The “heavy-handed response strategy” is because of “an invention of the media”? Don you give us far too much credit. That government’s work out their response to the threats of Covid-19 by combing through the news each day is a ludicrous and simplistic assertion, not backed up by any evidence. We are merely reporting the many faces of the pandemic as best we can, whilst avoiding the rhetoric and keyboard warriors who think the media are an easy target and responsible for all the evils of the world.

        • Avatar

          Rinky Stingpiece

          September 12, 2020 at 1:10 am

          Oh but you know you are though… democratic governments all over the world (with a few notable exceptions) march to the media’s beat, but sure, we’ll give you the benefit… Thai politicians probably don’t refer to a regional English-language online thingy so much. 😀

        • Avatar

          Don R

          September 16, 2020 at 11:30 am

          The suggestion that the media hasn’t fueled a panic is ludicrous. Media as a whole has failed to provide objective coverage with historical context.

          If you want to serve your readers, I suggest you spend the next few decades covering the consequences of the panic:

          -shorter life expectancy for young poor people
          -small businesses and landlords going bankrupt, being bought up by commercial real estate firms
          -greatest rise of authoritarianism since the 1930s

  3. Avatar

    suchart

    September 8, 2020 at 8:29 am

    Instead of buying submarines, subsidize the tourist industry, until the pandemic is over.

  4. Avatar

    Mike

    September 8, 2020 at 10:07 am

    I want the best for Thailand, Im married to a Thai. I want to retire in Thailand and hopefully start a family. But didnt PM Prayut say Thailand can easily absorb any shutdown and its effects with a surplus budget from over the years? Just remembering a story from a top Thailand internet news outlet BP.

    • Avatar

      Perceville Smithers

      September 9, 2020 at 12:50 pm

      I left right on time (Aug 2019 – 10 Mar 2020)

    • Avatar

      Perceville Smithers

      September 9, 2020 at 12:55 pm

      Can’t open up for intl tourism too soon and save face.

  5. Avatar

    Toby Andrews

    September 8, 2020 at 10:20 am

    This is like having a large empty hotel with a vicious dog in reception.
    Nobody can book in because of the vicious dog.
    The management are too stupid to take the dog away.
    The dog is the Thai government.

  6. Avatar

    Preesy Chepuce

    September 8, 2020 at 11:27 am

    To be honest, it seems like a good thing to stop the development pipeline on an overdeveloped island, where environmental degradation has become a problem.
    The prices of hotel rooms and property prices have spiked way too high, and need to be forced back down to earth.
    Most beneficial of all is forcing the island to diversify its economy away from tourism, which is way too dominant at 90%, and to return to the Thailand 4.0 strategy of becoming a computing and IT hub – a sector that is doing just fine in the pandemic. It’s logical to switch from tourism to technology in this situation, and the retraining needed will require changes to visa bureaucracy and direct flights to and from Phuket to bring in skilled farang to train and invest and create new jobs and businesses to replace the tourism businesses that are no longer viable.
    Governments around the world should not be propping up nonviable businesses with taxpayer money, they should be investing in technology training and facilitation.

  7. Avatar

    Ray W.

    September 8, 2020 at 1:45 pm

    An easy fix would be to open the boarders, recognize that the early lock down has allowed the medical capacity to now handle likely outbreak surges that could come, get the economy moving again, stop pretending you can tax and subsides your way to stability, and manage risk – not hide from it! You know, like a grown up with big boy pants and everything.

  8. Avatar

    factsnotfiction

    September 8, 2020 at 5:33 pm

    50,000 job losses in the hotel sector this year, and counting. Not to mention all of the other job losses throughout numerous other businesses all over Thailand. This is heartbreaking. And for what! A virus that has a 0,003% fatality rate? Which 99% of the deceased have to do with 2 to 3 OTHER FACTORS, which we call “underlying suffering” / comorbidities. A virus that has a scientifically established survival rate of 997/1000, which is again a 0,003% fatality rate? This nonsense needs to stop now! Seriously!

  9. Avatar

    James

    September 9, 2020 at 1:12 am

    65% down. How about 99% down.

    I just returned to England from Phuket after being there for 7 months.

    It was empty for the last four months. Most hotels and shops are closed.

  10. Avatar

    Mel

    September 9, 2020 at 12:45 pm

    But they could not let people on tourist visas stay. No. Though we are willing to pay for visa extensions and spend a lot of money here.

  11. Avatar

    Issan John

    September 9, 2020 at 3:51 pm

    “This is like having a large empty hotel with a vicious dog in reception.
    Nobody can book in because of the vicious dog.
    The management are too stupid to take the dog away.
    The dog is the Thai government.”

    Alternatively, @Toby, it’s like having a country which is rabies-free and you want to allow tourists to bring in their “vicious dog” which has rabies and permit it to attack and kill people in and outside the hotel, and spread rabies just so the hotel can make a profit.

