Speaking to the situation, C9 Hotelworks Managing Director Bill Barnett said “high season 2023/2024 is likely to see a “carmageddon”, traffic gridlock scenario that will have a profound impact on tourists and residents alike. The absolute failure to bring transportation infrastructure projects from paper to reality over the past decade will have long-term repercussions.

“Key projects that have not found their way forward include the Patong-Kathu tunnel, cross-island expressway and light-rail (LRT). While the current government has made all the right noise about making these projects a priority, there is no public sector funding capacity at present. This effectively means that a series of public-private partnerships or BOT (build-operate transfer) projects are needed to move these to execution stage. This includes the much-needed Andaman International Airport.”

Looking towards the coming winter peak period, C9’s market research has revealed that both hotels and tourism businesses remain deeply concerned over the slow return of Chinese travelers. Thailand’s image has been damaged in this enormous market, and travel sentiment to the Kingdom is muted despite a visa-free initiative. With China recovery a work in progress, most hotels are looking to strong demand from Russia, Kazakhstan and India, along with traditional ‘snow bird’ seasonal travelers.

Despite strong underlying fundamentals for Phuket hotels, C9’s Bill Barnett is quick to point out, “the first-aid, band-aid approach by the public sector to tourism simply won’t work in a mature international destination that Phuket has evolved into. For nearly two decades the island’s private sector has outgrown antiquated provincial infrastructure and what is desperately needed is a master plan and strategy that can fast-track an ailing infrastructure backbone.”

Speaking about the impact of the Eastern European markets on the island C9 Hotelworks Managing Director Bill Barnett said “the arrival of tourists from Russia not only created a spark in economic recovery for hotel and tourism businesses but radiated into retail, transportation, and real estate. The segment is now the most active direct foreign investment (FDI) leader in Phuket’s booming property market. A knock-on effect has been also seen on land prices across the island which are growing at their high rates in over two decades.”

Looking inside the numbers and key trends in Phuket’s hospitality industry, C9’s research points to a broader overall movement of hotel owners converting from management agreements to franchises and also changes in brands. Two recent notable deals has seen the Destination Group inking agreements with InterContinental Hotels Group (IHG) for two Holiday Inn properties and two with Radisson. Additionally, one of the island’s largest hotels, the Arcadia has been reflagged as a Pullman under ACCOR, and Thailand’s hospitality giant AWC (Asset World Corporation) have made public plans to upgrade and convert the Westin Siray Bay into a luxury resort branded to Ritz-Carlton.

Citing the conversions C9’ Bill Barnett commented “this is a sign of maturity for Thai hotel owners who are experienced enough to operate but look for distribution and brand value in a franchise scenario. This practice is prevalent in North America and Europe so it was only a matter of time until Asia caught up. We expect to see more changes in brands for the remainder of 2023 and beyond, given many hotel agreements signed in the early millennium tourism boom years are set to expire. “

Despite positive economic indicators, the reality on the ground is evident everywhere in the stress placed on Phuket’s transportation infrastructure. Population growth, development spread to inland areas and skyrocketing tourism demand has created a massive traffic problem. The clearest example was when a landslide closed an important thoroughfare between the popular Patong tourist area and its central island feeder road. Delays in repairs caused a domino effect in access to west coast hotels in peak season and demonstrated how fragile the island’s transportation network is.

The major challenge that demands attention, according to C9’s Bill Barnett is people, or the lack of them wanting to return the hospitality industry post Covid when over 1.45 million tourism jobs were lost. “Where’s our pipeline of people? This is what will create success for the next generation. Thais no longer want to work in hotels so our mission must be how can we innovate products and bring the best and brightest people back to the industry. We have to pay higher wages. Now is the time for Thailand’s hotels to change,” said Mr Barnett.

The point was reiterated by Proudputh Liptapanlop, Executive Director, Proud Real Estate PLC who said that Covid was a real wake-up call for owners about how to take care of their people.

Ms. Wallapa Traisorat, CEO & President of AWC, argued that product and brand integration was the key innovation for the future. “For us it is all about creating happiness,” she said. “We are all searching for how we can be fulfilled and I believe we need to look into partnerships with brands to create unique projects that are integrated with the destination and bring local communities into the hotel experience. It should be an integrated customer journey.”
 
For Liz Perkins, Vice President of Revenue Management & Commercial Services for Hilton APAC, the most important thing is to create the right balance between technology and people. “The key is to successfully merge physical and digital to create seamless travel. During Covid we invested in technology. For example, we introduced digital keys for a fast track check-in. Customers can still go to reception but what we are doing differently is giving customers choice.”
 
“For me innovation comes from constraints,” added Ho Ren Yung, Senior Vice President – Brand and Commercial, Banyan Tree Group. “We created the pool villa concept as we were not on the beach 30 years ago. Now we are introducing a product with no walls or doors to bring nature in.”

Ms. Proudputh Liptapanlop, Executive Director of Proud Group, which owns numerous tourism assets including two InterContinental branded hotels in Hua Hin and Phuket, said: “In Thailand we need to open up. We need everyone to understand that we need to open up the country for their good and for the benefit of the country.”

Mr. Bill Heinecke, Chairman/Founder Minor International, added: “If we don’t open up we can’t be competitive. Currently the rules are just too complicated. We are not even 10% of where we were pre-Covid and Thailand will not reach its target of 10 million arrivals in 2022. We are falling behind. We are not even keeping up with our neighbours.”

