Mid-year blues for Bangkok hotels?

With Thai tourism’s “piece de resistance” of the 2006 Grand Celebration promotion behind them, their royal dignitaries returned home and the royal barges back in dry dock, hotel executive’s report they are facing a mixed future.



Once again it would appear the four-star market is faring better at filling rooms in the nation’s capital than the top end five-star products, but they are experiencing lower food and beverage revenues than last year.



The five-star hotels’ lower occupancies are however balanced by higher RevPAR (revenues per available room). This might suggest price resistance in the luxury end, or oversupply?



Industry observers had long predicted that 2006 would be a better vintage than 2005 but few realised the extent of the quadruple combination of the World Cup, rising oil prices, a strong baht and the continuing political stalemate. The five-star market is describing July as “sluggish” with occupancies under performing in comparison to last year by 15-20 percent, although many of the five-star hotels have increased rates over last year.



Observers have also commented that top hotels like the Peninsula and The Oriental are once again offering summer packages, so bargains are to be found if you know where to look.



Hotels in the Sukhumvit corridor and CBD have been aggressively pricing their wholesale rates for next season, with 30-40 percent increases without breakfast.



The results so far have been that buyers have accepted these rates increases for next season; the real test will be to see if they use them.



Couple this with restricting access for local (cheaper) rates being offered by Bangkok-based agents to the international market via the Internet. These are then marked up in price and offered to third parties. Many hotels have, in the past, tried to police this practice with restrictive contracts, but many have been ignored and thus proven to be unworkable.



The result is that the more confident hotels (usually preferred, first choice, branded hotels) have stopped working with local agents altogether, or offered only regular corporate rates, a practice normally aimed at small to medium volume producers.



The dilemma faced by the industry, is that whilst these centrally located hotels continue to push up the yield, the divide between four and five-star hotels, is widening.



Many agree that 2006 is Thailand’s “Grand” Year and we should achieve our target of 14.4 million foreign tourist arrivals. But there are others that believe it will be difficult. Thai Hotel Association president Chanin Donavanik is less optimistic about the industry this year.



“Thailand’s tourism industry might be losing international tourists to other destinations. We lack new tourism magnets”.



So is Thailand’s hotel industry set for a major correction between the four and five-star hotels on rates? I still believe not. Location is the key, along with competition in the immediate vicinity and within your competitor set.



The river hotels and five-star hotels, with their control of the luxury leisure market, corporate and MICE market will do what they do and the four-star properties will be mainly driven by what their neighbors are doing.



Andrew J Wood is general manager of Chaophya Park Hotels & Resorts, Thailand