Airlift Juggernaut Hits Samui Tourism
The Phuket Gazette.
AFTER Phuket, Koh Samui is Thailand's second-most-visited island resort destination. As a ramped-up hotel supply reaches 16,069 rooms, the island is experiencing growing pains as part of its emerging journey into the mainstream.
One of the prevailing challenges for Samui is the lack of international flights, with 2009 seeing domestic traffic mainly routed through Bangkok representing 91% of all arrivals.
Unlike Phuket, where the airport is operated under the public agency Airports of Thailand (AoT), Samui Airport is privately run by Bangkok Airways. They in turn sub-lease the operation to the Siam City Asset, which operates the airport through its Siam Airport Property Fund. The airline is a major shareholder in the investment vehicle.
Although Bangkok Airways recently announced plans to develop Samui into a "second international hub", its direct international flights to the island are currently limited to Hong Kong and Singapore.
Other direct international connections currently being offered include Malaysia's Firefly and Berjaya Air serving Samui from Kuala Lumpur.
On the domestic front, Thai Airways has been allowed to provide limited domestic services since 2008.
At the root of the demand quandary are environmental controls which limit the hours during which planes can arrive and depart, coupled with a ceiling of 36 flights a day. In simple terms, for hotels this equates to "you can't stay there, if you can't get there".
Looking into Samui's performance rear view mirror for 2009, airport arrivals in the first half of the year were down 23 percent, mainly due to political-related events. The second half of the year surged, but failed to compensate for the earlier shortfall, with the final tally still falling short of 2008 levels.
Discounting room rates on the back of a shift to regional markets was felt in similar fashion to Phuket's experience, with rate drops of 13 percent. However, results from the first quarter of this year show that room rates are on the way up.
Viewing international source markets, the list is led by the UK followed by Germany, Australia, Sweden and Russia. It's interesting to note the correlation between access and emerging travel-hungry nationalities, with Indonesia topping the rising tide followed by India, Malaysia, Eastern Europe and the Middle East.
What is becoming increasingly apparent is that Thailand and its resort destinations all are experiencing a growing reliance on short-haul, Asian-based customers. Finding an equilibrium for this type of rate-sensitive business currently looks likely to stretch past 2010.
Regarding regional trade, many tour operators are vocal that the profound lack of developed tourism demand generators and attractions could inhibit a shift to more of a mass tourism model.
Speaking to property developers and agents on Samui, it is clear that they have suffered greater impact from the global financial crisis than Phuket, and that the number of projects currently on hold or for sale is significant. While some marquee hotel-branded projects have been for sale, the market absorption rates have been muted.
There is a reason for an upbeat outlook, though, as 541 internationally-managed rooms will open in the next 15 months, led by luxury giants W, Conrad, Banyan Tree and Starwood. It is inevitable that a high critical mass of branded properties create benefits, as could be related to, say, taking a shopping expedition to Paragon, Central World or the Emporium.
However, there also exists a danger that the market absorption of new hotels could see supply well outpace demand. While talks have been going on for years about a new larger international airport, the constraints of a privatized operation that is financially focused on returning yields to investors does raise concern.
The ongoing question of how Koh Samui and Phuket will be able to cope with the at-times "runaway train" of tourism development is no easy puzzle to solve. Water, traffic, waste disposal, population explosion and crime all somehow become strange bedfellows in the cycle and unfortunately often take a back seat to economic models all geared to year-on-year growth.
Samui remains a stunningly beautiful destination. Its new hotels rival anything Phuket has to offer, and residential property is world-class. While perhaps the growth of the two islands are headed in similar directions, it will be interesting to see how the very different challenges play out in the years ahead.