“There’s no choice anymore,” commented Marisa Sukosol, President of Thailand Hotels Association. “Thailand must open up and stop Test & Go. In fact, it must Let It Go! We need to move our mentality from a pandemic to an endemic.”

Speaking about the process of a gradual stepped programme for accepting overseas arrivals, C9 Hotelworks Managing Director Bill Barnett said “the learnings from the first week of the Phuket Sandbox will likely follow a similar pattern.  Over 2,300 international arrivals have come to the island with more than 140,000 confirmed hotel nights booked in SHA Plus hotels through August. Demand has remained strong and is now demonstrated, which bodes well for Koh Samui’s chances.”

He added “an ancillary impact of the Sandbox is the restoration of regularly scheduled direct flights between the two islands from 16^th July starting with four flights a week this month and becoming daily in August. In analyzing tourism, we look to the sky for answers as the logical starting point, and this increased airlift is a key driver for the tourism economy.”

Moving to the outlook for the island’s lodging industry, C9 Hotelworks’ new Koh Samui Hotel Market Update points out that the likely recovery journey will be top-down, with many travelers taking advantage of competitive rates in luxury and upscale tier hotels. C9 is forecasting the short to medium-term impact to be in rising demand at the expense of room rates as travelers tend to historically trade up in post-crisis travel.

As Covid-19 has landed the tourism industry in unknown territory, leading global data group STR’s Area Director for Asia Pacific Jesper Palmqvist weighed in with “since Q2 in 2020 when the crisis started, we have seen three hotel peak periods in Koh Samui, where levels reached beyond the bare minimum – Mid-October 2020 for the long weekend, New Year’s Eve, and most recently the Songkran holiday where occupancies reached close to 50%.  These spikes in demand came from the domestic market and once the international factor comes into play, more stability will evolve.”

While Thailand’s tourism fortunes remain highly focused on islands, C9’s Bill Barnett is quick to say “it’s important to remember that Koh Samui and Phuket remain only small pieces of a bigger puzzle and that even Robinson Crusoe had to eventually get onto a raft and return to the larger world at hand. Until the entire country gets better, the sandbox remains a relatively small stage.”

Download: C9 Hotelworks Samui Hotel Market Update.

Looking forward to the high season when the numbers spike upwards in the four months of December through March, the high season months last year equated to more than one-third of annual demand.  Total domestic and international arrivals at the airport totaled just over 9 million in 2019.  Adding in high season shoulder months into the equation, the stark economic impact of Phuket’s economic seasonality is reflected in the fact that well over half of the island’s tourism arrivals are packed into a six-month period.

Now, nearly two months into that timeframe, what is apparent is it’s virtually impossible to save the high season and hotel owners in 2021 will be forced to contend with historically the lowest trading months of the year by May. Given these grim prospects, C9 is predicting large-scale job losses and business closures given there is no light at the end of the pandemic-induced tunnel.

“Taking a 360-degree view on the restricted domestic-only demand, you have to take into account that Phuket’s current registered accommodation supply has continued to surge to its present size of 90,267 rooms in 1,773 hotels/tourism establishments” adds Barnett. “Of this supply upper midscale, upscale, and luxury properties of international standards are approximately 25% of the total rooms.”

Data from leading data intelligence provider STR daily has Phuket occupancy averaging 10% with upward spikes on weekends at international standard hotels. Looking into the number though, the reality is domestic travelers are cashing in on cheap deals at upscale and luxury hotels.  Given limited visitor arrivals the far larger mid and economy tiers where most of the hotel inventory sits, are experiencing even lower occupancy. This domino effect is expected to prevail unabated throughout a sustained downturn and effectively crushes the smaller properties and local tourism businesses.

As Thailand’s government policy has maintained Bangkok as the sole entry point for a limited number of travelers from overseas under the Alternative State Quarantine (ASQ) program, a number of hotels in all tiers are operating under the scheme. Hotel performance data for Bangkok from STR is reflecting occupancy just above 25% for international standard hotels, though again in the broader marketplace demand is at considerably lower levels.

In Phuket, many hotels pinned high-season hope on the now-aborted ‘Phuket Model’ to allow Special Tourist Visa’s (STV’s) aimed at long-staying visitors, which is logical given the island’s legacy winter ‘snowbird’ market from Northern Europe and Russia. Putting the Alternative Local State Quarantine program at the head of the reopening tourism initiative, 17 Phuket hotels have been approved and 21 applications are under process. Properties who have undertaken both the expense and time in qualifying for the status have been shut-out, given the government’s about-face policy of centralizing all overseas arrivals into Bangkok.

What is unclear is the logic in policy flip flop on negating the island’s essential tourism lifeline. Using smaller contained resort-focused islands would appear a logical risk mitigation strategy that was echoed in all of the hype over the ‘Phuket Model’ but after the dust has settled, it ultimately failed to launch.

The time has come that Thailand must gain confidence from international benchmarks, such as  the tourism dependent Maldives. According to data from the nation’s Ministry of Tourism, in October the destination recorded 21,514 tourist arrivals. This trend is again on the rise in November and looking back the country has safely managed the reopening of its borders since mid-July. Another nearby island, namely Singapore is set to put an overseas travel bubble into place within this month to Hong Kong (SAR).

Putting Phuket’s economy debacle into perspective C9’s Bill Barnett says “losing this high-season will further intensify the catastrophic impact on the island’s business owners and the livelihoods of the vast majority of residents. Given the sheer size of the hotel inventory, it cannot survive only on domestic visitors, cheaper airfares, or by adding more public holidays. For Phuket, this high season, faced with the prevailing arithmetic the island can only wait and wonder what comes next.”