Sandbox seen as the sole hope for revival

Sandbox seen as the sole hope for revival

Some operators are struggling to plan for reopening as the situation remains volatile

A passenger bound for Koh Phi Phi checks in at Rassada Pier in Phuket on Sunday using the Mor Chana app. (Bloomberg photo)
A passenger bound for Koh Phi Phi checks in at Rassada Pier in Phuket on Sunday using the Mor Chana app. (Bloomberg photo)

The long road to recovery for Thai tourism marked a milestone following the first month of operation of the Phuket sandbox scheme.

The Andaman island welcomed 14,055 international travellers, contributing 829 million baht, which created a multiplier effect of 1.9 billion baht for the local economy and led to 2,719 full-time jobs, according to the Tourism and Sports Ministry.

However, active supply and employment haven't returned to normal as most operators are anxious about unpredictable demand amid extremely high uncertainty.

Kongsak Khoopongsakorn, president of the Thai Hotels Association's southern chapter, said 300-400 hotels or 30,000 rooms will become active in the third quarter.

The number is a far cry from the pre-pandemic level of 2,500-3,000 hotels, generating 300,000 rooms which could create at least 150,000 jobs in the province.

He said hotels in the sandbox had an average of 30-50 staff after downsizing during the outbreak. The actual employment rate remains at 12,000-15,000 workers.

There are 40,000-50,000 tourism jobs in Phuket under the social security system.

Most of them are under leave-without-pay policy as employers want to keep businesses closed until the province shows more promising signs.

Mr Kongsak said another 700-800 hotels may reopen in the fourth quarter and those furloughed workers will be the first group to come back to their posts.

"The sandbox is the only solution for tourism to live with the virus, if we can move forward to the upcoming high season, there will be an uptick in demand from 5% occupancy rate to 20-30%," Mr Kongsak said.

GAUGING DEMAND

Hoteliers might not benefit much from the first stage of the sandbox, particularly hotels that were closed for more than a year since the virus emerged, said Suksit Suvunditkul, chief executive of Deevana Hotels and Resorts.

Hotels that decided to reopen have to be either international brands or those that serve local guests and continue their operations despite tourism slowdown.

Deevana Hotels and Resorts has six properties in Phuket, of which three hotels in Patong remain closed and the rest serve as state local quarantine facilities for high-risk contacts.

Mr Suksit said it is difficult to plan the reopening as the situation remains volatile.

However, the group will test the water with Deevana Patong Resort and Spa set for October, followed by another two hotels in December and next January.

The reactivation after a prolonged shutdown needs a lot of investment, including system maintenance and updates and workforce retraining which will take 2-3 months to get back on track.

The group now hires 30% of the previous workforce, mostly senior staff who can be responsible for multiple properties.

He said operators have to ensure that demand will be stable enough to fulfill room supply before deciding to reopen their businesses.

The outbreak has affected demand due to travel restrictions in the sandbox, as well as quarantine rules for travellers when returning home.

"The long-haul market started booking their vacations for next January and February after the island opened to tourists in July," Mr Suksit said.

SHAKE A LEG

Phuket's reopening definitely had a positive financial impact as for the first time in over a year, many hotels have managed to cover operating expenses, in some cases generating a positive gross operating profit, said Frederic Varnier, managing director of Anantara and Avani+ resorts and residences in Phuket.

Even though no additional staff were hired for the sandbox, all permanent staff are now receiving full salaries in order to accommodate the growing business level.

He said the company plans to rehire staff in the last quarter, if the country as a whole can fully open to the international market with minimal travel restrictions.

Minor Hotels, the hospitality unit of SET-listed Minor International, has four properties in Phuket under the Anantara and Avani+ brands which saw overall occupancy of around 25-35% in July.

However, forward bookings in August were 15-20% less than July across the board and occupancy for September is currently single digit.

Mr Varnier said the virus situation in Thailand created a negative impact on the pace of booking for August and September, while stringent restrictions by the Phuket authorities resulted in a number of cancellations.

"The upswing in business caused by the sandbox has helped to mitigate our fixed costs and secure our cash flow," said Dirk De Cuyper, chief hospitality officer of S Hotels & Resorts (SHR), the hospitality arm of SET-listed Singha Estate.

SAii Laguna Phuket reached nearly 40% occupancy during the first month of the Phuket sandbox.

However, demand is softer from late August through September due to the current outbreak in Thailand which downgraded the country on many countries' warning lists.

September is considered as the off-peak period for Phuket from its season and the start of the school year in Europe.

However, SHR remains confident that demand will pick up towards the end of the year.

He said the acceleration of vaccine rollout is critical to a safe reopening. Herd immunity is the only feasible way out as seen in Phuket which reported low levels of new infections despite the resurgence of new cases elsewhere.

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