Hotel rates low despite surging costs

Hotel rates low despite surging costs

Hotels are struggling to raise room rates amid intense competition in the industry, despite pressure from higher operational costs due to surging electricity bills and wages.

On Tuesday the cabinet agreed to raise the minimum wage from October, while the power tariff for the September-December period has reached a record high of 4.72 baht per kilowatt-hour (unit).

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association (THA), said those two expenditures usually account for the largest costs in hotels’ operations.

Mrs Marisa said even though most hotels already pay workers at a higher rate than the revised minimum wage and have only a small number of staff that are employed at the base wage, an indirect impact would eventually occur as the salary gap between each position is squeezed downwards.

Hotels must also eventually increase wages for workers receiving mid-range salaries to maintain employment during the labour shortage, she said.

Mrs Marisa said power bills, the second-highest cost for hoteliers, will put more pressure on fixed costs, particularly for old properties that cannot afford to invest in cutting-edge energy saving technologies or have a poor environmental design.

“Operational cost is surging though the number of guests is still modest,” she said.

“Both room rates and revenue per available room are still 20-30% lower than pre-pandemic levels.”

According to THA’s confidence index, the average occupancy in September fell to 40% from 48% in August, below the same period of 2019, which had a rate of 63.4%.

Moreover, 61% of hotel operators remain concerned about the number of international tourists this year, which could be lower than expected.

However, four- and five-star hotels might feel less impact as this segment has surpassed the industry in terms of revenue. They have already regained more than 50% of their pre-pandemic income.

Suksit Suvunditkul, president of the southern chapter of THA, said hotels have to prepare energy-saving plans.

“For a hotel with more than 200 rooms that has to use chillers for an air conditioning system, once the engine starts, power bills will cost at least 600,000 baht per month,” said Mr Suksit.

“In terms of energy management, small hotels that have individual air control in each room can manage the cost better.”


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