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Thailand’s hotels face more pain after European tour group asks to defer debt

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Thailand’s hotels face more pain after European tour group asks to defer debt | The Thaiger
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Hotels in Thailand, particularly in Phuket and some surrounding regions, have been hit with a double whammy. First the whole Covid-19-related wipe-out, now a cash-flow problem brought about after the TUI Group – an Anglo-German multinational travel and tourism company – has stalled repayments for hotel rooms.

The amount owed to Thailand hotels is believed to exceed 2 billion baht. TUI is in the top three tour operators in Thailand and brings in significant numbers of tourists from Germany, Scandinavia and Britain. There are at least 2,000 hotels in Thailand who partner with TUI.

TUI Group has sent letters to hotels asking to delay repayment on debt. That’s pushed 12 tourism associations in Thailand to file a complaint with the government asking for help to resolve the situation.

Regional hotel consultant, Bill Barnett from c9hotelworks.com says that hotel owners are in the midst of a perfect storm situation where their forward cash flow is virtually stopped due to forced closures and a significant issue of uncollected debt from a leading wholesaler.

“It’s a high-season hangover. Given the island’s (Phuket) shift towards mass tourism the reality that for a large number of hotels is over half of their revenue comes from wholesale groups like TUI Group. The unpaid rooms are for the January-March quarter.”

Different hotel operators receive slightly varied conditions from TUI based on their locations and contracts but most have been asked to accept 25% of the owed monies within 10 days after signing a new contract, while the remaining debt will be paid “when TUI’s business is back to normal”. The lack of any defined debt repayment timeline is another concern for the hotels who wallow around in financial limbo.

Bhummikitti Ruktaengam, president of the Phuket Tourist Association, told Bangkok Post that hotels usually receive payment within 30-60 days after guests check out.

“We understand tour operators are facing a financial shortfall because of the pandemic, but forcing us to comply with this new contract will rub salt in our wounds as we have also suspended operations and are avoiding layoffs.”

Angkana Tanetvisetkul, president of the Kata Karon Business Association, noted that other Europe-based tour operators are also asking for payment delays or instalment payments, “…but the deals are acceptable as there is a clear timeline that allows hotels to manage cash flow”.

But Bill Barnett noted that the tour operators are in deep financial problems of their own and probably have no choice but to pass their debt issues down the line.

“In the Covid-19 situation a number of these operators in Europe and elsewhere have staggering cash flow issues and are caught between paying debts from the high season and covering cancellation charges as well as refunding their travelling customers.”

“It’s a massive ‘Catch-22.’ The problem gets worse for hotel owners, as Online Travel Agencies are keen to refund customers to retain their reputation, and hotel groups through their distribution systems are doing the same.”

“Sadly hotel owners in Phuket are getting caught in the crosshairs of vested interests. Expect this stress to continue as the new-norm will probably result in negotiated settlements and ultimately debt write-offs by island hotels.”

SOURCE: Bangkok Post | c9hotelworks

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Thailand

Government is to allow people to use “legal” parts of cannabis in business

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Government is to allow people to use “legal” parts of cannabis in business | The Thaiger
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With intentions to promote cannabis as the country’s potential new cash crop, the government is preparing guideline to allow people to produce, sell or own cannabis and hemp. The permitted businesses, including textile, pharmaceutical, and cosmetics will be able to register to receive FDA permissions from January 29.

According to the FDA secretary-general, leaves, stalks, stems, roots, flowers, and seeds are not in a list of legal parts as they have high drug content (is there anything left?). Individuals are still not allowed to grow both cannabis and hemp without authorisation. Import and export of hemp must seek permission from the FDA Office as well.

Interested applicants in Bangkok can register at the FDA Office, while those in upcountry can contact the provincial public health offices. Courses and training about how to start a business using marijuana plants will be provided under the collaboration of the Education Ministry and Public Health Ministry.

However, a traditional medicine expert with Chaopraya Abhaiphubejhr Hospital, suggests that 6 groups of people should avoid food and drink with marijuana, including those with liver and kidney problems, heart disease patients, people aged below 25, pregnant women, breastfeeding mothers, and those taking stimulant medications.

