Small Phuket hotels feeling the pinch
A number of small hotels in Phuket that cannot shoulder their financial burden look set to be sold in 2016 despite tourism picking up again since late last year.
The southern chapter of the Thai Hotels Association (THA) said hoteliers wanting to sell their properties were already negotiating with potential buyers, with transactions expected to start next year.
The negative tourism situation in Phuket began in 2013 due to domestic political problems and the global economic slowdown. Many hotels had to freeze their room rates to survive among fierce competition.
Worsening the situation even further was a decline in the number of Russian tourists, the province's second-biggest market, and a hotel oversupply in some locations.
Amid these tough circumstances, a price war has sprung up among Phuket hotels, threatening to lower service standards in the near future.
Some small hotels that have no strong financial back-up plan are struggling and expected to end up being sold, said Krisada Tansakul, president of the THA’s southern chapter.
"Phuket used to be a high-end destination but nowadays is more of a destination for the mass market," he said.
Bhuritt Maswongssa, the Phuket Tourist Association's vice-president for marketing, said arrivals were expected to reach only 10 million this year for revenue of 160 billion baht, down from 12 million visitors and 200 billion in revenue last year.
"High-spending tourists land at Phuket airport but prefer to travel to other destinations such as Krabi and Phangnga," he said. "So Phuket's tourism revenue will probably see a significant drop this year."
Mr Krisada said Phuket now had 90,000 hotel rooms, an increase 40,000 or 80% from 2010.
Of the new supply, 30,000 rooms are in small hotels, most of which are not registered.
Research by C9 Hotelworks Ltd shows an additional 4,727 rooms will become available in Phuket between now and 2018.
An unofficial survey by the THA found at least 20 hotel owners with a combined 1,000 rooms in Phuket had expressed interest in selling their properties via brokers. Most of these are small hotels.
The THA said some small hotels charged only 500 baht a night just to generate enough revenue to pay loan interest.