Knight Frank report translates Phuket tourism COVID hit into numbers

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Carlos Martinez, Director of Valuation and Advisory, Knight Frank Thailand, pointed out that before the COVID-19 pandemic Phuket was already affected by global economic uncertainty, the China-US trade war, the appreciation of the Thai Baht, and a fall in the number of domestic tourists, while the number of international tourists increased only moderately in 2019 compared to previous years. In all, the total number of travelers only grew by 0.6% Y-o-Y in 2019, Mr Martinez said.

The first half of 2020 has witnessed a significant plunge in the number of tourist arrivals due to the travel restrictions imposed locally and globally to prevent further spread of the ongoing COVID-19 outbreak, resulting in a plunge in the hotel occupancy rates.

The situation is having a strong impact in the island as the hospitality industry represents almost half of the total GPP in Phuket, Mr Martinez added.

The number of international tourists in the first quarter of 2020 declined by 33.8% Y-o-Y to 1.06 million, starting in January, when the Chinese market, the largest international market feeder, declined as the Chinese government imposed outbound travel restrictions.

During the poor market conditions, some hotel operators suspended their operations and some offered deep discounts on room rates, promotion campaigns and packages, to attract local customers, Mr Martinez noted.

Supply and Demand

According to research conducted by Knight Frank Thailand, Patong comprises the majority of the luxury and upscale hotel supply at 24% of the total supply followed by Karon (15%), Bang Tao (14%), Kata (13%) and Kamala (10%). 

In 1H 2020, only one upscale hotel opened in Phuket, providing an additional 600 rooms: the Four Points by Sheraton Patong Beach. At the end of 1H 2020, there were 22,461 luxury and upscale hotel rooms in Phuket, said a report by Knight Frank released yesterday (July 31).

As the number of travelers dropped due to the COVID-19 outbreak at the end of 2019, the occupancy rate of luxury and upscale hotels plummeted, falling 22 percentage points Y-o-Y to 38%. The temporary closure of Phuket International Airport since April resulted in the lowest level of hotel occupancy rates, forcing some hotel operators to suspend their operations until market recovery, the report noted.

The average daily rate (ADR) of luxury and upscale hotels fell 6% Y-o-Y to B3,840 making the drop a record low for the past few years, it added.

Outlook

Mr Martinez pointed out that 11 hotels were scheduled to open in Phuket this year, providing about 2,431 rooms. Besides the Four Points by Sheraton Patong Beach, the remaining might postpone their openings due to the current epidemic situation. These include Anayara Luxx Panwa Resort (44 rooms), Angsana Ocean View (116 rooms), Island Escape by Burasari Phase 2 (220 rooms), JW Marriott Phuket Resort & Spa Chalong Bay (189 rooms), and Noxu Roxy Phuket (91 rooms) in the luxury segment. Also likely to be affected, in the upscale segment, are the openings of the Dhawa hotel (150 rooms), Ramada Plaza Grand Himalai Resort (426 rooms), Utopia Mai Khao (92 rooms), Wyndham Chalong Phuket (150 rooms), and Wyndham Nai Harn Resort Phuket (353 rooms), 

“The closure of Phuket International Airport on April 3 to stop the spread of the COVID-19 caused a fall in the number of visitors. As a result, demand for hotel rooms fell dramatically. Some hotel operators kept their businesses suspended to reduce losses until clear signs of market recovery,” Mr Martinez explained.

“The airport opened to receive domestic flights on June 16. Thus, we expect to see local tourism picking up in the third quarter, and, as global travel restrictions are lifted, international travel may return slowly during the fourth quarter, or beginning of the next year,” he added.

“Overall, we expect the average occupancy rate for luxury and upscale hotels in Phuket to decrease sharply below 50%, and the ADR to drop by 5-10% Y-o-Y in 2020,” Mr Martinez said.

“The number of tourists to Thailand is expected to hit a record low in 2020, and the occupancy rate of hotels is expected to drop drastically. The hotel industry in Thailand is facing an extremely challenging environment, with a long lasting impact from the pandemic. In the short term, Phuket’s economic dependence on the tourism industry will suffer due to the travel restrictions resulting from the COVID-19 pandemic.

“Nevertheless, in the long term, Phuket’s hotel sector will be bolstered by improved infrastructure, e.g., Phuket International Airport expansion Phase 2 due in mid-2020, increasing the capacity to 18.5 million passengers per year, and phase 3 by 2023-25 increasing to 25 million passengers per year, the Phuket Light Rail Transit System by 2024, and the new Andaman International Airport by 2025,” he said.

“Phuket upholds an attractive position as an international and local tourist destination and keeps growing and expanding their accommodation offer. In 2019, three new shopping malls opened; Central Patong, Porto de Phuket and Blue Tree Phuket, enhancing Phuket’s attractiveness as a tourist destination,” Mr Martinez concluded.

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