The Thai hospitality market is so active right now, that it isn’t unheard of to hear of a new development of a hotel near Waterpark in Pattaya alongside several other developments in the area. Hoteliers are now coming up with new strategies to rake in profits in the wake of the local tourism industry‘s growth. Thai tourism is pretty much on a roll, with an expected international arrivals of 35 million for 2018.
However, the Thai Hotels Association (THA) has issued a warning to the hotel sector, saying that major destinations, such as Pattaya, Chiang Mai and, of course, Bangkok, are oversupplied, while the average room rate growth across the country has simmered down a bit compared to the previous decade. As a result, not everyone who competes in the hospitality sector will benefit from the local tourism scene.
According to STR Global and C9 Hotelworks, high demand for hotels is driving up confidence in the Thai hotel sector, with 100 hotels amounting to 21,600 room in development, the majority of which will be located in the capital.
The problem then lies with the low average daily rate (ADR), an extremely competitive field, and a transport industry struggling to cope with the influx of tourists. STR Global notes that, while demand for hotel rooms in the Asia-Pacific region increased by 6% from January to April of 2017, the average daily rate dropped by .5% as supply rose by 2.8%, meaning that hotels were losing a bit of profit due to the number of players on the field.
Notably, demand and supply fluctuated based on location, with the following numbers showing up:
- Bangkok supply up by 3.6%, but demand growth is only 2.2%, and revenue per room available (RevPAR) only went up by 2%.
- Hanoi supply remained flat, but demand spiked by 10.5% and RevPAR by 17%.
- Ho Chi Minh supply up by 1.2%, but demand grew by 9.5% and RevPAR by 11%.
The SCB’s Economic Intelligence Center noted three trends that would drive the hotel and tourism industry of Thailand:
- Demographic change, in particular the increase in senior citizen travellers;
- Intensified international competition, with governments across the world easing up on VISA requirements and promoting tourism investments;
- Increase in smartphone and social media use, means that businesses must learn to use these technologies to keep up.
The EIC says that these trends are both opportunities and challenges, and that business should be proactive and adjust as soon as they can to get the most profits.