Think temples, palaces, beaches and vibrant nightlife, and chances are Thailand comes to mind.
While political turmoil in 2013 and 2014 hit the hospitality sector hard in Thailand, 2015 brought renewed optimism and a record 29.9 million international travelers to its shores.
For a tourist hub like Thailand, which ranks among the top 10 preferred holiday destinations globally, the prolonged unrest in 2014 could have spelled disaster. However, according to Mike Batchelor, Managing Director for Investment Sales (Asia) at JLL Hotels & Hospitality Group, the impact it had on the Thai hospitality market was barely “a hiccup”.
He believes the country’s remarkably resilience in the face of coups, airport closures and natural disasters may have played a role in minimizing the extent of the damage.
If that is true, it would be little surprise that in the year leading up to September 2015, year-on-year growth in tourist numbers to Thailand was 49.9 percent. So has the Thai tourism sector finally turned a corner?
Tourists turn to Thailand
Recent news reports certainly indicate so by forecasting that a million foreigners will visit the Kingdom during the Lunar New Year celebration alone from February 6 to 14, 2016. The projection is equivalent to a 19 percent increase in arrival numbers over last year’s Chinese New Year, according to The Nation. Also encouraging is the revenue forecast of 29 billion baht ($8 billion), representing a 32 percent rise over the same period last year.
This is set to build on a strong start to the year with two million foreign visitors and spending rising by 16 percent compared to the same period last year.
Batchelor points to increased activity from the low-cost air carriers that are flying tourists to transport hubs such as Surat Thani and U-Tapao, which in turn service popular destinations such as Koh Samui and Pattaya respectively. Pattaya, for example, is expected to see a 13 percent rise in tourists when AirAsia connects Thailand with Chinese cities such as Nanning and Nanchang.
Other factors likely to bump up arrivals in 2016 include the recent introduction of multiple-entry six-month visas, the re-opening of Terminal 2 at Bangkok’s Don Mueang airport and an almost completed expansion of Phuket airport, which will increase capacity from 6.5 million to 12 million visitors a year.
Big plans for cross-border tourism
The Thai government also plans to increase its marketing efforts to encourage cross-border tourism with Cambodia and Myanmar, and promote marine and cruise tourism by linking Thailand with the Philippines, the Nation reports.
“The tourism sector is playing an increasingly important role in driving the country’s economic growth,” says Suphin Mechuchep, Managing Director, JLL Thailand. “A decent chunk of tourist spending goes to retailers in various retail formats from street-side retail strips to modern shopping centres. Retail markets in key tourist destinations such as Bangkok, Pattaya, Phuket, Krabi, Koh Samui, and Chiang Mai will benefit most from this trend,” she adds.
While the pace of recovery could be moderated by the new supply of hotels, Batchelor notes that mid-tier hotels will likely continue to do well, thanks to increased tour group activity, especially from China. These are already seeing 70 per cent occupancy rates, higher than other hotels. Bangkok, meanwhile, will have more hotel rooms this year with the opening of a further 5,500 rooms in the mid-scale segment.
Over in the luxury sector, demand is very much keeping up with supply. Around 900 new rooms are expected in Koh Samui in the next two years yet occupancy is likely to increase due to better transport connections to the island and a growing number of tourists.
While the demand for hotels increases in 2016, the lack of premier assets on the market will likely keep yields tight. Batchelor says: “There is a scarcity of investment-grade assets on Thailand’s hotel market, which has shifted the focus of transactions to smaller assets over 2015.” He also points out that “yields for Thai hotels are likely to remain tight across most markets in 2016, which may prompt local Thai investors to seek investments offshore.”
Despite fewer investment opportunities, the outlook for the Thai hospitality sector in 2016 is positive. With tourist numbers steadily on the up, optimism levels are also rising in happier time for the Land of Smiles.