Phuket Hoteliers Seek Solution To Price-Cutting Woes

[webfact]

Phuket hoteliers seek solution to price-cutting woes

A sign in Patong advertises a special low-season room rate to passing motorists.

PHUKET: In a bid to keep small hotels and guesthouses in Patong from falling into bankruptcy, a group called the Patong Hotel and Guesthouse Association (PHGA) is calling for hoteliers to end current price wars by agreeing to set minimum room prices.

The informal consortium of hoteliers wrote in its “Letter of Awareness Awaking” sent to members last week: “During the past high season, even on New Year’s Eve, several hotels where selling good rooms at 700 baht per night. This year, new hotels have opened up nearby and I am afraid that due to competition the prices will go even lower than that,” the statement read.

"If a solution is not found quickly, for the incoming high season this ‘war of prices’ will continue and even though the number of customers may increase, lower room prices will not be sufficient to cover all the costs and many hotels will face bankruptcy,” it warned.

The letter suggested adopting several “price seasons” and a basic framework for classifying standard rooms so that minimum prices could be agreed on by any hotel joining the campaign.

However, the letter also recognized the limited impact the campaign would have if only a few hotels took part. It also acknowledged that classifying and categorizing rooms would be a “difficult task”.

The PHGA listed a downturn in tourist arrivals, operating cost increases and the strengthening of the Thai baht as factors contributing factors to the crisis, but it identified the main culprit as oversupply.

According to the the most recent Tourism Authority of Thailand (TAT) figures, Patong has 14,821 rooms in 264 "accommodation establishments", or about one-third of the total 43,036 rooms on the island.

"People do not come to Patong because the rooms cost 500 baht. They are coming anyway and they are used to paying more. It is the ‘war of prices’ between the hotels which has set the prices so low," the letter read.

"Even though there is still an economic crisis in [the] USA and in Europe, a room for 1,000 baht is still a cheap room. But of course, if we sell it cheaper, anyone will be glad to pay as [little] as they can,” it continued.

Bert van Walbeek, chairman of the Pacific Asia Travel Association (PATA) Thailand Chapter, supported the call, but said the campaign was unlikely to garner wholesale support.

"I think working on this terrible price dumping that is happening everywhere is very good. It’s a sad story that the hotel rates in Thailand, including Phuket, are 30% less than anywhere else in Asia,” he said.

Creating better marketing awareness and sales training would be much more effective than setting certain rates, because implementing something like this in Thailand is ‘mission impossible', he said.

Trying to establishing fixed minimum rates might also run into legal difficulties, he added.

Preechavude “Prap” Keesin, President of Patong Taxi Federation and son of Patong Mayor Pian Keesin, agrees with the proposal.

"If this problem goes on, it may cause business operators to suffer and ruin confidence in investing in Patong,” Mr Prap said.

"The real problem is that oversupply has forced prices down, and I think it would be better if the prices were regulated,” he added.

Despite agreeing that a state of oversupply exists, Mr Prap's Pisona Group last week reportedly took the first step towards applying for permission to build a new 744-unit resort across 20 rai high in the Patong hillsides. If completed, the project would be the largest on the island in terms of room numbers.

Phuket Chamber of Commerce (PCC) President Dr Sirichai Silapa-archa disagrees with minimum prices, arguing that the forces of supply and demand should be left alone.

"There should be a better solution. The problem is too many rooms and not enough customers. If prices were set [artificially] high, they wouldn’t sell and trade would go 'underground'," he said.

Suchart Hirankanokkul, President of the Thai Hotels Association (Southern Chapter), was also wary of the legality of such ‘price fixing’.

"Actually they cannot do that; it’s competition in the free market and without legal support there would be no way of making sure [PHGA] members cooperate,” he said.

What they should do is call a meeting and just ask for cooperation to stop the price war,” he said.

-- Phuket Gazette 2010-09-20

[Jimi007]

Hum, too many rooms to support all the businesses, but let's keep building more and try to organize price fixing. Amazing!

