Hotel glut a massive challengeThe American hotel chain Best Western International (BWI) expects the hotel business in Thailand, especially in Bangkok, will continue to face the impact from the European economic crisis and a room oversupply until 2013.
Thailand still has room to grow in tourism because it offers value for money, service quality and a variety of products. However, room demand cannot overtake supply.
At the present, 11 international hotel chains in Bangkok have a total of 4,523 rooms with average occupancy of 57.8% and an average daily room rate of 2,973 baht, according to a survey complied by leading chains.
Mid-scale hotel rooms of 19 international and local chains total 6,037 with average occupancy at 59.8% and a daily room rate of 2,235 baht. Total rooms at nine economy hotel chains in Bangkok are 1,700 with occupancy of 70.9% and a room rate of 848 baht.
Since the start of this year to date, the occupancy rate of Best Western Plus @20 Sukhumvit has been 36% and Best Western Bangkok Hiptique Sukhumvit 13 50%.
Glenn De Souza, vice-president for BWI's international operations in Asia and the Middle East, said nobody in the hotel business, particularly in Bangkok, can avoid the price war.
"Customers have more choices today. If your room rate is higher than your competitors', they will change to stay with the others. Your revenue will decline eventually and this will affect debt-payment ability. And you will finally have to enter debt restructuring," he said.
Sukhumvit has already oversupplied. Average occupancy in the area is estimated at 40-50%.
"If someone says their occupancy rates are higher than this figure, I think they are telling a lie," said Mr De Souza.
"If local politics becomes more stable and hoteliers can increase their room rates in the high season, the problem will be eased. If not, the situation will worsen for the whole of next year."
The difficulties mean that some newer hotels will need longer than the standard five to seven years to break even, he added.
He is also concerned about populist policy promises by the Pheu Thai Party such as the increase in the minimum wage to 300 baht a day, and its potential impact on labour in the hotel industry.Although the new government promises to cut corporate tax from 30% to 23% in 2012 and to 20% in 2013, it cannot offset higher salary expenses. At the present, labour in the hotel business makes up about 30-40% of total costs.Looking on the positive side, Mr De Souza said the lower average room rate for Thai hotels makes prices very competitive. It creates new markets for budget-conscious travellers from countries such as Russia, China, Taiwan, India, and South Korea.
"The mid-scale hotel segment has room to grow because its investment cost is lower than for four- and five-star hotels both in terms of software and hardware," he said.
Therefore, BWI has focused on mid-scale hotels through its two brands _ Best Western and Best Western Plus+. It will operate 25 hotels in Thailand in the next two years, up from 14 now.
In 2011, average occupancy rate of BWI hotels is estimated at 68% nationwide, compared to 75% last year. Next year's occupancy rate will be around 65-70%.
Original articlE; http://www.bangkokpost.com/business/eco ... -challenge 
