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Phuket fighting for its life as Domestic Tourism fails to support the island

8 Sep 2020

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

 

The hotel industry in Phuket is reaching its breaking point and the government will need drastic economic support to survive the high season. The warning reached a crucial turning point from a slew of industry leaders who fear the island. 

In the wake of the controversial international travel reopening scheme "Phuket Model," the reality is biting back as hotels on Thailand's leading resort island can not sustain domestic tourism-based operating viability. 

 

Passenger arrivals at the air gateway have plunged 65 per cent year-on-year from January through July of this year, according to Thailand's Airports. 

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

 

One of the green shoots is the Alternative Local State Quarantine programme, with the application of more than 60 island properties. While this program is meant to emulate Bangkok's ASQ program, given that there are no direct international flights to Phuket, the government needs wider support for the local-level return of international travellers and inter-ministerial coordination before it can materialize.

But it can take months. 

Anthony Lark, president of the Phuket Hotels Association representing 78 hotels in Phuket said: "Math simply doesn't work with reporting single-digit occupancies. No amount of induced local demand can prevent the continuing dramatic loss of jobs and quickly erode the financial crisis for owners and operators. For foreign travellers, we strongly advocate a safe, pragmatic and strategic reopening. 

 

Phuket hotels struggling as domestic tourism don't support the island The Thaiger News 

 

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

 

C9 Hotelworks Managing Director Bill Barnett said: "The failure of Thailand to relaunch the overseas tourism creates a dangerously dangerous scenario for the hospitality industry in Phuket. The financial impact of the domino is not only on hotels and the expanded tourism sector, but the development pipeline is suffocating. This will negatively trigger job erosion in construction, real estate, retail and eventually show up in consumer credit defaults. The situation is bad and is likely to get worse, as the remaining operating hotels incur losses day by day. 

 

In terms of updating the situation of the Phuket hotel on the ground, there continues to be a lot of controversies and a lack of national and local consensus about the proposed long-stay sandbox "Safe and Sealed." While the Bank of Thailand issued a strong warning last week about the potential disruption to the country heavily dependent on tourism, the fate of Phuket's coming high season remains highly challenged. 

 

Bill Barnett commented on a way forward for C9: "Any reopening plan must not only be well planned but must also 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 tourism restore, the more critical issue is how hotels in the current state of limbo can fight for their lives. 

 

Speaking of the current situation of Phuket, Anthony Lark added: "First of all, the more proactive dialogue must be undertaken between the public and private sectors. We can not simply say that we are eternally in unknown territory now. Steps must be taken, and one voice must be formed. 

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

Source Thaiger