Bangkok area hotels under pressure
HVS Bangkok Director Christian Pucher recently shared updates and counsel for the hotels in his locale: The protests that began in November 2013 have been taking their toll on hotels? performance amidst what would regularly be the high season. Occupancies are said to be down by 20-40 % on average as travelers cancel or postpone their trips to the City. As the protests are localized to specific areas of the city, some hotels near the protest sites are feeling the impact considerably more than others.
?Past conflicts have shown that the market is resilient and that occupancies tend to recuperate to normal levels within three to four months of conflict resolution. As the situation prolongs over time, the immediate threat is that some hotels will be challenged to meet their financial obligations, which in turn would have a short-term negative impact on employment in the Bangkok hotel market,? explains Pucher. ?The long-term threat lies in the reduction of market- wide average hotel rates. As the situation normalizes, hotels will need to make efforts to help bring back business, through tactical promotional offers – targeted and limited to a period of time.. However, during and after previous crises, the market had reacted differently, in that rates were actually dropped across the board rather than launching temporary offers.?
?It is very hard to rebuild rates once they have been lowered, affecting returns over a longer period,? adds Pucher.
Over the past eight years, Bangkok hotel performance has suffered as a result of several political conflicts, flooding, as well as the slow recovery of the global economy. These conflicts have had a direct negative effect on hotel occupancies as visitors have deferred their travel plans to the city. Additionally, hotel rates have been largely stagnant or even depressed over the last few years through a combination of all of the preceding factors – global economic slowdown, political unrest in the region, increasing appeal of other neighboring cities, and stiff competition induced by an augmentation in supply which is set to continue for the next few years. Additionally,, with a surge in real estate prices, escalating construction costs, as well as higher operating costs-returns on hotel investments have become less attractive.
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