Gap between four and five stars widens
Bangkok Post
POST REPORTERS

Now that the celebrations for the 60th anniversary of His Majesty the King's accession to the throne are over, the hotel industry faces an uncertain future. It seems that the four-star hotel market is picking up again, with improved occupancy rates in Bangkok, compared to the slower five-star market.

But many top hotels are experiencing lower food and beverage revenues than last year, according to veteran hotelier Andrew Wood. However, lower occupancy in five-star hotels is balanced by higher yields, through revenues per available room. ''This might suggest price resistance in the luxury end, or oversupply,'' said Mr Wood, the general manager of Chaophya Park Hotels and Resorts.

Industry observers had predicted that 2006 would be better for business than 2005, but few predicted the impact certain factors would have, namely the World Cup, rising oil prices, a strong baht and the continuing political stalemate.

Most believe that unrest in the South of Thailand is not a great threat to the industry, having gained little attention from international tourism operators. The far South has never been very popular with long-haul international tourists, so arrivals have remained relatively unchanged.

The five-star market is sluggish this month, with occupancy underperforming in comparison to last year by 15-20%, although many hotels have increased their rates over the last year. Top hotels such as The Peninsula and The Oriental are once again offering summer packages, so bargains are to be found. The Peninsula has also been offering incentives such as three-for-two offers, while the Oriental has been offering rooms for US$239, including breakfast, during this year's low season.

Some hotels in the Sukhumvit area and the central business district (CBD) will be pushing up wholesale rates for next season by as much as 30-40%, and removing inclusive breakfast. The Grand Hyatt and the Sheraton Grande were early initiators of this new pricing structure, with many others on the central Sukhumvit Skytrain route and side streets following suit. Buyers have so far accepted rate increases for next season, but whether they will purchase is still uncertain.The market is also feeling the impact of the sale of cheap local bookings by Bangkok tourism 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 these are often ignored. The result is that the more popular hotels have stopped working with local agent altogether, or offer only regular corporate rates, a practice normally aimed at small- to medium-sized companies.

The dilemma faced by the industry is that while these centrally located hotels continue to push up yields, the divide between four- and five-star hotels is widening. A four-star room in a hotel located 10 minutes away from the CBD will often cost three to four times less than a five-star room in a CBD hotel. Results for the first quarter suggest that supply is still surplus to demand, particularly in Thailand's north and central regions.

The Thai Hotels Association (THA), in a recent report, said occupancies in Chiang Mai were down for the first quarter by 50% during the Songkran holidays, and had dropped from 76% last year to 68% this year in the central region.

Strong recovery in the South, however, has resulted in occupancies doubling from the 25% lows of last year.

Ross Cunningham, the director of sales for the Conrad Hotel, said: ''As long as there is no future civil unrest, we should have a good second half in 2006.'' Many agree that 2006 should be a strong year for Thailand, with the target of 14.4 million foreign tourist arrivals achievable. Others believe it will be difficult.

THA president Chanin Donavanik was less optimistic: ''Thailand's tourism industry might be losing international tourists to other destinations. When compared to other countries in the region, we lack new tourism magnets.'' Hong Kong's Disneyland and Singapore's coming casinos are seen as missed opportunities for Thailand by the industry.

Bangkok Post

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