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Paradise island no more? Phuket hotels are fighting for survival amid pandemic

With airport arrivals plunging as a result of COVID-19 travel restrictions, Phuket’s hotel industry is reaching breaking point, according to new research by consulting group C9 Hotelworks.

Paradise island no more? Phuket hotels are fighting for survival amid pandemic

Hotels on Thailand’s leading resort island are incurring losses, with the situation likely to get worse. (Photo: Unsplash/Katie Musial)

The COVID-19 pandemic has had a devastating effect on the global economy, one that is painfully felt by the tourism and hospitality industry worldwide. Even as governments push for domestic tourism, in several tourist destinations, it will not be enough to make up for a shortfall in overseas visitor arrivals.

Phuket, Thailand’s leading resort island, is reaching breaking point, according to a new report by consulting group CP Hotelworks, prompting industry leaders to seek drastic economic support from the government.

Thailand’s Phuket Model, which will allow some foreign tourists into the island once implemented, has drawn little support from the Thai people. In the wake of the controversy surrounding the model, hoteliers on the island said that they are “unable to sustain operating viability based on domestic tourism”.

According to Airports of Thailand (AOT), passenger arrivals at the aviation gateway have plunged 65 per cent year-on-year from January through July this year.

The 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break even or even be cash-flow positive with only domestic demand. Hoteliers estimate the island will suffer 50,000 job losses in the hotel sector this year if no international visitors are allowed in. 

The island of Phuket will suffer 50,000 job losses in the hotel sector this year if no tourists are allowed in. (Photo: Unsplash/Frankie Spontelli)

Anthony Lark, President of the Phuket Hotels Association that represents 78 hotels in Phuket said, “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic and strategic reopening for foreign travellers.”

Tourism is the lead economic indicator in Phuket, and newly released data by CP Hotelworks reveals the COVID-19 impact on the hotel development pipeline, with 69 per cent of hotels now being delayed or put on hold.

“The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the dramatic continued loss of jobs and rapidly eroding financial crisis for owners and operators." – Anthony Lark

At the end of 2019, there were 1,758 licensed accommodation establishments on the island. Incoming projects stand at 58 hotels, representing a 19 per cent rise in supply with 16,476 additional rooms planned.

Bill Barnett, Managing Director of C9 Hotelworks said, “Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry. The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline."

"This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels continue to incur losses day in and day out.”

"The situation is bad, and likely to get worse, as operating hotels continue to incur losses day in and day out.” – Bill Barnett

READ> What the new normal will be like for future travellers staying in hotels

Source: CNA/st(ds)

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