What's new in business news: August 13, 2013

Bangkok hotel rooms up 12% but no change in room rates, farmers accept once a year subsidies at higher price & govt rice stocks still a secret.


Farmers accept once-a-year sale

Only those in central region will be affected

Farmers say they are willing to accept the government's latest proposal to continue buying paddy at 15,000 baht a tonne under the pledging scheme for the 2013-14 main crop but limit pledging to only once a year.

But they demand the government improve the pledging process by allowing farmer representatives to participate in inspecting rice quality and moisture content, as well as millers' preservation methods.

The government should also support farmers by helping them grow more high-quality rice varieties and reduce their production costs and chemical use.

Most farmers in the North and Northeast and those outside irrigation areas can grow rice only once a year anyway.

Those affected are farmers in the well-irrigated central region who can grow rice more than once a year.

The government is likely to face heavy protests from farmers in the central region.

Farmers from the Northeast will for sure accept the latest proposal by the government, as their production cost stands at only 4,500-5,500 baht a tonne.

According to the Thailand Development Research Institute (TDRI)'s estimates, of Thailand's 4 million rice-farming households, over 3 million now grow rice once a year, leaving only 800,000-900,000 families growing more than once a year (the second crops) mostly in the central region.

The government's latest proposal would for sure help reduce fiscal pressure, as it will limit the amount of paddy into the scheme.

He estimated the new proposal would help cut paddy entering the scheme by 20% from 20 million tonnes.


Rice stockpile size still a secret

The amount of rice in state stockpiles under the government's rice pledging scheme remains a mystery, even after a sweeping inspection was done on more than 2,000 warehouses nationwide on June 27.

The total figure gathered by the police is estimated to be 1 million tonnes short of what the Finance Ministry's committee tasked with handling the scheme's accounts shows.

The government asked the police to inspect the rice stored at warehouses taking part in the scheme in late June after discrepancies were found in the accounts of the committee and the Commerce Ministry.

As of Friday the government had yet to see the report, the source said, adding that the delay is likely to prolong the scheme's auditing process.

But a high-ranking police officer said the report has already been submitted to the government. 

The cabinet approved a budget limit of 500 billion baht for all farm pledging schemes, but 759 billion has been spent so far.

To date, the Bank of Agriculture and Agricultural Cooperatives has been repaid 114 billion baht from the Commerce Ministry for the money it paid to farmers.

This means the Commerce Ministry faces an uphill task in selling as much rice as possible to get funds for the scheme and stay within the budget limit.

For the current 2012-13 crop, 21 million tonnes of rice have been pledged with the bank for 310 billion baht, still within the budget limit for the crop of 22 million tonnes (340 billion baht).


Bangkok hotel room supply up 12.1%

The number of hotel rooms in Bangkok grew 12.1% year-on-year with the completion of six new hotels in the first half of 2013, lifting the total to 37,500 rooms in downtown Bangkok.

4,400 additional rooms are projected by the end of 2015, bringing the total to almost 42,000.  This projection represents an 11.9% increase on current figures.

Almost all of the new hotels are high-rise buildings. The most popular area for hotel development remains the Ploenchit/Sukhumvit area with 65% of the total hotel supply and four out of six new hotels opened in this area. The Silom/Sathorn area accounted for 21% of the total hotel stock while the Riverside area accounted for 14%.

Approximately 2,250 new rooms at various levels of accommodation will be completed in the second half of 2013. 

The big challenge for hotel owners is to raise the room rates which have not grown significantly for the last five years.  The second half of 2013 may finally see the growth in visitor arrivals outpacing new supply allowing owners to raise rates.

He said there is a significant opportunity for economy hotels in Thailand as many more visitors want consistency in quality as well as value for money but currently there are a limited number of players with branded product in this market. 

Several hotel operators have announced plans to open budget hotels in Bangkok. Central Plaza Hotel (CENTEL), known as a high-end hotel operator in Thailand under the brand “Centara”, has jumped into this segment and introduced their new economy brand ”COSI”.  The Erawan Group (ERW), a listed hotel developer, has also introduced their new budget hotel brand “Hop Inn”, targeting to open 30 Hop Inn hotels in Thailand.

About the author

Writer: Jon Fernquest
Position: Online Writer