Mid-priced hotels in Thailand struggle amid price-sensitive tourists

Hotels in the mid-priced and budget segments in Thailand faced significant challenges in maintaining room and occupancy rates in August, as tourists remained sensitive to prices.

Thienprasit Chaiyapatranun, President of the Thai Hotels Association (THA), reported that while the average occupancy rate for hotels nationwide improved to 61.8% from 58.4% year-on-year, it still fell short of the pre-pandemic rate of 64.7%. This information was revealed through the hotel operator sentiment index for August.

For hotels rated three stars or lower, the situation was particularly concerning. The average occupancy rate for this segment dropped to 49.3%. In contrast, hotels rated four stars or higher saw their occupancy rates surge to 68.8%.

The THA president noted that 40% of the 106 respondents had not fully resumed their revenue streams, and 20% believed a return to normalcy might not occur until the second quarter or second half of next year.

“Some 7% of respondents expressed doubt about ever fully recovering to pre-pandemic levels.”

Meanwhile, 31% of respondents indicated that they had surpassed pre-pandemic revenue levels, primarily due to increased room rates driven by investments in renovations and service upgrades.

Foreign tourists, especially from China, the Middle East, Europe, and other Asian countries, constituted more than 50% of the occupancy for these hotels. However, hotels that struggled to increase their selling prices attributed this to the price sensitivity of their target customers (63%), intense competition (55%), and a decrease in bookings (42%).

The average room rate for these budget hotels remained below 1,500 baht (US$45) per night, in stark contrast to five-star hotels, which charged over 5,000 baht (US$150) per night, and four-star hotels, with rates between 1,500 and 2,499 baht per night (US$45 and 75), reported the Bangkok Post.

The labour shortage issue in Thailand persisted from July, with around 40% of hotels unable to fill vacant positions. This issue was most prevalent in hotels located in the Central region, according to Thienprasit.