Bangkok: "Perfect Storm" for the Thai hotel business: When electricity prices soar while tourist numbers decline. While Thailand is facing scorching heat, the tourism and hotel sector is shivering from a "perfect storm" of negative factors converging simultaneously, particularly the rising cost of electricity, which is becoming a significant burden for businesses. According to Thai News Agency, the electricity costs have emerged as a major expense, escalating the financial strain on the hotel sector. Mr. Thienprasit Chaiyaphatranan, President of the Thai Hotel Association, highlighted that electricity costs are the number one or second biggest expense for the hotel business. The tiered increase in electricity rates, potentially reaching 5 baht per unit for those using over 400 units, has shocked hotel operators, as hotels operate lights and air conditioning 24/7. Furthermore, electricity costs in Thailand are 10-20% higher than in Vietnam, directly impacting their competitiveness and pricing. The president of the Thai Hotel Association compared the COVID-19 pandemic to a knockout punch followed by a shutdown, but the current situation is like a chronic illness that we must continue fighting despite being battered. Even though businesses aren't 100% shut down, they still have to bear fixed costs such as employee salaries, land taxes, and various fees, while revenue has decreased alarmingly. In addition to electricity costs, the hotel business is also being impacted by other factors. Many airlines are struggling to cope with soaring jet fuel costs, forcing them to cancel both domestic and international flights, potentially reducing flights by 50-60% by mid-year. In May, cancellations exceeded new bookings due to rising airfares and the economic downturn. Even during the recent Songkran festival, actual travel decreased as most people returned to their hometowns due to economic uncertainty and a decline in tourism sentiment stemming from rising prices. In order for hotel businesses (especially SMEs) to survive, the Thai Hotel Association has submitted proposals to the government. They have suggested reducing land and building tax, considering not collecting 100% of the tax this year, or extending the repayment period to help with liquidity during the low season. Additionally, special electricity tariff measures are proposed, recommending government support for groups that genuinely reduce energy consumption or provide specific assistance measures for the tourism business sector. They have also requested cooperation from the Bank of Thailand and commercial banks in providing soft loans to enhance liquidity and ease principal and interest repayment. While there are hopes that bookings in the fourth quarter will be better than last year, the prolonged war and global oil prices remain significant risks that could prevent the number of international tourists from reaching the projected target of 32 million.
Menu