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Koh Samui Airlift Hits Hotel Performance

  • KOH SAMUI, THAILAND. Koh Samui’s four-year hotel building boom is threatening to undermine the long-term success of the destination as supply outstrips an arrivals demand hamstrung by severely limited airlift, according to Samui Hotel Market Update 2010, released today by leading consulting firm C9 Hotelworks.

    The respected report (download the full report here) reveals that oversupply heavily impacted last years operating performance and if there was no airport expansion or relocation plans that would improve access to the island, the long-term potential of Koh Samui would be effectively capped.

    Koh Samui, Thailands second-largest island, 700 kilometres south of Bangkok, is located in an international flight corridor requiring low landing levels. Coupled with environmental restrictions allowing only 36 flights a day at the existing airport and a runway length unable to handle larger aircraft, it has created a situation that is strangling the popular southern Thailand destination.

    C9 Hotelworks Managing Director Bill Barnett said: The simple problem is that you cant stay there if you cant get there, this is the key restricting growth in Koh Samui. Private sector development in the hospitality sector has surged well ahead of transportation infrastructure improvements which has caused the market to go into a tailspin.

    According to report data, gains during 2010 in international arrivals were neutralised by diminishing European tourists and a drop in the volume of historically strong repeat guests. Marked declines were registered in occupancy by 7%, average room rates by 15% and RevPAR by 26% compared to 2009.

    Supply is far outweighing demand in Koh Samui. Download hi-res version here.

    However, Mr Barnett added that forward trading prospects were greatly bolstered by the high quality of much of the new supply with a number of stylish branded products entering the market in the luxury and upscale tiers.

    Short-term there is an inherent risk of being lost in transition over the next few years. This uncertainty is highlighted by the ability of the market to absorb 801 new rooms scheduled to enter the supply side by 2012, presenting a growth of 5% over the existing 14,401 rooms at the end of 2010, Mr Barnett said.

    Speaking to resort owners and hotel managers during the market research process comments to C9 centred on the airlift conundrum topic. Comparing the emerging destination to the more developed markets of Phuket and Bali, what was clearly missing in Koh Samui was regional low cost carrier and charter flights.

    As new markets are emerging low cost carriers and charter flights are high demand generators. An example of competing regional destinations is the new international airport in the emerging tourist island of Lombok in Indonesia near to Bali, which looks set to leapfrog growth with its ability to land Boeing 747 and Airbus wide body aircraft, Mr Barnett said.

    Koh Samuis journey from an idyllic Robinson Crusoe-like paradise to a mainstream market has hit the halfway marker. Expectations for 2011 look to focus on the coming of age debate and whether increasing international brands can induce sustainable demand.

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