Stumbling but hopeful

Stumbling but hopeful

Tourism industry starting to see light at the end of the tunnel, but Ukraine crisis could threaten fragile recovery.

Domestic travellers have been the lifeline for tourism-reliant countries, especially in Southeast Asia, for the past two pandemic-battered years. But even as countries start scrapping restrictions to welcome international visitors back, some pandemic uncertainties persist and now a crisis in Ukraine threatens the global economic recovery as a whole.

Tourism accounted for 11% of Thailand's domestic gross product (GDP) and some 4.5 million jobs in 2019 before the coronavirus emerged. Today, as many as 50% of those in the tourism workforce are estimated to have left the industry.

In its heyday, Thailand welcomed almost 40 million international travellers. In 2021, the number sank to 427,869, according to data from the Ministry of Tourism and Sports.

Ratiporn Tammaraksa has had first-hand experience from the drastic impact of the pandemic. The 29-year-old event manager has witnessed the ups and downs of the tourism sector in the past two years in one of the most popular destinations in Thailand.

"I was lucky that I wasn't laid off," said Ms Ratiporn, who worked in a five-star international luxury resort in Phuket. But her working hours were reduced to 15 days a month and her salary was cut by 30% for almost two years. Other colleagues couldn't make ends meet so they left.

Overloaded with work, she struggled to maintain the same hotel standards and provide the experience customers expect. "We gave the guests special prices because we couldn't take care of them like before due to our worker shortage," she told Asia Focus.

The hotel has been trying to cut fixed costs, she says, by hiring part-time workers to give it more flexibility to respond to shifts in demand. "But there is no one willing to work. It isn't stable. All of them want full-time positions."

Some of her colleagues left the hotel for agricultural jobs. "Only a few have come back. Some people find working in other sectors gives them more independence."

She remains optimistic, though, that workers will come back once the industry rebounds. "Hotels are a money-making job."

These days, following public health guidelines is as important as providing excellent services. The staff who have stayed on are fully vaccinated with booster shots included. A nasal swab test is mandatory every week.

Tourism has been battered and there still a long way to go before it can recover to pre-Covid levels, but Ms Ratiporn says she still wants to work in the sector. "I love hospitality. I believe it will get better because there is pent-up demand, especially from Chinese guests once that country reopens. Phuket will definitely be their top destination."

Dillip Rajakarier, group chief executive officer of Minor International Plc SUPPLIED

PROMISING SIGNS

"It is undeniable that the pandemic continues to present new challenges to all of us in the tourism sector," says Dillip Rajakarier, group chief executive officer of Bangkok-based Minor International Plc, one of Asia's largest hospitality companies. "But I am certain that the worst is over, and a quick recovery is expected."

In his view, widespread vaccinations, more effective treatments and the overall trajectory of the pandemic have made Covid-19 more manageable while rates of hospitalisation and deaths have also been decreasing.

"More countries are reopening to travellers and further relaxing border restrictions despite rising infections," Mr Rajakarier told Asia Focus. "This sends a strong signal that a big shift in pandemic thinking is already here as we move closer to a return to a more normal life."

Operating more than 550 hotels in 55 countries, Minor sees a number of recovery signs in many of its locations. But the Maldives is shining more brightly than others.

"This was attributable to both demand from the island's quarantine-free first-mover advantages and strong performance from Minor Hotels' sales team," said Mr Rajakarier. The company's revenue per average room (RevPar) in the Maldives, where it has six resorts, exceeded the pre-Covid level by 38% for the last two quarters of last year.

Minor International chairman Bill Heinecke also noted the success of the Maldives in a recent interview with Bloomberg News. He pointedly contrasted the archipelago's traveller-friendly entry policies with the "cumbersome" Thailand Pass and testing regime.

Mr Heinecke and other local hotel industry leaders last week called on the Thai government to completely scrap RT-PCR testing for foreign arrivals -- they already have to produce a negative PCR test within 72 hours before departing their home countries -- and other measures.

Mr Rajakarier, meanwhile, sees travel recovery signs emerging in the Middle East as well as the region has been welcoming international visitors throughout the pandemic, allowing it to retain its position as an international travel hub.

Australia has also been one of the most resilient markets in Minor's portfolio thanks to demand for domestic tourism and the government's efforts to contain the virus. Optimism is high now that Canberra has finally ended one of the toughest border-closure regimes in the world and is starting to welcome back international visitors.

LABOUR SHORTAGE

As the hospitality industry starts to see an upturn in its fortunes, the need for workers is growing. And although the demand is there, the supply might not be enough. Over the past two years, some workers have made up their minds to leave the industry for good, while others are still closely monitoring the bigger picture from afar given the uncertainty over new waves of Covid-19.

"We are actively recruiting back into the industry as we reopen more hotels," said Cedric Tardivel, vice-president of sales and marketing of Bangkok-based Aspira Hospitality, which operates hotels and resorts across the country.

However, "hiring new staff is now a challenge as many employees have left companies or switched industries", he acknowledged. And finding the people with the right skills will be more challenging than ever as other hotel operators are after the same thing.

With existing staff, Mr Tardivel says the focus is now on training and scaling operations to align with realistic demand and to keep fixed costs down. Cross-training is now provided to employees to equip them with the necessary skills to perform tasks outside their routine functions as needed.

With this approach, workers will be able to lend a hand to other departments during their downtime, he notes, adding that Aspira is now considering combining departments and job roles to achieve a smaller but efficient team.

