Chasing Dragons. Phuket Hotels Under Pressure to Perform

Despite registering a record high 9 million passenger arrivals at the island’s gateway international airport in 2018, performance data is indicating that a slowdown in its double-digit growth rates over the past few years is on the horizon for Thailand’s resort destination of Phuket. 

While airport arrivals grew 8% year-on-year, the gains posted were at their lowest level since 2015 according to consulting group C9 Hotelworks newly released Phuket Hotel Market Update. As the first half of 2018 saw arrivals soar by 17% versus the same period in 2017, the second half of the year was marred by the Chinese boat accident which decelerated momentum and by the end of the year annualized hotel demand had declined by 4%.

Commenting on the rise and fall of 2018 C9’s report indicated the period of August through October eradicated the early gains in the year. At that juncture, despite negative industry sentiment of a continued drop, a soft landing ensued in the final two months of the year driven mostly on rates, and by year-end the new normal kicked in.

Moving into 2019, and looking to put the benchmark in perspective for  Phuket hotels,  Jesper Palmqvist of hospitality intelligence group STR said “When looking at the long term historic trend, the pipeline of new supply but conversely also the increased competition in the region for Chinese demand, it is plausible that this recent pressure on Phuket performance will continue into the second half of the year, with an increased spread in performance among the hotels – basically a tightening of the market compared to the past couple of years.”

 Further reflecting on the prevailing trade winds at the end of 2018 “This trend continued throughout peak season into 2019 where January was similar to that of 2015, with overall demand shifting by -6% compared to the same month last year. Indications in daily data for the important month of February echoes the sentiment hitting numbers close to 2017, leading to peak season ending with a noticeable step back. In addition, it is likely that March may also see a year-over-year decline from last year, but as we approach low season again we do not expect negative growth to continue to the same extent.”

Closing out the outlook on Phuket, one of the key takeaways from C9 Hotelworks report is that India is seeing a rapid escalation of market prominence. In 2018 Indian inbound travelers recorded a 56% year-on-year increase as direct flights to the island were opened from Mumbai, New Delhi and Bengaluru. With more airlift coming in 2019, eyes are now turned to the subcontinent as a supplement for the Mainland China mass travel machine.

To download C9 Hotelworks Phuket Hotel Market Update

https://www.c9hotelworks.com/downloads/phuket-hotel-market-update-2019-03.pdf