SOURCE: Bangkok Post

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Thailand

Myanmar cancels Thai investment in the Dawei Special Economic Zone

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Myanmar cancels Thai investment in the Dawei Special Economic Zone | The Thaiger
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The Dawei Special Economic Zone Management Committee has announced the cancellation on the deep seaport project contract with Italian-Thai Development (ITD), one of Thailand’s leading industrial firms, by saying that they “lost confidence” in the company after long, controversial issues.

The Dawei Special Economic Zone Management Committee said that the Thai company has caused them “repeated delays, continuing breaches of financial obligations under the contracts and the concessionaires’ failure to confirm their financial capacity to proceed with development”.

They say they will look for new development partners to continue the projects. Currently, there are still no comments from ITD.

The Dawei Special Economic Zone is Myanmar’s initiative to encourage international investments into the country, but the project has been delayed because of funding problems and local opposition.

SOURCE: Thai PBS World

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Future of Thai department stores is being redefined

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Future of Thai department stores is being redefined | The Thaiger

While department stores have been a familiar destination for Thai people for many decades, CBRE, an international property consultant, is witnessing a decline in popularity and stunted growth, particularly in 2020 when Covid-19 adversely impacted the sector. CBRE believes that to adapt to e-commerce disruption and the changing consumer behaviour, department stores in 2021 (and beyond) will have to fine-tune their business model in terms of customer shopping experience, inventive activities and value-added programmes to continue their status as the second home for Thai shoppers.

Jariya Thumtrongkitkul, Head of Advisory and Transaction Services – Retail, CBRE Thailand explained… “While department stores offer shoppers convenience, saving them time with many varieties of goods grouped in different departments and allowing the shoppers to find and compare products and choose what they want, the traditional department store model does not fit the needs, lifestyle and behaviour of its shoppers anymore, especially the new generations.”

According to CBRE Research, the total retail supply in Bangkok as of Q4 2020 increased to 7.8 million square metres, a 1.16% increase year-on-year. Out of this, only approximately 3% was reported within the department store format. The department store market in Thailand is mainly dominated by two domestic retail giants, with Central Group and The Mall Group holding the largest market shares. They do not only concentrate in Bangkok, but have also opened department stores in many major cities throughout the country which allowed them to build bigger networks and grow their customer base.

In the past few decades, Japanese investors had also shown interest in entering the Thai market and offered local features that are well-known in Japanese department stores: simplicity, premium quality and services. However, with strong competition many Japanese department store operators have ceased their expansion plans. Some have exited the country due to the fierce competition against the local players, their performance in Thailand and the shrinking Japanese department store business, especially in overseas countries.

“The department store concept as a one stop shopping place is still in demand for certain groups of customers. However, with the e-commerce disruption and changing consumer behaviour, department store operators need to adapt their models, offerings and value-added services to their customers to cope with the challenging economic and market conditions.”

Adaptability of department stores can be highlighted into 3 main parts: customer shopping experience, inventive sales and marketing activities, and value-added programmes. While more and more younger generations prefer to shop online to save time and money, the brick-and-mortar store is still believed to be the second home for Thai shoppers. Department stores should be more agile in the era of e-commerce and adopt some technological innovations such as in-store automation and mobile payment solutions to reach the younger crowds.

Design is another aspect that plays an important part in customer shopping experience. Department stores can be more creative in remodelling traditional department store space into some ingenious and interactive space with a great design and right product portfolio mix for their customers.

The Mall Group, for example, has launched its first “Lifestore” concept at The Mall Ngamwongwan at the end of 2020 by redesigning and renovating its traditional department store space to enhance customer shopping experience and enjoyment.

The second part to be considered for the adaptability comprises inventive activities related to sales and marketing. The prices of products being sold in a department store are normally set high to cover the higher establishment and operating costs by operators, narrowing their target to only upper- to high-income customers.

Brand offerings may also no longer meet fast-changing customer needs since today’s shoppers have more choices in buying products online, not to mention the declining footfall due to the growth of e-commerce. CBRE Research has seen domestic players pushing hard to drive sales growth via numerous promotions, marketing campaigns and activities and collaboration with credit card companies during seasonal sales.

The third part consists of value-added programmes such as personal shopper, customer loyalty programme, on-demand solution and service personalisation, which have become a new trend as customers, including the aging population, are now more sophisticated and demanding.

The retail landscape has changed drastically in the past few years from various factors like technological advancement, consumer behaviour and preference as well as Covid-19. Cookie-cutter strategy will be a thing of the past, especially for department stores where the format and offerings have remained the same for decades.

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