Looking-Toward-the-End-of-2007

The Thai tourism industry performed well despite the prospect of the war in Iraq, with nearly 3 million foreign tourist arrivals during the last quarter of 2002 and over two millions in January and February 2003. A majority of tourist arrivals (about 57%) are from Asia, which up to now had been identified as the ""new engine"" of global travel and tourism. Asia had a sizeable 17% share of the world tourism market with a strong 8% growth in 2002. At the beginning of 2003, Thailand and Asia as a whole were widely regarded as being on the course of a post-war tourism boom.

Total tourist arrivals to Thailand increased by only 2.3% in the first eight months of 2007, compared to the first eight months of 2006. The resort hotel markets performed well, but Bangkok suffered with lower occupancy rates, according to the latest CB Richard Ellis’ Thai hotel report. More hotels are being built in both Bangkok and the resort markets. Investors and international hotel operators remain positive about the long term prospects for the Thai tourism market despite recent weaker performance.

The number of tourist arrivals increased to 9.59 million in the first eight months of 2007 up from 9.37 million during the same period of time in 2006. European arrivals grew by 14.3% in the first six months of 2007. East Asian arrivals were down by 3.9% and South Asian increased by 10.5% during the same period last year.

Thailand has been successful in attracting visitors from some new markets. The number of visitors from Russia increased to 139,000 in the first six months, a 51% increase year-on-year. India is now a growing market with about 265,000 visitors in the first six months, an increase of 14% from the same period last year. Middle East arrivals were also up 20% on a year-on-year basis.

There were weaknesses in other markets. Visitors from Malaysia dropped by 12%, Japan by 7%, and China by 18%. China is one of Asia’s fastest growing markets with 37 million Chinese expected to travel overseas this year. In the first six months, Thailand only attracted about 2% of the total Chinese overseas travellers.

“We expect that overall occupancy rates for Bangkok’s four and five star hotels will only be 70% in 2007 compared to 75% in 2006,” said Mr. Navaphol Viriyakunkit, head of Research Services at CB Richard Ellis Thailand. The reasons for low occupancy rates have been political uncertainties, the New Year’s Eve bombings and a weak economy.

The average room rate for four and five star hotels in Bangkok has increased slightly in Baht terms by 2% year-on-year, but the appreciation of Thai Baht against the US dollar has increased the rate in US dollar terms by more than 10% from last year. It is likely that rate will hit $170 per night at the end of 2007 compared to about $158 at present. Some hotel operators are going to change their contract rates from dollars into baht because of the appreciating currency. A typical hotel in the luxury (five to six star) category will have an average daily room rate (ADR) of over THB5,500 a night, while ADRs of first-class (four star) hotels ranged THB4,500-5,500.

CB Richard Ellis projects that more than 2,000 new four and five star hotel rooms will be completed in Bangkok in 2008, raising the supply by 24% from 2007. Major hotel developments that are due next year include Centara Grand at CentralWorld, The Regent Bangkok and Sofitel Sukhumvit Bangkok. Competition is expected to increase throughout 2008.

In Bangkok, serviced apartments are also competing with hotels and many offer daily rates. The total supply of serviced apartments is expected to top 10,000 units at the end of 2007, and exceed 12,000 units in 2008. The increase in supply will mean that more serviced apartments look for daily guests, increasing the competition with hotels.

International hotel operators want to establish their brands in Thailand not only in Bangkok but also in resort locations such as Phuket, Krabi, Phang-nga and Samui. Starwood has announced that they will operate a St. Regis hotel in Bangkok and W hotels in Bangkok and Koh Samui.

CB Richard Ellis believes that growth in international hotel operators will be positive for Thailand by both raising the quality of the total hotel supply, and harnessing the marketing power of the international operators to attract visitors to Thailand.

There will continue to be rising competition in the Asian tourist markets. India and Vietnam are new competitors attracting rising numbers of visitors. Thailand has had continued success in Europe and new markets such as Russia, India and the middle east, but has suffered set backs in the East Asian markets, particularly the fast growing Chinese market.

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