The first-quarter earnings of major listed hotel companies plunged by an average of more 70 per cent year on year, with the depressed state of the sector expected to worsen in the current quarter and continue until the high season returns in the final three months of the year.
Kosin Sripaiboon, a senior vice-president at UOB Kay Hian Securities, said the earnings drop would continue for at least two quarters, due mainly to the domestic political uncertainty.
"Political instability concerns hotel operators more than the economic recession. The slow response by Asean leaders to invitations to the Asean Summit in Phuket showed many leaders did not want to join the event," he said, adding that the Pattaya violence that led to the previous summit's postponement had severely tarnished Thailand's image.
The government yesterday decided to postpone the Asean meetings to October. Earlier, it had tried to convince other nations to convene in Phuket next month, including granting permission for their leaders to bring in their own security details.
The Kingdom's tarnished image is expected to lead to a sharp drop in tourist arrivals. According to brokers, about 100 hotels are currently up for sale.
Thailand has been hit hard by the global economic downturn, anti-government protests and the flu scare, Kurt Wachtveitl, departing general manager of the Mandarin Oriental, Bangkok, told the Foreign Correspondents' Club of Thailand on Tuesday night.
"It's the perfect storm, for Thailand in particular. We have 45 suites, and for the next two to three months, we don't have a booking for a single one of them," he said.
Research by Asia Plus Securities advised investors to limit investment in hotel stocks, due to the political conditions as well as the
outbreak of type-A (H1N1) influenza, which will likely have a further negative impact on the tourism industry.
Kosin said the recent hike in oil prices would also pressure hotels' operating costs, while room rates could not be cut further, as hotels were concerned about margins and their brand image.
"The hotel and tourism business is one of the worst-performing securities sectors this year," he said. "The situation is not likely to recover until the fourth quarter."
Four listed hotel companies have reported their quarterly results so far. Shangri-La Hotel's earnings dropped 98 per cent to Bt3.2 million in the first three months, from Bt154.46 million in the same period last year.
It attributed the drop to declining room rates and revenue from food and beverages in light of the political situation and global economic crisis.
Laguna Resorts and Hotels suffered a plunge of more than 80 per cent in its quarterly net profit to Bt109.3 million, from Bt718.6 million a year earlier. Its occupancy rate fell to 60 per cent in the first quarter, from 87 per cent in the same period last year.
Minor International's consolidated net profit
contracted 47 per cent to Bt400.36 million, from Bt750 million, although revenue declined only 1 per cent year on year to Bt4.25 billion.
The average occupancy rate at Minor's properties was down from 80 per cent in the first quarter last year to 58 per cent this year, due to the prolonged political unrest and the aftermath of the Bangkok airport closures late last year.
Minor's revenue from the hotel business - which contributes 30 per cent of its income - was Bt1.27 billion in the quarter, down from Bt1.76 billion in the same period last year.
The Erawan Group booked a net loss of Bt20.95 million in the quarter, against a net profit of Bt134.24 million a year ago.
Source: The Nation May 14, 2009
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