[PoorSucker]

It's bad times, we must raise the prizes.

[laurentbkk]

Patong has became the Pattaya of the south ,no wonder many people dont want to go there. If they want tourists to come back ( not the single sex tourists men) they should maybe renew their policy there. I go to Phuket time to time but havent been to Patong for years ,its a total disgrace. :annoyed::annoyed:

[lovelomsak]

I have been to Phuket once seen it never ever going back. Just one last thing Maybe the guys renting for 700 a night have had them for years and are paid off a long time ago.They can still make decent money at that price.

[gotlost]

Price fixing? Did I hear the dirty words PRICE FIXING?

[Jimi007]

Price fixing? Did I hear the dirty words PRICE FIXING?

Well, at first it was:

"The real problem is that oversupply has forced prices down, and I think it would be better if the prices were regulated," he added.

But then:

Bert van Walbeek, chairman of the Pacific Asia Travel Association (PATA) Thailand Chapter, supported the call, but said the campaign was unlikely to garner wholesale support.

"I think working on this terrible price dumping that is happening everywhere is very good. It's a sad story that the hotel rates in Thailand, including Phuket, are 30% less than anywhere else in Asia," he said.

Creating better marketing awareness and sales training would be much more effective than setting certain rates, because implementing something like this in Thailand is 'mission impossible', he said.

Trying to establishing fixed minimum rates might also run into legal difficulties, he added.

And the part I really liked! Patong's Mayor's son saying;

Preechavude "Prap" Keesin, President of Patong Taxi Federation and son of Patong Mayor Pian Keesin, agrees with the proposal.

"If this problem goes on, it may cause business operators to suffer and ruin confidence in investing in Patong," Mr Prap said.

"The real problem is that oversupply has forced prices down, and I think it would be better if the prices were regulated," he added.

Despite agreeing that a state of oversupply exists, Mr Prap's Pisona Group last week reportedly took the first step towards applying for permission to build a new 744-unit resort across 20 rai high in the Patong hillsides. If completed, the project would be the largest on the island in terms of room numbers.

Ah logic, what's that again? "The real problem is over supply", so I'm going to add to the problem by clearing a hillside and building a 744 unit resort! Brilliant!

Edit: font resize

Edited September 20, 2010 by Jimi007

[How]

Price fixing? Did I hear the dirty words PRICE FIXING?

Reducing prices only benefits the Tourists,and if you can reduce your prices now ,you were too greedy before.Everyone has there overhead costs,so prices should reflect these cost,NOT GREED.

Cutting your prices will not bring you more Tourists!

[MaiChai]

Thailand is not cheap anymore, especially if you are coming from Europe or America, and then add on the cost of the flight. Then for alot of these guesthouses, the quality of the rooms are not very good. Now if you go to Vietnam the rooms there go for about 10USD a night and alot of the guesthouses are really nice and in beautiful locations. Thailand really is over developed now and I suspect alot of people don't come here for the culture/food/scenery

[yesdavy]

Price fixing? Did I hear the dirty words PRICE FIXING?

Reducing prices only benefits the Tourists,and if you can reduce your prices now ,you were too greedy before.Everyone has there overhead costs,so prices should reflect these cost,NOT GREED.

Cutting your prices will not bring you more Tourists!

Amen-and-a-half, How. You know what you are talking about. Two things that can be added to your comment are:

1. The kinds of tourists that are price driven are not the demographic that enlightened public and private sector travel industry professionals target. The reasons are obvious so no need to waste space here.
2. Deep discounting has a future backlash upon returning to normal economic and political conditions when wholesalers and tour operators balk at paying increases for the same properties that have only gotten more wear and tear on them.

[yesdavy]

Thailand is not cheap anymore, especially if you are coming from Europe or America, and then add on the cost of the flight. Then for alot of these guesthouses, the quality of the rooms are not very good. Now if you go to Vietnam the rooms there go for about 10USD a night and alot of the guesthouses are really nice and in beautiful locations. Thailand really is over developed now and I suspect alot of people don't come here for the culture/food/scenery

The way things are going, they will, like it or not, find that they have come here for the 100 meter billboards.

