Many negative factors in Bangkok in 2015 have driven SET-listed Erawan Group Plc (ERW) to expand its hotel business abroad and increase the number of budget hotels in a bid to reduce risks.
The company expects to open 15 hotels under the budget Hop Inn label in the Philippines, starting this year. The Hop Inn will be its flagship brand for this market.
Erawan president Kamonwan Wipulakorn said the Philippines' economy was expected to continue to expand, making the company confident Hop Inn will find demand from local businessmen.
Kamonwan Wipulakorn, president of Erawan, is keen on the Hop Inn brand.
The top four populations in Asean are Indonesia with 255 million, the Philippines with 103 million, Vietnam 92 million and Thailand 70 million.
GDP in the Philippines is projected to grow 6-7% this year, double that of Thailand, which the National Economic and Social Development Board expects to grow at 3%.
"Our main focus in Asean is the Philippines," Ms Kamonwan said.
The Asean Economic Community is likely to produce a direct benefit for the hotel business in Thailand and increase travel across the region through the growth of low-cost airlines and airport development in member countries, she said.
In the first nine months of 2015, 11 Hop Inns operated in Thailand, mostly in provincial areas.
Erawan set a 2-billion-baht investment budget to open 15 new hotels in 2016, seven of which are Hop Inns.
The company prefers Hop Inn to penetrate potential markets because it requires a smaller investment budget, with Erawan expecting to break even within three years, below the 10-year average of most other hotel segments.
Each Hop Inn room costs around 700,000 baht compared with 1.7 million baht per room for other economy hotels.
Ms Kamonwan said the earnings before interest, taxes, depreciation and amortisation margin for five-star hotels is about 35%, four-star hotels is 40-45%, economy hotels 45% and budget hotels including Hop Inn 50-55%.
The revenue contribution from Hop Inns is expected to rise to 15% of Erawan's total income in the next five years, up from 5% last year, while revenue from five-star hotels would drop to 45% from 55% and four-star and economy hotels remaining unchanged at 20% each.
The company is optimistic its hotel business will see 10% growth in revenue this year. Its revenue is projected to increase 28% to 5.60 billion baht for 2015.
In the third quarter of 2015, Erawan reported its revenue grew by 34% to 3.89 billion baht and net profit was 94 million baht, up from a net loss of 163 million the same period the year before.
ERW shares closed Wednesday on the SET at 4.28 baht, down 10 satang, in trade worth 11.1 million baht.