Dr. Santi Kiranand, President of TRIS Rating, said today that prolonged political turmoil in Thailand will negatively impact the operating performances of hoteliers and tourism-related companies.
On 22 January 2014, the government announced a state of emergency in Bangkok and the surrounding areas, in response to anti-government rallies which started in November 2013. The recent government announcement has heightened the concerns of foreign tourists, especially for tourists from East Asian countries. Tourists from these East Asian countries comprise a 60% of foreign visitors to Thailand. More than 40 countries recently had issued warnings for their citizens about traveling to Thailand. However, Dr. Santi said that past experience has shown that the Thai tourism industry is quite resilient. Recent events and crises, such as the military coup in 2006, political turmoil during 2008-2010, and the flood crisis in 2011, have not had significant, lasting effects on tourism. For example, the nationwide hotel occupancy rate dropped to around 50% during 2009-2010 but recovered to around the normal level of 60% in 2012 and 2013. The number of foreign tourists has grown significantly, rising from 14-15 million per year during 2007-2010, to 19.2 million in 2011, and more than 22 million each year in 2012 and 2013.
Dr. Santi added that the current anti-government rallies are mainly in Bangkok and the surrounding area. As a result, the hoteliers which will be affected the most are the hotel companies that derive most of their revenues from assets located in Bangkok. The Tourism Authority of Thailand (TAT) estimates that the hotel occupancy rate in Bangkok is expected to fall by 30%-40% in the first quarter of 2014. Currently, TRIS Rating has rated three major hoteliers: Central Plaza Hotel PLC (CENTEL), Dusit Thani PLC (DTC), and Minor International PLC (MINT). Under the current circumstances, DTC will be the most affected among the three rated hoteliers, since its hotel properties in Bangkok contributed around 22% of total revenue, following by CENTEL (15%) and MINT (7%). However, prolonged protests would inevitably affect the performances of all hoteliers.
The airline industry is another sector affected by the political unrest. The drops in the cabin factor for Thai Airways International PLC’s (THAI) had coincided with political turmoil. For example, THAI’s cabin factor declined from 76% in the second quarter of 2008 to around 66% in the second quarter of 2009 and 2010 but recovered to around 70%-75% in 2012 and 2013. The travel warnings issued by several countries are expected to hurt THAI operating performance this year. In addition, THAI’s operating performance is still under pressure because its non-fuel costs remain high compared with industry benchmarks.
In TRIS Rating’s view, if the current political tensions could ease within the first half of 2014, the effect on the ratings and outlooks of the rated companies should be limited. Nonetheless, TRIS Rating will closely monitor the political situation and the operation development of each rated company. Currently, the ratings TRIS Rating has assigned to the hotel and tourism-related industries stay unchanged; CENTEL at “A/Stable”, DTC at “BBB+/Stable”, MINT at “A/Stable”, and THAI at “A+/Negative”., said Dr. Santi.
Current ratings of tourism-related and airline companies in TRIS Rating’s portfolio:
1. Central Plaza Hotel PLC (CENTEL)
Company & Issue Ratings: A/Stable
2. Dusit Thani PLC (DTC)
Company & Issue Ratings: BBB+/Stable
3. Minor International PLC (MINT)
Company & Issue Ratings: A/Stable
4. Thai Airways International PLC (THAI)
Company & Issue Ratings: A+/Negative
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