Digging into the Phuket hotel data

by Bill Barnett, c9hotelworks

As Phuket’s hotel operators and owners face a disruptive 2019, we thought it was time to do a deep dig into the island’s accommodation performance metrics.

Global hospitality data and analytics group STR was the logical resource, so we spoke to their Area Director Asia Pacific, Jesper Palmqvist. The following are key takeaways from the highly focused look at Thailand and Phuket’s hotel sector:

To set the stage for the declining numbers this year it’s important to cast an eye backward into 2018 and understand the first quarter of 2018 for Thailand including Phuket well eclipsed the previous two years. Call it a high water mark, but it’s important to understand the benchmark was set exceedingly high.

For Mainland Chinese arrivals into the country 2017 by percentage topped a three-year trend (2016-2018) and in fact if for the first four months of this year, 2019 is above the same period is 2017.

By now, you have to be wondering what this all means? In a nutshell, one could say that perhaps market expectations from 2018 have created unrealistic expectations and that after a long night of binge drinking, the current hangover is somewhat self-imposed.

Still, Mainland Chinese as of the first four months of this year, represents 40% of the international market, with Russia at 12% and 5% for Australia. On the airlift front yes, three airlines have ceased service but five more have entered the fray.

As we have written in our new Phuket Hotel Market Update Mid-Year Edition, RevPAR (Revenue Per Available Room) for the high-performance months of January through April 2019 was down 12%, but again be reminded this is a year-on-year comparison against the epic 2018 uptick.

What has to cause concern though and is a tell-tale sign of a slowdown is that over a 12-month period the market has registered a consistent pattern of lower demand. That reality is now a fact, and one hoteliers are now coming to grips with.

Another question mark was performance in May this year which despite being a traditional low-period, was even more pronounced. Is this the new normal, with a return to more seasonal trading swings or just a blip in trading? Only time will tell.

One interesting takeaway is that softening rates market-wide have largely followed demand drop but for properties outside Patong the rate swing has generally been more significant. On a seasonal scale, Phuket hotels in the three months of December through February have over the past five year even able to gain high rates, particularity in periods when occupancy hits 80% an above, hotels have been able to cash in.

The summer months of July and August this year are capturing everyones interest and while demand is expected to rise, it will be hard for rates to recover.

One of STR’s key comparisons is to Phuket’s symbiotic resort cousin Bali. The Island of the Gods has seen occupancy move upward the past few years after a period of tremendous new supply growth. There is only a 2% occupancy difference presently. If you go back three years, Bali trailed by 13% lower occupancy so there is little doubt that Southeast Asia is a more competitive landscape.

Looking into the crystal ball there are signs of tourism markets across the region softening in 2019. Where are the opportunities? Source markets like India, MICE and niche segments and the shoulder season. Though there is growing apprehension what October will bring, operators and owners need to understand the need for improved management and sales and marketing strategies in the year ahead.