DestinationsRecent long weekend saw low demand for Phuket, and industry leaders fear more than 50,000 jobs will be lost if the situation persists.

Phuket tourism teeters closer to breaking point

Without international tourism, it is unlikely that Phuket’s hotels can realistically break even or even be cash-flow positive.
Without international tourism, it is unlikely that Phuket’s hotels can realistically break even or even be cash-flow positive. Photo Credit: tampatra/Getty Images

The growing likelihood of Phuket reopening plan being pushed back, after Thailand last week saw its first local Covid-19 infection in more than three months, is sending the island's heavily battered tourism sector into further distress. 

Phuket’s hotel industry is already reaching breaking point and drastic economic support from the government is needed for it to survive the high season, urge industry leaders.

With the country closed to international tourism since end March, hotels in Thailand's top resort island have been unable to sustain operating viability without international tourism. According to the Airports of Thailand (AOT), passenger arrivals at the aviation gateway have plunged 65% year-on-year from January through July of this year.

Tourism Authority of Thailand (TAT) Phuket Office director Napasorn Kakai has revealed that the island received some 15,000 tourists over the four-day long weekend (September 4-7) and an estimated 80 million baht spending over the holidays, The Phuket News reported. 

However, Napasorn rated the success of the long weekend in attracting tourists to Phuket as low, with an overall occupancy rate of around 30% recorded for the 125 hotels and 8,000 rooms currently open on the island, the report added. 

Despite the resumption of domestic tourism in Thailand, what is clear is that the 86,000 rooms in Phuket’s registered accommodation establishments cannot realistically break-even or even be cash-flow positive. This could translate into 50,000 job losses in the hotel sector this year if there is no support forthcoming or international visitors are not allowed in, according to new research by hospitality consulting group C9 Hotelworks. 

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.”

C9 Hotelworks also expects Covid-19 to have further knock-on impact on the hotel development pipeline, with 69% of hotels now being delayed or put on hold. At the end of 2019, there were 1,758 licensed accommodation establishments on the island and today incoming projects stand at 58 hotels, representing a 19% rise in supply with 16,476 additional rooms planned.  

Bill Barnett, managing director, C9 Hotelworks, commented: “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 remain incur losses day in and day out.”

While a stark warning was issued last week by the Bank of Thailand (BoT) over the potential disruption to the heavily tourism-dependent country, much controversy continues to plague the Thai government's proposed 'Safe and Sealed' long-stay programme. 

Citing a way forward, Barnett commented: “Any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, but the more critical issue is how hotels can fight for their lives in the current state of limbo.”

Lark also called for greater proactive dialogue between the public and private sector and urged the BoT to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. 

"Tourism is a human endeavour and without protecting and nurturing our Thai workforce there will be no recovery,” said Lark. 

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