HVS Bangkok Director Christian Pucher recently shared updates and counsel for the
hotels in his locale: The protests that began in November 2013 have been taking their
toll on hotels' performance amidst what would regularly be the high season.
Occupancies are said to be down by 20-40 % on average as travelers cancel or
postpone their trips to the City. As the protests are localized to specific areas of the city,
some hotels near the protest sites are feeling the impact considerably more than
others. "Past conflicts have shown that the market is resilient and that occupancies
tend to recuperate to normal levels within three to four months of conflict resolution. As
the situation prolongs over time, the immediate threat is that some hotels will be
challenged to meet their financial obligations, which in turn would have a short-term
negative impact on employment in the Bangkok hotel market," explains Pucher. "The
long-term threat lies in the reduction of market- wide average hotel rates. As the
situation normalizes, hotels will need to make efforts to help bring back business,
through tactical promotional offers - targeted and limited to a period of time.. However,
during and after previous crises, the market had reacted differently, in that rates were
actually dropped across the board rather than launching temporary offers." "It is very
hard to rebuild rates once they have been lowered, affecting returns over a longer
period," adds Pucher. Over the past eight years, Bangkok hotel performance has
suffered as a result of several political conflicts, flooding, as well as the slow recovery of
the global economy. These conflicts have had a direct negative effect on hotel
occupancies as visitors have deferred their travel plans to the city. Additionally, hotel
rates have been largely stagnant or even depressed over the last few years through a
combination of all of the preceding factors - global economic slowdown, political unrest
in the region, increasing appeal of other neighboring cities, and stiff competition
induced by an augmentation in supply which is set to continue for the next few years.
Additionally,, with a surge in real estate prices, escalating construction costs, as well as
higher operating costs-returns on hotel investments have become less attractive.
"While the overall economic and political scenario has had an impact on multiple
industries and sectors across the spectrum, it is important to remember that the
hospitality industry is cyclical in nature and is typically one of the first to rebound, post
downturns and crises.," explains Pucher. "Hence, despite the prevailing issues, Bangkok
remains and will continue to grow as an attractive destination for tourism and particularly
the Meetings, Incentives, Conferences, Exhibitions/Events (MICE) segment, which has
driven occupancies and contributed to overall growth, since 2012." With the upcoming
launch of the ASEAN Economic Community (AEC) in 2015, tourism will continue to grow
as will investment from member countries into Thailand, which will drive corporate,
transient and MICE business. Furthermore, Bangkok has the opportunity, through its
overall offering, to emerge as one of the top global destinations for MICE. An increase
in MICE business would help the much needed growth in average rates, however
becoming a global MICE destination will require a collaborative effort; hotels will need to
work more closely with one another as well as with national organizations such as the
Thailand Convention and Exhibition Bureau (TCEB). [if !supportLineBreakNewLine]