Up to August 2008, eight months into the year, the Chaophya Park Hotel, a four-hundred room, 4-star, deluxe hotel in Bangkok was exactly on budget and on target to achieve its Gross Operating Profit (GOP) for the year 2008. The YTD occupancy was 79 percent, and total hotel revenue from all revenue streams was 8 percent ahead of last year. And then came September 2008…
Up to August 2008, eight months into the year, the Chaophya Park Hotel, a four-hundred room, 4-star, deluxe hotel in Bangkok was exactly on budget and on target to achieve its Gross Operating Profit (GOP) for the year 2008. The YTD occupancy was 79 percent, and total hotel revenue from all revenue streams was 8 percent ahead of last year. And then came September 2008.
During this month, political demonstrations broke out into the streets and government house came under siege (as it is today, some 2 months later). Bloody clashes with the police led to 2 deaths, and 400 demonstrators were injured. Newspapers and the TV carried headlines and pictures for the entire world to see. Calls for the PM to step down by the opposition parties and the demonstrating People’s Alliance for Democracy (PAD) were reinforced by the four highest-ranking Generals of the Army, Air Force, Navy, and Police appearing together on TV asking the PM to step down. The newspapers called it a ‘coup by TV.’ The PM refused to step down.
There is daily talk in Bangkok that the Generals will do something, but most people are uncertain what they can do to resolve the political deadlock. How they will run the country is also unclear, after an earlier coup in 2006 to oust then PM Thaksin Shinawatra showed that the military were inept at successfully running the country and the armed forces are frankly very reluctant to take that course of action once again so soon.
The likely outcome is the PM will eventually step down and either the house will be dissolved followed by a general election or more simply that a new PM will be put in place that might be more politically acceptable.
The Thai tourism industry has taken great pains to stress that the political activities in a small area of Bangkok has little effect on the day-to-day lives of ordinary Thai’s, and tourists are still safe to travel freely in Thailand.
All of the above, coupled with the global economic meltdown and plunging stock markets, provides what one travel publication called ‘the perfect storm’ for Thailand’s hospitality sector. Occupancy at the Chaophya Park Hotel in September 2008 was 56 percent versus 73 percent last year, and October 2008 will close with 55 percent versus last year’s figure of 80 percent. Revenue in September and October will be behind last year by 11 percent and 18 percent off from the budget.
The forecast for November 2008 room occupancy is 60 percent with last year at 81 percent, although functions and weddings will be strong until the end of the year.
Currency exchange rates have also shown a weakening baht against the dollar with some analysts predicting Bt38 to the dollar next year from its present Bt34, a further 12 percent decline. The Yen is very strong and at a 13-year high at the time of writing. Recently, the baht against the pound and the Euro is strong, as these currencies weaken globally, with the baht gaining close to 20 percent.
However, with exports and tourism receipts set to fall, the baht is also likely to follow. During November 12-19, 2008, there will be 7 days of mourning and the final Buddhist preparations that will lead to the Royal cremation of the late Princess Galyani, the King’s sister. People have been asked to show respect and to wear black and white. All parties and functions have been cancelled or postponed to avoid a period when the whole country will mourn her passing.
The outcome for the next 4 months, taking us into 2009, is looking ‘soft.’ However, that the decline in tourism receipts will slow as we move into Thailand’s traditional high season. From mid-January 2009 onwards, it will be a testing time and may well set the stage for much of 2009. Optimism is still high that despite the growing economic turmoil, people will still travel; they will continue to visit restaurants, and they will continue to have meetings and celebrations. The change will happen with a growing dependence on the domestic traveler and local MICE market. It will be a difficult year for Thailand’s traditional long-haul markets and many will be reflecting this in their company’s marketing plans for 2009.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