While trying to fill various roles, hotels are refining their marketing strategies to attract more travellers too. For the local market, understanding their price-sensitive behaviour will be an advantage.

Strategies get more complicated when comes to international markets. With China's zero-Covid strategy still in place, the region's top travellers won't be flying anywhere soon. This has been driving hotel operators to look for new markets.

Mature markets like India will be on the list. The Thai cabinet last week approved an air travel bubble with India that is expected to begin later this month. The Middle East also offers untapped potential, especially the newly re-established relationship between Thailand and Saudi Arabia. As a result, Mr Tardivel believes there will be more arrivals from these countries in the months to come.

On Feb 28, the first commercial flight in 32 years from Saudi Arabia landed in Suvarnabhumi Airport, bringing 120 passengers.

Another short-term solution is to upsell by offering special packages to encourage guests to extend their stays, he notes.

Medium- and long-term strategies, meanwhile, will depend on the travel policies of each country in the region. Creating flexible and dynamic strategies, including value-added offerings such as free cancellations, may be options that hotels could consider, he added.

Mr Rajakarier notes that Minor's post-Covid strategies have been designed to respond to emerging trends including increasing reliance on proven brands, more demand for remote working, heightened focus on health and wellness, and preference for bigger rooms.

Seems like old times: Tourists stroll through the old town in Phuket last month. Achadthaya Chuenniran

FLEXIBILITY IS KEY

While inbound tourism gets most of the attention, the outbound market has endured two difficult years as well. The impact of the pandemic on incomes in Thailand also raises questions about how many local people will have money to travel abroad when the opportunity arises, but operators are hopeful.

Covid-19 threatened Chananchita Chumphonwong's career as a tour leader but now she is boarding flights again as destinations are opening up.

Georgia and Turkey were two of the most popular destinations before the pandemic, said the 38-year-old owner of LikeStyle Service, a company that offers a range of services from handling visa applications to organising trips.

"Government regulations always have an impact on tourism-related businesses, both inbound and outbound," said Ms Chananchita, who led a group of Thai and Malaysian travellers to Turkey last year and re-entered the country via the Phuket Sandbox scheme in January.

"Arrival and departure policies change every month and it has an impact on the confidence of tourists," she said, adding that the cost of testing and quarantine accommodation is also expensive, which has led to more cancellations of trip bookings.

Ms Ratiporn reports a similar problem, noting that some Singaporean customers at her Phuket hotel cancelled bookings on short notice because of constant changes in regulations. "About 50 rooms were booked, 25% were cancelled as the rules keep changing," she said. "I can't even explain to the guests when they ask about the rules because I don't know whether they're going to change again."

Mr Tardivel, Ms Ratiporn and Ms Chananchita all want to see clearer and more concise regulations from the authorities in order to restore travellers' confidence. Constant changes will only put them in endless confusion and eventually cause people to put off travel plans.

"Flexibility is key and there should be fewer hurdles for travellers. Obviously, having no travel restrictions and a minimum insurance guarantee to visit Thailand would be the first step," suggested Mr Tardivel, adding that extending tourist visas and scrapping visa fees could help fan the urge to travel.

The government could also attract more international guests by doing more to promote the Mice (meetings, incentive travel, conventions and exhibitions) business, he added.

All of them are hopeful and wish that 2022 will be a year of tourism revival, if government red tape doesn't impede the recovery.

Authorities on March 1 made a small concession by revising the Test & Go scheme. One RT-PCR test is still required on entry but the widely criticised fifth-day PCR test, in conjunction with another mandatory stay at an approved hotel, has been replaced by a simple antigen self-test. The minimum health insurance coverage has been reduced to US$20,000 from $50,000.

UKRAINE INVASION IMPACT

But just as the travel industry was starting to see signs of a steady improvement, the Russian invasion of Ukraine has dealt a severe blow to confidence. Oil prices are soaring, which will affect an airline industry just emerging from the pandemic, and safety concerns over airspace could put off international travellers, especially from Europe.

The value of the Russian rouble against all currencies has been plummeting -- it was trading last week at 0.28 baht compared with an average of 0.40 to 0.42 baht before the invasion. The drop reflects the severe sanctions imposed by Western countries and their allies targeting Russian banks and businesses. Payment services like Apple Pay and Google Pay are also no longer available in the country.

The prospect of substantially higher expenses could discourage Russians from travelling and that will affect tourism in Thailand, a favorite destination for Russians. Travellers from other countries could also face higher costs as airlines revamp routes to avoid Ukrainian and Russian airspace.

Data from the Ministry of Tourism and Sports shows that out of the 133,903 foreign tourists who visited Thailand in January, 94,088 were from European countries and Russians represented 23,760 of that total.

Ms Ratiporn notes that most of the guests in Phuket right now are Russian; however, she hasn't seen a direct impact just yet.

For Minor Hotels, Mr Rajakarier said the impact from the situation is still minimal as the company has limited exposure to the two countries.

However, he acknowledged that if the tension is prolonged, it would have further implications for European energy markets and potentially disrupt the food supply chain and increase financial market volatility as well. The overall impact on the world economy could be substantial.

"Hotels need to adopt innovative operational strategies, diversify their supply base and create a supply chain emergency plan in order to minimise the level of impacts that may occur," he said.

For its part, Minor has been working on more effective inventory management, such as dealing with multiple suppliers for long-term contracts and revamping hotel restaurant menus. It has also cut other costs dramatically during the pandemic to improve margins.

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