Hotels 2015: Growing despite Ebbing European Tourists amid High Competition (Current Issue No. 2583 Full Ed.)

Sputtering economies in Russia and the EU – both major inbound tourism markets – will hurt hotels at locales packed with holidaymakers from there, including Pattaya, Surat Thani (Ko Samui, Ko Pha-Ngan and Ko Tao) and Phuket, since arrivals from Europe will likely be fewer. Furthermore, the sheer number of operators with extensive choices in the hospitality industry has triggered a more aggressive showdown among businesses that may induce a fierce price competition. Three-star hotels, in particular, may encounter a stiffer price competition than other higher-grade premises.

Despite that, the number of ASEAN travelers coming here may rise as we approach the AEC inception at the 2015 yearend that will also facilitate hotel investments for investors from within the bloc, since Thailand continues to be a regional magnet for such investment. Meanwhile, government initiatives that include tax deduction on travel and seminar activities for individuals and juristic persons should help invigorate our hotel market among the locals during 2015.

KResearch forecasts that there will be a total investment of around THB513-527 billion in hotel business during 2015, expanding 7.1-10.0 percent YoY. Of this, THB344-353 billion will come from foreign sources, growing 4.9-7.6 percent YoY, while Thai tourists will pour around THB169-174 billion into the industry, growing 11.9-15.2 percent YoY. Part of the reason for this upbeat outlook is the industry recovery seen since a low point in 2014 when investment had contracted 2.6 percent on political turmoil and an economic slowdown.

Hotel operators, however, should avoid depending too much on specific tourist markets because it could jeopardize their earnings if such customers decline. To mitigate that risk, operators should look toward ASEAN member states whose nationals will be increasingly traveling to Thailand; they should put more emphasis on attracting local holidaymakers as well.

Three-star hotels must keep watch on situations that will generate price competition by positioning themselves in niche markets, e.g., as lifestyle facilities, whereas most hotels of this rating are positioned as typical mid-range, no-frills lodging.

Hotels must also distinguish themselves from condotels, boarding houses and serviced apartments by organizing activities that are popular among each tourist group as part of their marketing strategies.