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New research points to Phuket’s hospitality industry reaching breaking point

New research points to Phuket’s hospitality industry reaching breaking point
September 8, 2020

New research by consulting group C9 Hotelworks points to Phuket’s hospitality industry reaching breaking point with economic support from the Thai Government urgently needed for it to survive the high season.

The research highlights COVID-19’s crippling implications with airport arrivals plunging, the Phuket Model stuttering and 50,000 jobs expected to be lost if there are no overseas visitors this year

In the wake of the controversial “Phuket Model” international travel reopening scheme, reality is biting back as hotels in Thailand’s leading resort island are unable to sustain operating viability based on domestic tourism.

According to the Airports of Thailand (AOT), passenger arrivals at the aviation gateway have plunged 65% year-on-year from January through July of this year.

What is clear is that the 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break-even or even be cash-flow positive with only domestic demand. This realistically could set the scene for 50,000 job losses in the hotel sector this year if there’s no support forth coming or international visitors are not allowed in.

One of the green shoots is the Alternative Local State Quarantine (ALSQ) program, with over 60 island properties applying. While this program is meant to emulate the ASQ program in Bangkok, given there are no direct flights to Phuket, the government needs wider support of a return of international travellers at a local level and implement inter-ministerial coordination before it could materialise. But this may take months.

The Phuket Hotels Association represents 78 hotels in Phuket and its President, Anthony Lark advises “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”

With tourism being the lead economic indicator in Phuket data newly released by hospitality consulting group C9 Hotelworks reveals the Covid-19 impact on the hotel development pipeline with 69% of hotels now being delayed or put on hold. Looking at the economic consequences, at the end of 2019, there were 1,758 licensed accommodation establishments on the island and today incoming projects stand at 58 hotels, representing a 19% rise in supply with 16,476 additional rooms planned.  

C9 Hotelworks Managing Director Bill Barnett notes “Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry. The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline. This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels remain incur losses day in and day out.”

In terms of updating the Phuket hotel situation on the ground, there continues to be much controversy and a lack of national and local consensus over the proposed “Safe and Sealed’ sandbox long-stay program. While a stark warning was issued last week by the Bank of Thailand (BoT) over the potential disruption to the heavily tourism-dependent country, the fate of Phuket’s coming high season remains very challenged.

Citing a way forward C9’s Bill Barnett commented “any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, but the more critical issue is how hotels can fight for their lives in the current state of limbo.”

Speaking about Phuket’s current situation Lark added “firstly, greater proactive dialogue between the public and private sector has to be undertaken. We can’t simply say we are now in unknown territory forever. Steps must be taken and a single voice formed.

“Secondly, the Bank of Thailand (BoT) has to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. Tourism is a human endeavour and without protecting and nurturing our Thai workforce there will be no recovery.” 

Phuket Hotels Association members include:

Amanpuri, Anantara Layan Phuket Resort, Anantara Maikhao Phuket Villas, Anantara Vacation Club, Andara Resort & Villas, Angsana Laguna Phuket Resort, Banyan Tree Phuket, Boathouse by Montara, Burasari Resort, Cape Sienna, Centara Grand Beach Resort, Club Med Phuket, Dream Hotel & Spa, Dewa Phuket, Grand Mercure Phuket Patong, Hilton Phuket Arcadia, Holiday Inn Maikhao, Holiday Inn Resort Phuket, Patong, Hyatt Regency Phuket Resort, Impiana Resort Patong, JW Marriott Phuket, Le Meridien Phuket Beach Resort, Maikhao Dream Villa Resort & Spa, Manathai Surin, Movenpick Resort Bangtao Beach, Novotel Phuket Kamala Beach, Novotel Phuket Karon Beach, Novotel Phuket Phokeethra, Novotel Phuket Surin Beach Resort, Outrigger Laguna Phuket Beach Resort, Outrigger Laguna Phuket Resort & Villas, Paresa Resort, Phuket Marriott Resort and Spa, COMO by Point Yamu, Pullman Phuket Arcadia Naithon, Pullman Panwa Beach Resort, Renaissance Phuket Resort & Spa, Rosewood Phuket, Swissotel Resort Phuket Kamala, Swissotel Resort Phuket Patong Beach, Thanyapura, The Bell Pool Villa, The Nai Harn, The Pavilions, Phuket, The Slate, The Surin, The Village Coconut Island, The Westin Sirey Bay Resort &  Spa Phuket, Trisara, Twinpalms Phuket.

Image of Anantara Layan Phuket Resort

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