Phuket hotels fighting for their lives as domestic tourism fails to support the island

By Bill Barnett

 

 

In the wake of last weekend’s ministerial talkfest and discussions with local industry players on the island, Bill Barnett paints a bleak picture of a tourist island in freefall. All the shops, restaurants and hotels can’t remain empty, or merely keep their doors open with a handful of domestic customers, forever.

 

Phuket’s hotel industry is reaching breaking point and drastic economic support from the government will be needed for it to survive the high season. The warning from a slew of industry leaders who fear the island has reached a crucial turning point.

 

In the wake of the controversial “Phuket Model” international travel reopening scheme, reality is biting back as hotels in Thailand’s leading resort island are unable to sustain operating viability based on domestic tourism.

 

According to the Airports of Thailand, passenger arrivals at the aviation gateway have plunged 65% year-on-year from January through July of this year.

 

 

What is clear is that the 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break-even or even be cash-flow positive with only domestic demand. This realistically could set the scene for 50,000 job losses in the hotel sector this year if there’s no support forth coming or international visitors are not allowed in.

 

One of the green shoots is the Alternative Local State Quarantine program, with over 60 island properties applying. While this program is meant to emulate the ASQ program in Bangkok, given there are no direct international flights to Phuket, the government needs wider support of a return of international travellers at a local level and implement inter-ministerial coordination before it could materialise. But this may take months.

 

Anthony Lark, President of the Phuket Hotels Association that represents 78 hotels in Phuket said: “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”

 

 

With tourism being the lead economic indicator in Phuket data newly released by hospitality consulting group C9 Hotelworks reveals the Covid-19 impact on the hotel development pipeline with 69% of hotels now being delayed or put on hold. Looking at the economic consequences, at the end of 2019, there were 1,758 licensed accommodation establishments on the island and today incoming projects stand at 58 hotels, representing a 19% rise in supply with 16,476 additional rooms planned.

 

C9 Hotelworks Managing Director Bill Barnett said: “Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry. The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline. This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels remaining incur losses day in and day out.”

 

In terms of updating the Phuket hotel situation on the ground, there continues to be much controversy and a lack of national and local consensus over the proposed “Safe and Sealed’ sandbox long-stay program. While a stark warning was issued last week by the Bank of Thailand over the potential disruption to the heavily tourism-dependent country, the fate of Phuket’s coming high season remains very challenged.

 

Citing a way forward C9’s Bill Barnett commented: “Any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, but the more critical issue is how hotels can fight for their lives in the current state of limbo.”

 

 

Speaking about Phuket’s current situation Anthony Lark added: “Firstly, greater proactive dialogue between the public and private sector has to be undertaken. We can’t simply say we are now in unknown territory forever. Steps must be taken and a single voice formed.

 

“Secondly, the Bank of Thailand has to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. Tourism is a human endeavor and without protecting and nurturing our Thai workforce there will be no recovery.”

 

Source: https://thethaiger.com/coronavirus/phuket-hotels-fighting-for-their-lives-as-domestic-tourism-fails-to-support-the-island

 

-- © Copyright The Thaiger 2020-09-08

 

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Phuket has always been over rated!

I went to Phuket only once, the taxi from the airport took a detour to some place that tried to sell me tours. This was obviously far from unique.  Left a bad taste so I shortened my stay from a week to three days. And have never been back.  Phuket deserves all it gets.

Boy this is going to a massive 'reset' with very few left in business to reap any possible rewards in regards to new arrivals.

Interesting and testing times ahead for sure for Phuket businesses...

17 minutes ago, webfact said:

Bill Barnett paints a bleak picture of a tourist island in freefall. All the shops, restaurants and hotels can’t remain empty, or merely keep their doors open with a handful of domestic customers, forever.

Thankyou Bill Barnett explain.

 

We not know that. 

 

Obvious.

14 hours ago, PatOngo said:

Phuket has always been over rated!

 

With a lot of yellow shirts.  

Get creative!  Allow quarantine in Phuket...sell room with pay for 2 nights get 3rd night free.

 

Free soapy massage with 1 week booking.  Free escort for 1 evening with 2 weeks booking...

 

Free WIFI...1st drink free during happy hour!

 

You want to stay in business?  Do something  to attract attention and tourists. 

From Chiang Mai, return flight to Phuket 5kbht, return flight to Hanoi/Da Nang/Saigon 2k5 (plus another 90 days on return).

It's just not worth the air fare, so unless they reduce the price, I'll wait until the borders open up again.

 

I'd book a holiday there tomorrow if the flight price was 2k5.

RIP  Phuket  ......   start digging the graves  

 

 

 

1 minute ago, BritManToo said:

From Chiang Mai, return flight to Phuket 5kbht, return flight to Hanoi/Da Nang/Saigon 2k5 (plus another 90 days on return).

It's just not worth the air fare, so unless they reduce the price, I'll wait until the borders open up again.

Ho Chi Min for me soon .... 2.5k rtn.  

This place is doomed without the intl. tourists. Very sad. No other industry here.

3 minutes ago, BritManToo said:

From Chiang Mai, return flight to Phuket 5kbht, return flight to Hanoi/Da Nang/Saigon 2k5 (plus another 90 days on return).

It's just not worth the air fare, so unless they reduce the price, I'll wait until the borders open up again.

Well, go to Vietnam then. Enjoy the quarantine when you come back!

Just now, madmitch said:

Well, go to Vietnam then. Enjoy the quarantine when you come back!

Tourism is an optional choice, I can wait until the restrictions have gone, or just save my money.

If Thailand wants to encourage local tourism, it needs to make local tourism attractive.

