Home / Business / The crackdown on zerodollar tours affects hotel performance

The crackdown on zerodollar tours affects hotel performance

Tourism will continue to be one of the few bright spots for the Thai economy. “We believe the effect of the crackdown on zerodollar tours will be short-lived”, according to CBRE.

The crackdown on Chinese “zero-dollar” tours slowed down the number of tourist arrivals in Q4. The average growth was around 18-20% Y-o-Y for the first three quarters of 2016. However, the Q4 number only increased by 8.2% Y-o-Y. The crackdown hit Chinese tourist arrivals to Phuket, which fell by 8% Y-o-Y in Q4. From previously accounting for an average of 40% of the total arrivals in the past three quarters, they only made up 28% in the last three months of 2016.

The crackdown mainly affected the performance of hotels that were reliant on this group but the drop in low end room rates had a knock-on effect on hotels in other categories. Hotel occupancy in Q4 2016 was 72.3%, the same as in Q4 2015; but ADR fell 1.6% Y-o-Y and RevPAR also dropped by 1.6% Y-o-Y, the first Y-o-Y drop in 2016.’

“The tourist arrivals will continue to grow faster than supply which will increase hotels’ occupancy levels. Adaptation and flexibility are the keys to maintaining revenue as relying on the Chinese market and focusing on quantity alone may limit hotel performance”, writes CBRE.

The STR Blobal, a major hotel performance data supplier),data covers around 180 hotels in Phuket, mainly international branded hotels and 3-5 star hotels, while Agoda, a leading online travel agent, has around 2,000 hotels in its list, of which around 800 hotels have asking room rates of less than THB 1,000 per night.

“This means that around half of the hotels in Phuket target the very bottom of the market. The ratio is similar to that in the Bangkok hotel market. However, these low end hotels in Phuket comprise mostly hostels and smaller sized hotels of less than 100 keys compared to the larger low cost hotels in Bangkok with over a hundred rooms”, according to CBRE.

Competition has continued to put downward pressure on room rates.

“We expect 30% growth in supply over the next four years with the West Coast remaining the most popular area for hotel developments. In addition to the new supply, hotels will face competition from the condominium market”, writes CBRE.

There have been around 1,200 condominium units launched in the past few years that are branded residences offering rental services to purchasers. These units are expected to be completed in the next two years, which will increase the competition for daily rate guests. Many of the condominium developers say that they have hotel licenses which means they will compete directly with hotels.


Check Also

IKEA celebrating success in Phuket

It is nine months since IKEA opened its pick-up store at the bypass road in …