Large-scale layoffs in the hotel sector could be seen during this low season if the government agrees to raise the minimum wage to 400 baht from next week as planned, while the Thai Hotels Association (THA) has submitted a petition to the prime minister, asking for the policy to be cancelled.
La-iad Bungsrithong, an advisor to the THA board, said that as five-star hotels in Chiang Mai had earlier been mandated with the 400-baht daily minimum wage, they had already felt an impact from the soaring wage costs, which are up 14% from last year.
Since the beginning of this year, five-star hotels in most tourism provinces, including Chiang Mai and Phuket, have adjusted their daily rates twice until they reached 400 baht, as this segment was selected as a pilot area for the minimum wage hike.
From July 1, two-star hotels or those with more than 50 rooms will also have to comply with the same rate of 400 baht a day, as the Labour Ministry is set to propose this measure to the cabinet.
In 2024, the minimum wage for employees in Chiang Mai's hotels stood at 350 baht. With the new rate, affected hotels would suddenly face an increase of more than 12%, while hotels in other destinations, such as Chiang Rai, Hua Hin, and Phangnga would be burdened with a 13.6% increase, according to the THA.
"Hotels in the upper-scale segment have been struggling to control their operational costs due the wage hike, which would account for 35-45% if including benefits for employees. We anticipate even more critical consequences if small-scale properties in Chiang Mai, which have over 10,000 rooms, are compelled to introduce the 400-baht minimum daily rate," said Mrs La-iad.
She said the timing of this policy is inappropriate for the hotel industry in the low season.
Most hotels would opt to reduce their headcount as their revenue could not keep up with the increasing expense during the low season, particularly energy costs that have surged due to the ongoing Iran-Israel war.
Suksit Suvunditkul, president of the southern chapter of the THA, said the wage hike is expected to have a critical impact on the provinces that have a low wage rate, such as hotels in the three provinces in the Deep South, which would suddenly face an 18.7% increase.
The situation is expected to be tough in this low season, as the Chinese and Middle Eastern markets, which are usually major sources of visitors during this period, are facing significant drops.
As Phuket hoteliers have encountered this measure before other provinces, about 30% of employees immediately received higher pay due to the policy, Mr Suksit said.
However, as each hotel also has a large number of experienced workers, they had to revise up their wages for another 30% of employees, too, resulting in a 60% adjustment.
"Payrolls typically account for 25-30% of total operational costs during the high season, but during the low season, salaries and related expenses would surge 50%. More layoffs are possible for the hotel industry, as we're currently experiencing a high turnover rate," said Mr Suksit.
The number of employees has fallen from the level seen before the pandemic, as hotels opt for workers with multiple skills rather than hiring more employees.
Mr Suksit added that using casual staff might help hotel operations in terms of flexibility, but it would not help to lower costs, as the outsourced manpower is still required to enrol in training programmes to meet each hotel's standards.
Last week, the THA submitted a petition to the prime minister, requesting that the government revise the policy of raising the minimum wage for two-star hotels or those with more than 50 rooms.
Thienprasit Chaiyapatranun, president of the THA, said the minimum wage hike is projected to increase operational costs by 10-15%. He said this policy was unacceptable, especially considering the currently sluggish economy.
