On Feb 28, when the US-Israeli war with Iran began, Thailand's tourism industry was looking forward to reaping the benefits of the final month of the high season.
Disruptions to air travel hobbled the industry in the first few weeks, as Middle Eastern airlines could not operate as usual. As the conflict dragged on and hindered the global tourism market, airlines worldwide reduced services as jet fuel prices more than doubled.
Hotels felt the sting with many tourists unable to travel, prompting operators to be more cautious ahead of the low season.
LONE BRIGHT SPOT
Despite a record-breaking net profit of 1.9 billion baht in the first quarter for SET-listed Asset World Corp (AWC), it represented marginal year-on-year growth of 0.9% as Thai tourism was affected by the crisis in March.
The company's hotel and commercial portfolios still expanded, recording 6.77 billion baht for the quarter, with hotel and hospitality reaping a benefit from the high season, posting revenue growth of 12% to 4 billion baht and an 8.6% gain in earnings before interest, taxes, depreciation and amortisation (Ebitda) to 1.6 billion baht.
Wallapa Traisorat, chief executive and president of AWC, said the Gulf conflict immediately affected guests from the UK and Germany in March, though the company posted growth among long-haul markets of 11% thanks to the stable US market.
While the Middle East market fell 10% for the tourism industry in the first quarter, AWC's hotels posted 24% more guests from these nations because a number of them decided to extend their stays in Thailand when the war began, she noted.
However, as the low season approaches Mrs Wallapa said the company has tightened its grip on cost management and is monitoring markets, while remaining cautious about large investments. One project called for a 100-storey building on the same plot as the company's Asiatique, which has now been delayed.
She said the project remains in the pipeline and the plot will not be used by other projects, as AWC waits for more appropriate market conditions before starting construction.
Instead, the company plans to focus on increasing value for existing projects with high potential by repositioning them to match growing wellness demand. Records indicate past enhancements can help grow total asset values as strongly as new investments, said Mrs Wallapa.
With 24 hotels in operation, the company wants to continue expansion to reach 35 hotels offering 9,321 rooms by 2030, focusing on quality assets that can add value to the group, she noted.
AWC's new projects comprise Intercontinental Chiang Mai, Marriott Chiang Mai and Meliá Chiang Mai, which helped to ramp up performance with Ebitda growth of 45% year-on-year in the first quarter.
Those luxury properties contributed to revenue per available room (RevPar) reaching a record high of 5,230 baht per night in the first quarter, said Mrs Wallapa.
COST CONTROL NEEDED
Gun Srisompong, chief financial officer of SET-listed Central Plaza Hotel (Centel), said the Middle East crisis impacted its operations from March, with consequences for each hotel differing depending on the location.
Of Centel's 50 active properties featuring 11,179 rooms, hotels in Dubai, even if left physically intact during the war, had a cancellation value of 250 million baht, accounting for 50% of cancellations for the entire portfolio, while recording an occupancy rate of 25-35% between March and April, a sharp plunge from 90% year-on-year.
For hotels in Thailand, the cancellation rate was particularly high in locations that draw a large number of long-haul guests, such as Samui, Krabi and Bangkok, Mr Gun said.
However, due to cost and expense management for hotel operations, Ebitda for hotel businesses in the first quarter still rose by 6% to 1.63 billion baht, with revenue tallying 3.7 billion baht, up 5% year-on-year.
He said the group maintained an occupancy rate of 78% for all hotels in the first quarter, while properties in Thailand posted 81% occupancy, up by 3 percentage points.
Meanwhile, RevPar for hotels in Thailand in the first quarter remained unchanged at 4,523 baht, less than the portfolio average of 5,359 baht, which was up 6%.
In April, the impact become more apparent as Centel's RevPar growth for hotels in Thailand plunged by 3% to 3,238 baht as some properties closed for renovation.
However, the average occupancy rate rose by 3 percentage points from 69% to 72%.
MINIMAL STIMULUS IMPACT
Even when the government's co-payment scheme begins, Mr Gun said hotels cannot reap benefits from this stimulus as spending is geared towards small businesses rather than large hotel chains.
He said hoteliers are concerned about rising energy costs, such as fuel prices and fuel tariffs, which requires strict management of operational costs, along with revising investment strategies to be more appropriate to the economic context.
This year Centel plans to open seven owned and joint venture properties as well as six hotels under management contracts, with the investment budget dipping slightly to 3.7-4 billion baht.
The major investment allocations are for renovations in Hua Hin and Krabi, said Mr Gun.
SET-listed Minor International said RevPar for its hotels in Thailand rose 15% year-on-year in the first quarter. Due to its diversified portfolio, the Middle East conflict had a limited impact on hotel operations across most regions.
As of the first quarter, the company has 368 owned properties, plus 197 hotels and serviced suites under management in 57 countries.
Of the total, 6,125 rooms in Thailand account for 8%, while the remaining 75,269 rooms are located in Asia, Oceania, Europe, the Americas and Africa.