[PhilHarries]

"I think working on this terrible price dumping that is happening everywhere is very good. It’s a sad story that the hotel rates in Thailand, including Phuket, are 30% less than anywhere else in Asia,” he said.

I don't know what he's been smoking but it sure as hel_l wasn't legal.

Only Malaysia and Singapore in Asia are more expensive than Thailand.

[keestha]

Nobody mentions that tourists simply have less money to spend nowadays, just look at the exchange rates for the Euro, British Pound, US$ and so on. Plus the fact that many people are losing jobs or afraid to become unemployed.

Operating a hotel, restaurant, bar, travel agency or whatever tourist business, you are under heavy pressure to keep the prices low.

[LivinLOS]

"I think working on this terrible price dumping that is happening everywhere is very good. It’s a sad story that the hotel rates in Thailand, including Phuket, are 30% less than anywhere else in Asia,” he said.

I don't know what he's been smoking but it sure as hel_l wasn't legal.

Only Malaysia and Singapore in Asia are more expensive than Thailand.

But keep repeating a lie long enough and the myth might become accepted. Really tho, the wonderful irony of someone whose one of the primary benefactors and leaders of the tuk tuk cartels, discussing price fixing and 'regulation'.. Superb.

The thing is I do feel for the hoteliers, its not like these are transient non skilled workers like tuk tuks, these are people who have made significant investments into the country, employ large amounts of people etc. The thing that they are faced with is the high price of land and INSANE key money requirements, which serves to enrich only a tiny subset of the entrenched power families. Its due to these high fixed costs they need more income than other areas in asia to simply pay their investment / provide an income. Like bars they are not enriching themselves with these high costs, the margin is passed on (to the same family as the person talking about 'price regulation' above) !!

[Valentine]

These are the same hotels that force their guests to pay for Xmas & New Year's dinner whether they want to eat it at the hotel or not. Provide a good quality service at a fair price is what counts. Charging extortionate fees for internet access is akin to excessive telephone charges made through the hotel system. Internet access should be included in the room rate, it is not expensive these days.

[madmitch]

The kinds of tourists that are price driven are not the demographic that enlightened public and private sector travel industry professionals target. The reasons are obvious so no need to waste space here.

This is a real generalisation and not necessarily right.

It may be the case for the larger and medium hotels but there are a number of smaller businesses targetting backpackers,long-stayers on a budget and general budget travellers. It can be profitable if marketed correctly. Websites like hostelworld are booming right now and it's not just backpackers using them. More tourists this year are likely to be on a tight budget and it could be that these establishments do better than the so-called small boutique hotels that are often no more than glorified guesthouses.

[Seelow]

"I think working on this terrible price dumping that is happening everywhere is very good. It's a sad story that the hotel rates in Thailand, including Phuket, are 30% less than anywhere else in Asia," he said.

I don't know what he's been smoking but it sure as hel_l wasn't legal.

Only Malaysia and Singapore in Asia are more expensive than Thailand.

Having just come back from a four night stay in the 5star Raffles Le Royal hotel in Phnom Penh for the equivalent of TB 3,650 a night I find that statement rather hard to believe. I have just checked online the prices charged by La Flora where we usually stayed on our trips to Phuket until we finally gave up on the country and there is nothing under TB5200, and that in a few weeks time may double.

For our money not only did we get a nice room with balcony in a beautiful colonial style building overlooking huge well kept gardens, but joy of joys after Phuket, the tuk tuks cost $1-$2 for most trips, and were available on a half day basis for $10.

There were lot of bars catering to all tastes with many overlooking the river with old style high ceiling colonial architecture with the beers ranging from 80 cents in happy hour to $2 normal. Smart resteraunts were $25 for two to eat well, and you can walk down the main streets without being constantly assaulted by touts.

We have already reserved for our Xmas break, with another great joy being we will not be forced to pay for meals we do not want which I despised.