After The Sandbox – Phuket Hotels Ask What’s Next?

The resort island of Phuket’s proof of concept Sandbox advantage looks to dramatically change come October. Since the first of July island hotels have experienced considerably higher occupancy levels and much-needed revenue from international arrivals. This has been Sandbox generated, and travelers, not necessarily tourists. Bangkokians fleeing the red zone situation have also aided in demand.

With the Thai government now looking to reopen the country’s capital gateway on 15^th October to overseas travelers, Phuket no longer will be the only way back into the country for fully vaccinated travelers who do not want to quarantine.

Other markets that can potentially access direct international flights such as Chiang Mai, Krabi, and Pattaya (U-Tapao) are expected to follow in the steps of Bangkok.

With the Bangkok outbreak, many Phuket hotels have also seen an uplift in long-stay guests who are both Thai’s and foreigners, who have fled the urban crisis.  Mid-October will likely see most return back to the city.

Hotels have seen lower forward bookings in September (no surprise here has it and May are the two slowest months of the year for occupancy) and October is a shoulder month leading into the traditional high winter season.

With the Phuket Sandbox marginalized by the reopening of the country, hoteliers will have to contend with a much more competitive marketplace. The domestic segment that had been growing pre-travel restriction is the logical starting point so Phuket hotels have to adapt and address this segment.

Coming into the end of the year as hotels start to finalize their annual business plans, the reality of the situation is that it makes more sense to use rolling forecasts and a more dynamic approach to old school annual plans as things have, and will change quickly.

The legacy of Phuket hotels having parallel sales and marketing offices both at the property and in Bangkok is arcane and having in-house teams locally, led by their GM’s work through strategies makes considerably more sense.

Phuket is a tourism market that is highly leveraged (say 50-60%) in broad terms on the wholesale market. In the absence of mass tourism, hotels will have to adjust to innovative ways to reach FIT travelers and induce demand.

On a broader scope, the biggest worry is that Phuket has experienced a rapid ascent in volume markets like Russia, India, and others before the pandemic. In the last 18 months, the global travel market has become more competitive and the question remains can the island regain loyalty.

Looking at Vietnam and Phu Quoc reopening in October, leisure travel will become a very competitive landscape and the destination must improve its brand, infrastructure, and services to regain its position.

We continue to look closely at Mainland China where travelers have flocked to Hainan in what is arguably the largest leisure market in the pandemic travel world. China’s resort destinations will no doubt want to compete more actively with Phuket in the future so it’s not a given that the island’s number one mass market will remain intact.

Arguably, there is the question of pent-up demand, and in our opinion that will happen quickly, but for hotels, the new mantra is to leave the business plan upon the dusty shelf, look at social media, niche segments, and other fast to market channels, and don’t rely on the Sandbox past October to generate the same numbers it has been. Expect the unexpected the rest of 2021 is our forecast.