A vaccine-dependent Thailand—will domestic demand hold hotel performance steady?
On 28 November, Thailand’s Prime Minister announced that the country would only open to substantial tourism once a vaccine was approved, produced and implemented. Now being a vaccine-dependent country, Thailand will rely heavily on domestic demand in the meantime. So where does that leave hotel performance?
While overall levels are still low, the country is reporting higher month-to-month performance, especially compared with nine months ago.
Thailand’s hotel occupancy dropped to a single-digit low in April (7.8%) and has since climbed its way back to 25.5% in November—the highest level in the metric since March.
When looking at Thailand’s capital city, Bangkok, the lowest occupancy level in the market was also seen in April (10.8%). Occupancy stayed below the 20% level throughout the summer, eventually surpassing that threshold in October (21.2%), while November was slightly higher at 22.8%.
Phuket, on the other hand, remains under the 20% level, with November occupancy coming in at 16.3%. In other markets such as Chiang Mai and Pattaya Area, October occupancy levels reached 47.3% and 35.1%, respectively.
Like other countries around the world, weekend demand has been the driver of occupancy for Thailand. While hovering in the 20% occupancy range during the weekdays, the country has seen spikes as high as 35% on weekends. Drive-to markets in the country are also experiencing similar performance patterns, such as Hua Hin, which has seen higher weekend occupancy.
On Saturday, 28 November, Hua Hin reached an 82.1% occupancy—the highest daily level recorded for the month. Beyond drive-to markets, fly-to markets like Chiang Mai are also picking up speed, as the market reached its highest occupancy for the month (74.5%) on Saturday, 21 November. This trend has been seen around the world, as shorter weekend leisure trips have taken over, and business and group demand have remained at unprecedented lows. Weekdays continue to remain limited for most markets.
Hotel class data has also showed a similar trend around the world—lower weekdays and Saturday spikes.
When looking at the capital city, Bangkok, Midscale & Economy class hotels showed better occupancy than all other classes on Saturdays during November, with the level reaching as high as 38% on Saturday, 28 November, followed by 37.4% on Saturday, 21 November.
Expectations for the new year
In the short term, Thailand performance will rely on domestic tourism and business travel to keep performance steady. With current limited domestic corporate travel, meetings and events still yet to take off in the country, we can continue to expect lower weekday performance with Saturday peaks heading into the new year and Q1.
Any increase in domestic travel in 2021 will depend on increased confidence in both leisure and corporate travel into a wider selection of destinations, including the future success of initiatives such as the “We Travel Together” campaign. Launched in July 2020, this program offers government subsidies of 40% for a hotel stay, but after initial progress, the second phase of the campaign was recently suspended by the Tourism Authority of Thailand after allegations of corruption by some participants.
Throughout Asia Pacific we have seen examples of travel campaigns working very well to release the pent-up travel demand, including in Japan, Singapore and Adelaide.
Oxford Economics’ recent piece on Thailand notes that tourism is not expected to return to pre-COVID levels for a number of years. However, that does depend on the rollout and coverage of vaccines domestically.
The piece also noted that according to Thailand’s Health Authority, the government plans to inoculate around 50% of the population via its participation in the Covax program and Astra Zeneca, which will produce the vaccine domestically. Even if that target is met, though, this would not be enough to reach herd immunity. Because of this, Oxford Economics expects a cautious approach in lifting restrictions for most of next year.
In good news, however, Bloomberg recently ranked Thailand number one on the list of 17 emerging markets that could beat expectations next year, due to its solid reserves and high potential for portfolio inflows
In conclusion, while we expect a gradual increase of key economic factors in the country in 2021, Thailand’s current plans for a vaccine rollout via the Covax program makes it reasonable to believe that travel-inhibiting restrictions to some degree will remain in place even beyond the first half of 2021.