TRIS Rating holds a positive outlook for the hotel industry. Thailand remains a world class tourist destination. Tourism has been a key growth driver for the Thai economy for over a decade. The number of tourist arrivals in Thailand has grown consistently. Despite several event risks, the industry has been proven to quickly recover within a few quarters.
The number of tourist arrivals is expected to increase, especially Chinese tourists. However, the competitive environment among hoteliers is expected to be intense due to a rise in lodging supply. The diversification in terms of geography and customer profile will help smooth the operational and financial performance of hotel operators. In addition, some operators expand to other businesses such as food services or real estate development, which also help secure additional sources of income.
KEY FACTORS
• Rising number of tourists
In 2016, the number of tourist arrivals in Thailand reached 32.5 million persons, an 8.7% increase from the level in 2015. The number of foreign tourists in 2017 rose moderately to 35.4 million persons, up by 8.8%.
TRIS Rating expects that the number of tourist arrivals will keep rising for several reasons. Chinese tourists, the largest share of tourist arrivals into Thailand, are expected to increase in line with the new direct flight routes from China to many popular Thailand destinations. Moreover, the economic recovery worldwide supports a rising number of tourists from other key countries such as Russia, South Korea, and Japan.
Domestic tourism is expected to continue to expand. Receipts from the Thai tourists increased by 5.4% to Bt930 billion in 2017. The Department of Tourism (DOT) forecasts receipts from the Thai tourists will grow by 8.2% in 2018. The Cabinet approved tax breaks for tourism spending in secondary provinces from 1 January to 31 December 2018. The tax breaks will be offered to individual tourists who spend on accommodations and corporations that organize seminars in these second-tier provinces. Each tourist can claim a tax deduction of up to Bt15,000 while corporations can claim up to 100% of the cost of their seminars.
• Increasing lodging supply
The bright industry prospects are attracting new entrants to the market. Economy and midscale segments have lower barriers to entry than luxury and large-scale properties. Thus, competition among lodging operators is quite intense, especially in the economy and midscale segments. According to the Tourism Authority of Thailand (TAT), the number of available rooms in Thailand is continually rising. The lodging supply increased from 511,023 rooms in 2014 to 729,658 rooms in January 2018. The number of rooms grew especially fast in small- to medium-sized properties such as resorts, serviced apartments, and guesthouses.
• Improving occupancy rate and revenue per available room
During 2017, hoteliers benefited from the rise of tourists which in turn increased occupancy rates (OR) and the average revenue per available room (RevPar). The average OR of lodgings in Thailand during January to November 2017 was 68%, growing by 2.4% compared with the same period in 2016. The highest OR was in the central region at 73.3%, followed by 69% in the southern region.
The average RevPar earned by hoteliers rose to Bt1,099 per night nationwide, up by 13.6% during the first 11 months of 2017. The southern region still had the highest RevPar at Bt1,534 per night in the first 11 months of 2017. The central region ranked second, with RevPar at Bt1,154 per night. RevPar in the northern and northeastern regions was at Bt647 per night and Bt457 per night, respectively.
TRIS Rating believes that the tax breaks approved by the Cabinet will stimulate domestic tourism. The tax breaks will encourage Thai tourists to travel to secondary provinces. This will further improve the OR and RevPar in 2018.
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