Sorry you can't grasp that.

 

PS.

If Cambodia or Vietnam opened their border to me, I'd probably not come back to Thailand.

31 minutes ago, Yinn said:

Thankyou Bill Barnett explain.

 

We not know that. 

 

Obvious.

If a Thai would have said that, stating the obvious , he would have been ridiculed .

3 minutes ago, BritManToo said:

Tourism is an optional choice, I can wait until the restrictions have gone, or just save my money.

If Thailand wants to encourage local tourism, it needs to make local tourism attractive.

Sorry you can't grasp that.

It was the nonsensical comparison I was trying to highlight.

 

Of course we'd like to see cheaper flights, and there are cheaper options than 5,000 baht CNX-HKT return BTW. Don't forget that Thais who have registered for the Goverment scheme get a large discount on thise prices and that's possibly why we're seeing higher prices right now.

 

And when things get back to a semblance of normality regarding travel, I have a feeling we'll be in for a rude awakening when it comes to flight prices as the airlines try to get back into profit based on fewer travellers.

Phuket has shunned domestic tourism for years out of greed for the international visitors. Thai visitors were held in contempt and often ripped off more than foreigners. It is more expensive to take an open air tuk tuk from Patong to Kata beach than it is to cross Bangkok in an aircon Grab car.  Phuketians are not known for their friendliness and warm welcome. Is it any wonder that the Thais are not flocking to the island?

"We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”

 

Safe & pragmatic? Does this fit together? Or did he mean" We strongly advocate a reopening for foreign travellers". I think it safe to say that this would be very pragmatic. 

57 minutes ago, PatOngo said:

Phuket has always been over rated!

 

Totally agree and why does it get all the press? Pattaya and Bangkok are far bigger tourist destinations and hurting just as bad. At least they've realised that local tourism just doesn't cut the mustard

I don't think I ever heard anyone say "I had a nice holiday in Phukett" 

Many seem to comment on the unfriendly locals and the high prices , Thais and foreigners alike 

I don´t understand anything! A week ago it was dancing and joy all around. Here we had 90% full on weekends and about 70% on other days. 

Did they lie about that? 

1 hour ago, Chelseafan said:

 

Totally agree and why does it get all the press? Pattaya and Bangkok are far bigger tourist destinations and hurting just as bad. At least they've realised that local tourism just doesn't cut the mustard

Cus the funds from Phuket went back to the Goverment unencumbered hence a bigger slice of the pie Bangkok received!!!! 

Oh poor Phuket, you think you are the only place suffering from lack of tourists?

3 hours ago, PatOngo said:

Phuket has always been over rated!

And overpriced !

2 hours ago, Matzzon said:

I don´t understand anything! A week ago it was dancing and joy all around. Here we had 90% full on weekends and about 70% on other days. 

Did they lie about that? 

What you had was BS !

2 hours ago, Matzzon said:

I don´t understand anything! A week ago it was dancing and joy all around. Here we had 90% full on weekends and about 70% on other days. 

Did they lie about that? 

Of course they lie, but it's not about truth, it's all about FACE! To be maintained at any cost.

 

 

Anyhow, pretty clear from that infographic on flight arrivals that Phuket is having, and is in for, a very hard time. Best case scenario, it's going to be at least a year in total (Q1 2021) before anything gets back to something approaching 'normal'. It would be interesting to see August's figures, certainly quite a few of my Thai colleagues have been taking the chance to visit Phuket recently.

 

Without wanting to stick the boot in, like another said, I have only been twice in my 20 odd years in Thailand. I can't say I didn't enjoy both trips overall but the price gouging was blatant and left an unpleasant taste. This was not limited to foreign guests, Thais have had similar experiences.

 

Somewhat amusing that Phuket is now having to rely for its survival on the very group it has previously alienated....

Domestic tourism is increasing. Many Thais are seeing that the resorts are largely empty, and the prices are great. I booked a room in a seaview resort on Samui later in the month. Usually 2,500 to 3,000 baht. Got a deluxe seaview room for 630 baht! According to friends who live there, there are far more Thai tourists on Samui, than ever before. Phuket has countless issues. It is overpriced, especially during a holiday. Many still do not get it. And it is way over developed. In my opinion, other than the Andaman, which is gorgeous, Phuket lost it's charm 20 years ago. Now? It is a pale shadow of it's former self. 

 

Hua Hin was packed over the weekend. So were other coastal towns. Probably Pattaya too. 

 

The army needs to somehow find some courage, within their very timid minds, and allow international tourism again. If ANY person from ANY nation gets a covid test before boarding the plane, then pays for an expensive 14 day prison sentence (quarantine), there is no risk for Thailand, and only upside.

 

Get your act together guys. Man up. Do it for your people. If you care one iota. 

48 minutes ago, trainman34014 said:

What you had was BS !

Hahahaha!
 

43 minutes ago, PatOngo said:

Of course they lie, but it's not about truth, it's all about FACE! To be maintained at any cost.

Hahahaha!

 

I am so happy that you hung on to the thought they I didn´t know that. Ever heard of sarcasm?

Phuket is by far the best place to live in Thailand. Stunning beaches, malls and cinemas, clean air, local markets with great food, a beautiful house with private pool for less than 25k a month, motorbike trips to nearby Trang, Krabi and Phang Nga. Nothing beats living in Phuket imho. Especially since Covid, its an absolute paradise. Coming here as a tourist is a totally different story of course. Would never advise people to holiday here. 

So sorry Phuket and all other suffering tourist spots, and affected business.  You are paying a severe price for establishing a business model doomed to collapse sooner or later.