    Except, unlike rabies, there’s no vaccine for Covid-19 and it spreads invisibly and exponentially.

    Fortunately most Thais take a very different view.

    • Avatar

      Sami

      September 10, 2020 at 1:08 am

      Such characters with s mentality like yours will definitely drive the economy further deep into the gutters…learn to face facts and view things from a broad-minded perspective and not the narrow mind you are goading about

  12. Avatar

    Issan John

    September 9, 2020 at 4:45 pm

    “A virus that has a scientifically established survival rate of 997/1000, which is again a 0,003% fatality rate? This nonsense needs to stop now!”

    Interesting maths.

    If the “survival rate” was 997/1000 that would be a fatality rate of 3/1000 or 0.3% (not 0.003%), so you’re out there by a factor of one hundred.

    But it’s not 3 in a thousand or 0.3%. In the USA, with 6,350,000 cases and 190,000 deaths, that’s 30 deaths per thousand cases; in Thailand it’s rather less at 17 per thousand (58 deaths).

    This nonsense really does need to stop now.

    Seriously.

    • Avatar

      Don R

      September 11, 2020 at 1:20 pm

      Yeah, the fatality rate is about 0.3% and probably less.

      As for the 6.5 million cases in the US, it’s estimated there could be 10 times more that only had mild symptoms or no symptoms.

      So the virus is not the catastrophe the media makes it out to be. The catastrophe is the heavy-handed response that will shorten billions of lives, mostly among younger people.

      Time to put on the big boy pants and accept the small risk.

      • Avatar

        rinky stingpiece

        September 15, 2020 at 1:23 am

        Surely it’s really all about the underfunding of health services? The justification used for most lockdowns and travel restrictions is the lack of ICU beds… so the solution is surely to just build more ICU facilities, and absorb that minority?!

        • Avatar

          Don R

          September 16, 2020 at 11:24 am

          ICU bed shortages are common in the US even during regular flu seasons. Again, it’s not the catastrophe the media makes it out to be. New ICU units can be setup if needed. Patients can be moved to different facilities. They never really run out.

  13. Avatar

    EdwardV

    September 10, 2020 at 2:45 am

    An economic collapse isn’t linear, it’s a downward slope. It doesn’t appear too bad as people draw down their savings, sell off assets, keep their job at reduced wages and or hours. However as it continues it picks up speed and the economy starts to run out of credit and cash. The downward speed picks up as places that tried to stay open can’t and finally close. You can see the homelessness increasing, the desperation as people can barely afford food. As the crime starts to increase. There is an article in the Nikkei Asian Review today about how the real crisis at this point in time isn’t the virus or the demonstrators, it’s the Thai economy. How the Thai government has running out of time to save the economy. Creating a plan for a few thousand tourists isn’t going help much. I hope I’m wrong.

  14. Avatar

    Junk Man

    September 11, 2020 at 4:08 pm

    Let Phuket bleed and continue to bleed. Rip off scam capital of the world.

  15. Avatar

    Halim

    September 13, 2020 at 4:12 pm

    Phuket always been seeing for foreigner only and the way they treated thai peoples and overpriced rates, I just can say, what goes around come around, Phuket deserve it

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Read more headlines, reports & breaking news in Phuket. Or catch up on your Thailand news.

Bill Barnett has over 30 years of experience in the Asian hospitality and property markets. He is considered to be a leading authority on real estate trends across Asia, and has sat at almost every seat around the hospitality and real estate table. Bill promotes industry insight through regular conference speaking engagements and is continually gathering market intelligence. Over the past few years he has released four books on Asian property topics.

Business

Thai Vietjet introduce new “Deluxe” product for domestic routes in Thailand

Maya Taylor

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Thai Vietjet introduce new “Deluxe” product for domestic routes in Thailand | The Thaiger
PHOTO: www.vietjetair.com

Thai Vietjet, which currently operates 13 domestic routes within Thailand, is launching a new “Deluxe” product, starting from 999 baht. The “Deluxe” tickets will include 7 kilos of carry-on and 20 kilos of checked luggage (currently an additional charge), as well as seat selection and priority check-in. Date, route and flight changes are also permitted 1 time, free of charge.

Deluxe fares are available for travel between October 6 and December 31, excluding public holidays, on all domestic routes operated by the carrier. The 999 baht price tag does not include taxes and fees. Thai Vietjet is adding a number of new routes to its current network, including Chiang Rai to Hat Yai from November 1, and Bangkok Suvarnabhumi to Hat Yai, Khon Kaen, Nakhon Si Thammarat, Ubon Ratchathani, and Surat Thani from November 4.

The airline’s full network of domestic routes can be viewed at www.vietjetair.com. It also operates a number of international routes between Thailand and Vietnam and between Thailand and China, but not at the moment.

