Hotel margins dented by rising costs

Hotel margins dented by rising costs

People seek deals at the 2023 Thai Teaw Thai fair. Mrs Marisa says 50% of hotels are charging a higher rate than in 2019.
People seek deals at the 2023 Thai Teaw Thai fair. Mrs Marisa says 50% of hotels are charging a higher rate than in 2019.

The end of reductions for property tax and elevated energy prices this year have pushed up operating costs for hotels by at least 10%, leading to lower margins even as they service more guests.

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association (THA), said with the government terminating the property tax reduction scheme, hotel owners face higher fixed costs this year after enjoying a discount of 90% during 2020-21 and 15% in 2023. The tax rate is calculated based on the land appraisal price.

Despite stronger inbound tourism, some hotels are unable grow their profits as much as expected because of pressure from rising costs, as energy bills surged in line with higher consumption from hosting more guests, she said.

Mrs Marisa said only 50% of hotels posted a higher average daily rate than before the pandemic, with most concentrated in the four-star segment and above.

According to a recent survey by the THA and the Bank of Thailand, almost 80% of hotels reported revenue lagged the level in 2019, with 20% expected to fully recover this quarter. Some 21% of respondents believe they need to wait until next year to reach equal 2019 revenue.

Meanwhile, 48% of hotels rated four stars and higher were confident foreign guests in the first quarter will increase, compared with only 31% of hotels rated three stars and below.

She said some hotels that earn substantial revenue from food and beverages for banquets had higher costs from hiring more casual staff under the new daily minimum wage.

"In the first quarter, hotels in Bangkok and Phuket are projected to outperform hotels in other regions, while properties in Pattaya and eastern provinces are gradually picking up. However, the occupancy rate in Hua Hin and Chiang Mai, which mostly target locals, might hover at just 50%," said Mrs Marisa.

She said the full rate for the land and building tax might entice landlords or those who earlier planned to build new hotels to consider dusting off those projects to reap benefits from the revival in tourism.

"The outlook for Thai hotels this year isn't stable as in 2019. Even though investors are still keen to open new hotels, there are more second-generation owners who decided to sell their properties, deterred by the industry's volatility and surging costs," said Mrs Marisa.

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