European group riles up local hotels

European group riles up local hotels

Debt of B2bn owed, complaints to come

A viewpoint of three beaches in Phuket: Kata Noi, Kata and Karon. The island stands to be affected by a European tour operator asking for prolonged debt repayment delays.
A viewpoint of three beaches in Phuket: Kata Noi, Kata and Karon. The island stands to be affected by a European tour operator asking for prolonged debt repayment delays.

Thousands of hotels in Thailand are crying foul after TUI Group -- a global tourism business based in Europe -- submitted letters asking to delay repayment on debt that has grown to 2 billion baht.

Twelve tourism associations are preparing to file a complaint with government agencies by next week to ask for help in managing a fair negotiation. Most hotels that partner with TUI received the letter, which asks hotels to sign a new contract deferring payment for an indefinite period. The hotels see it as unfair treatment.

"We understand tour operators are facing a financial shortfall because of the pandemic, but forcing us to comply with this new contract will rub salt in our wounds as we have also suspended operations and are avoiding layoffs," said Bhummikitti Ruktaengam, president of the Phuket Tourist Association.

Total debts come from bookings between January to March, for which TUI usually collects money from customers. Hotels usually receive payment within 30-60 days after guests check out.

Hotel operators receive slightly different conditions from TUI based on their locations.

The vast majority were asked to accept 25% of debt within 10 days after signing a new contract, while the remaining debt will be paid when TUI's business is back to normal.

The unclear time frame for payment will severely impact partner hotels, mostly located in southern Thailand, because TUI ranks among the top three tour operators bringing in major feeder markets to Thailand, such as Germany, Scandinavia and Britain.

If payment is delayed to next year, hotel staff are likely to face a domino effect, said Mr Bhummikitti.

"We need government-to-government negotiations to solve this dispute. We already discussed the matter with Tourism Authority of Thailand. We will next submit a co-signed letter to all related agencies such as the Tourism Ministry and the Foreign Ministry to act as mediators, as well as the German-Thai Chamber of Commerce and the German Embassy in Bangkok, to clarify the legitimacy of TUI's action," he said.

Kongsak Khoopongsakorn, president of the Thai Hotels Association's (THA) southern chapter, said THA would like to raise this issue in a private meeting with Prime Minister Prayut Chan-o-cha, who is scheduled to visit THA headquarters today.

There are at least 2,000 hotels in Thailand partnered with TUI and the debt probably exceeds the estimate of 2 billion baht, said Mr Kongsak.

He said Thailand and Germany have a decades-long partnership, and TUI is considered a prominent partner for hotels, but the new conditions are too harsh to be accepted as hotels need to survive too.

Angkana Tanetvisetkul, president of the Kata Karon Business Association, said other tour operators in Europe are also asking for payment delays or instalment payments, but the deals are acceptable as there is a clear timeline that allows hotels to manage cash flow.

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