SOURCE: Chiang Rai Times

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Economy

Vietnam’s booming manufacturing sector reduced to a trickle as world pandemic kills demand

The Thaiger

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Vietnam’s booming manufacturing sector reduced to a trickle as world pandemic kills demand | The Thaiger

Vietnamese finance officials are downgrading expectations for a recovery of the south east Asian nation’s economy in 2021. The normally fast-growing gross domestic product in 2020 has stalled due to a huge drop in local and global demand, and the absence of international tourism. The booming economy, growing at an average of 6% per year since 2012, will struggle to reach a growth rate of 2% this year.

Fuelled by manufactured exports, the Vietnam economy has dropped back to a trickle. The Asian Development Bank estimates that this year’s GDP growth could be as low as 1.8%. The Vietnamese factories, that usually crank out shoes, garments, furniture and cheap electronics, are seeing dropping demand as the world’s consumer confidence drops dramatically.

Stay-at-home rules in Europe and America are keeping are keeping people away from retail stores. And despite the acceleration of online retail, many of the consumers are emerging from the Covid Spring and Summer with vastly reduced spending power.

The headaches of 2020 are also challenging Vietnam to maintain its reputation as south east Asia’s manufacturing hotspot. Rising costs and xenophobic foreign policy have put China ‘on the nose’ with some governments, complicating factory work in China, whilst other south east Asian countries lack infrastructure and are incurring higher wage costs.

One Vietnamese factory operated by Taiwan-based Pou Chen Group, which produces footwear for top international brands, has laid off 150 workers earlier this year. There are hundreds more examples of the impact of falling demand in the bustling Vietnamese manufacturing economy.

Vietnam’s border closure is also preventing investors from making trips, setting up meetings and pushing projects forward. Those projects in turn create jobs, fostering Vietnam’s growing middle class. Tourism has also been badly affected by the restrictions on travel. “International tourism is dead,” says Jack Nguyen, a partner at Mazars in Ho Chi Minh City.

“Inbound tourism usually makes up 6% of the economy.”

“Things will only pick up only when the borders are open and there’s no quarantine requirements. Who knows when that’s going to be.”

A mid-year COVID-19 outbreak in the coastal resort city Danang followed by the start of the school year has reduced domestic travel, analysts say. Some of the country’s hotels are up for sale as a result.

“Recovery could take 4 years.”

The Vietnamese Ministry of Planning and Investment is now warning that global post-pandemic recovery could take as long as 4 years, perhaps more.

Not that foreign investors in the country are pulling out. Indeed, many are tainge a long-term view that Vietnam’s underlying strengths will outlive Covid-19. Vietnam reports just 1,069 coronavirus cases overall.

SOURCE: VOA News

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Thailand

Thai Air Asia returns to Suvarnabhumi in addition to its Don Mueang hub

The Thaiger

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Thai Air Asia returns to Suvarnabhumi in addition to its Don Mueang hub | The Thaiger

Thai AirAsia is spreading its Bangkok wings and opening up a secondary hub at the main Suvarnabhumi airport (BKK), to help broaden its attraction and bolster its bottomline. Thai Air Asia was the first airline to head back to the moth-balled Don Mueang in 2012 to re-establish the older airport after all the airlines moved across to the new Suvarnabhumi and discount airlines were seeking a lower-cost base.

Although Thai Air Asia carried 22.15 million passengers last year, this year’s total will fall a long way short, just 6 million for 2020 up to date. Under the new set up, Thai AirAsia will have resumed nearly 90% of its pre-Covid domestic services, a total of 109 daily flights to 39 destinations. There will be 97 flights from Don Mueang Airport and 12 from Suvarnabhumi Airport.

With only a handful of international traffic, Suvarnabhumi officials are keen to re-kindle revenue for the massive airport and have struck a deal with Thai Air Asia to trial operations from BKK. They will be the only domestic carrier to operate flights from the two airports.

If the 2 month trial at Suvarnabhumi is successful, Thai AirAsia plans to add another plane to the BKK fleet by the end of the year. At this stage the trial is only approved up to the end of November.

Thai Air Asia have been concentrating on their ‘bus’ model to ferry passengers from the terminals to their aircraft waiting on remote airport aprons, and visa versa, to avoid some of the landing charges and using the sky-bridges. Some passengers have been complaining about the long trips in crowded buses, wild rides and over-enthusiastic air conditioning, whilst being told to strictly adhere to social distancing.

This week the Malaysian parent company Air Asia, announced the introduction of a ‘super app’, in an attempt to off-set the significant financial losses brought about by the Covid-19 pandemic. The mobile application shuffles Air Asia’s model as a flight and accommodation provider, to a broader platform of complimentary services. The app will offer users a variety of options, including digital payment services, delivery services, and an e-commerce platform. Air Asia Chief Executive and founder, Tony Fernandes, says the idea for the app was floated prior to the pandemic, but Covid-19 hastened its development.

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