Labour shortages in the tourism sector have caused hotel expenses to increase at a higher rate than revenue growth, according to hospitality market analyst STR.
Jesper Palmqvist, senior director for Asia-Pacific at STR, said the only risk for hotels this year is cost controls based on unparalleled growth of labour costs and room rates.
Room rates rose sharply over the last 12-18 months, enabling some Thai hotels last year to achieve room rates that were 20-25% higher than in 2019, but these spikes have already begun to slow, Mr Palmqvist said.
"For the market, we don't see rates dropping much because as costs have gone up for hotels, the biggest cost continues to be labour costs," he said.
The major factor behind this is the ongoing labour shortage in the tourism industry. Operators need to offer a highly competitive salary to attract staff, while fewer people are interested in working in the industry, said Mr Palmqvist.
This trend was evident last year when hotels in the country reported labour costs grew faster than their rate of income, he said.
From January to November 2023, hotel labour costs per available room (LPAR) grew by 8.1% year-on-year, while revenue increased at a slower rate.
Although the situation stabilised during the peak season late last year, as gross operating profit per available room in November grew by 23% year-on-year, compared with only 13% LPAR, there is no guarantee this balance will continue for the whole year, Mr Palmqvist said.
"Every hotel needs to be very mindful of costs, particularly labour, as well as energy costs," he said.
Still, Mr Palmqvist said he remains optimistic about the Thai tourism industry with stronger international tourism and diversified markets.
Hotels last year reported occupancy rates of only five percentage points below the level recorded in 2019, and the China market was sluggish in 2023, he said.
"If the Indian market continues to grow and the Chinese return, I think we'll start making up that occupancy gap," said Mr Palmqvist.
Under this scenario, he estimated the hotel occupancy rate this year would hover 3-4 percentage points below the rate recorded in 2019, with 15-20% higher room rates than in 2019.
Bangkok is projected to have an occupancy rate of four percentage points lower than in 2019, though room rates will be 18% higher than that year, said Mr Palmqvist.
Phuket should record a stronger performance, driven by Russian, Indian and Chinese visitors, with a single-digit growth rate over 2023, which was 30% higher than in 2019.
The occupancy rate for Phuket is projected at three percentage points lower than in 2019.
Roughly 41 new hotels are scheduled to open in 2024 with more than 10,000 rooms, according to STR.
Upper-midscale accounts for the largest market share at 32% of all rooms.