Interview: Patrick Basset
How has the strong recovery of Thailand’s tourism industry impacted the hospitality segment?
PATRICK BASSET: While occupancy increased in the 2015 calendar year, room rates remained relatively constant. A key metric in the hospitality segment is revenue per available room. Considering the trend of this metric over the past few years reveals how strongly tourism has recovered. While 2013 was a peak year for the industry, performance slumped in 2014 as political and economic uncertainty surfaced. To take our group’s performance over that time period as an example, the first eight months of 2015 brought a 28.6% year-on-year increase in revenue per available room. While the unfortunate bombing of that month did have some short-term effects, inbound tourism recovered quickly in the fourth quarter and performance was up 22% by the end of the year.
Looking at individual markets, the hospitality industry has shown strong growth, while the business group segment has remained relatively flat. Meetings, incentives, conferences and exhibitions typically accounts for about 20% of revenue for higher-end hotels, but this has stagnated at 6-10% over the past two years due to ongoing instability. Tourist growth has compensated for this. Chinese tourism has been driving up volumes in all South-east and North-east Asian markets despite languid growth in inbound tourism from other regions. Tourism to Thailand from Europe is relatively constant, while the Japanese market has been impacted by falling purchasing power due to currency fluctuation. Hong Kong and Singapore have also recorded dampened growth. China, however, represents a sizeable and growing market, accounting for 26.6% of all arrivals in 2015.
How are operators responding to online agencies and other potential market disrupters?
BASSET: The emergence of online agencies and search engines represents a significant challenge for hotel groups and operators, as these entities typically take around 20% commission rates for bookings. Operators would obviously like to take control of distribution themselves, and are investing in digital booking providers and other services to help internalise that process, including by running booking services from their own platforms. Services such as Airbnb have yet to gain full momentum in the continent of Asia, with the exception of cities such as Tokyo, which has very high technological and e-commerce penetration rates. But the effects of these potential market disruptors are already evident in Europe, North America and elsewhere, and have the potential to spread to the South-east Asian region in a few short years. Investment by hotel groups and operators in digital platforms and integration is, therefore, key.
Another noticeable trend is market consolidation, with the recent speculated mergers and acquisitions between large hotel operators serving as proof. Indeed, operators are increasingly looking to build up complementary portfolios in order to serve as many of the growing tourism segments as possible, and I anticipate this trend will continue in the near future.
To what extent has Thailand been able to disperse tourism across the country to account for overcapacity in Bangkok’s tourism infrastructure?
BASSET: While Bangkok serves as the gateway into Thailand, and often to South-east Asia, in terms of offering robust air connectivity, the nation has five major destinations which tourists tend to favour: Bangkok, Chiang Mai, Pattaya, Koh Samui and Hua Hin. One driving force in tourism growth that could potentially change this is the emergence in recent years of low-cost carriers that are allowing an increasing number of Thais and residents of the region to afford to travel. The domestic population is gravitating toward national parks and resorts such as Khao Yai, as well as to regions that are rapidly growing in connectivity.
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