Thai hotels hit hard as property tax breaks end

Thai hotels are facing an uphill battle this year as the government pulls the plug on property tax reductions and energy prices soar, sending operating costs skyrocketing by 10%.

Marisa Sukosol Nunbhakdi, the President of the Thai Hotels Association (THA), reveals the dire consequences for hotel owners who enjoyed a 90% tax discount in 2020-21, only to see it evaporate to 15% last year.

“Despite a surge in inbound tourism, many hotels are struggling to boost profits due to the relentless pressure of rising costs.”

The end of property tax reductions and surging energy bills, driven by increased consumption from hosting more guests, have hit hotels hard, leaving them with slimmer profit margins.

Only 50% of hotels managed to achieve a higher average daily rate than pre-pandemic times, mainly concentrated in the four-star segment and above, according to Marisa. A recent survey by THA and the Bank of Thailand paints a grim picture, revealing that nearly 80% of hotels reported revenue lagging behind 2019 levels, with only 20% expecting a full recovery this quarter.

Furthermore, 21% of respondents believe it will take until next year to reach revenue levels seen in 2019. However, there’s a glimmer of hope as 48% of four-star and higher-rated hotels express confidence in a surge of foreign guests in the first quarter, compared to a meagre 31% for three-star and below hotels.

The situation is not uniform across regions. Marisa projects that hotels in Bangkok and Phuket will outshine others in the first quarter, while properties in Pattaya and eastern provinces gradually recover. However, Hua Hin and Chiang Mai, which predominantly target locals, may struggle with an occupancy rate hovering around 50%.

Profit imbalance

The THA president highlights the challenges faced by hotels relying heavily on revenue from food and beverage banquets, citing increased costs from hiring more casual staff under the new daily minimum wage, reported Bangkok Post.

As a ray of hope, she suggests that the full rate for land and building tax might lure landlords and prospective hotel builders to reconsider their projects, hoping to capitalise on the anticipated tourism revival. However, Marisa warns that the outlook for Thai hotels in 2024 remains unstable compared to the pre-pandemic stability of 2019. Despite ongoing investor interest in opening new hotels, a growing number of second-generation owners are opting to sell their properties, deterred by the industry’s volatility and surging costs.