Bangkok hotel demand ‘set to rebound in Q2’

Bangkok hotel demand ‘set to rebound in Q2’

End of emergency decree a main factor

Despite high uncertainty, hotel room demand is expected to rebound in the second quarter now that the state of emergency has been lifted, according to the latest research by Jones Lang LaSalle’s hotels and hospitality group.

A bird’s-eye view of hotels along the Chao Phraya River in Bangkok. Analysts believe demand for rooms in the capital will rebound soon after a decline in the first quarter as international travellers return. Kosol Nakachol

After turning in improved performances each year from 2011-13, Bangkok’s hotel market saw a decline in occupancy levels and revenue per available room in this year’s first quarter.

The poor performance was blamed on the recent political turmoil causing a drop in international arrivals and thus demand.

Andrew Langdon, executive vice-president in charge of the group, said the continued political unrest that escalated last October and the introduction of the emergency decree in January negatively affected international visitor arrivals in Bangkok.

This has created a demand shortfall in Bangkok’s hotel market, as reflected by a drop in occupancy.

“However, there is good news in the first-quarter hotel trading figures, with the average daily rate increasing in the range of 1.2% to 5.4% across all hotel segments,” said Mr Langdon.

Tourism Department figures show international visitor arrivals in Bangkok last year increased by 20.1% from 2012 to a record 17.5 million. However, they fell by 15% year-on-year in this year’s first quarter, immediately affecting all hotel segments in Bangkok:

- The five-star segment was hit hardest, with average occupancy falling to 45.2% in this year’s first quarter from 75.2% in the same period last year. While the average daily rate (ADR) increased by 5.4% year-on-year, average revenue per available room (RevPAR) declined by 36.6% due to lower occupancy.

- In the four-star segment, while first-quarter ADR increased by 1.2%, average occupancy fell to 54% from 80.8%, resulting in a 32.4% decline in RevPAR.

- In the January-March period, the three-star segment saw an ADR improvement of 1.6% year-on-year. However, with average occupancy falling to 55.3% from 81.3% during  the same period, RevPAR declined by 30.9%.

“While no official update has been made available since the state of emergency was lifted on March 19, the consensus is that the cancellation of the state of emergency should help restore demand in the Bangkok hotel market,” said Mr Langdon.

“In addition, the amount of new hotel supply planned for completion in Bangkok this year is relatively low compared with previous years and thus should not have any significant effect on occupancy rates.”

Bangkok has about 100,000 hotel rooms. An additional 2,200 will be completed this year, down from an annual average of 3,700 for each of the previous four years.

“Having said that, it’s hard to predict where the Bangkok hotel market will be heading in the remainder of 2014, as it relies to some extent on the political situation, which remains uncertain. But experience from a series of crises that Thailand has faced in the past decade shows the market is resilient and recovers very quickly thanks to Bangkok’s position as one the world’s most popular holiday destinations,” Mr Langdon said.

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