Thursday, March 19, 2009

ITB Berlin Offers Little Near-Term Solace For Asian Hoteliers

The recent ITB travel show in Berlin, the largest in the world, ran from March 10 to 14 and provided Thai travel industry analysts and experts with conflicting signals as to what the future holds in store for the country’s beleaguered hospitality sector. On the one had it appears that the short term picture looks bleak but on the other hand the long-term prognosis is tending towards the positive. At least that’s the impression that can be gleaned from reading quotes from the head of the Thai Hotel Association (THA) and the Association of Thai Travel Agents (ATTA) along with thoughts gained directly from Greg Duffel, the CEO of the Pacific-Asia Travel Association (PATA), both of which are located in Bangkok.

Mr. Prakit Chinamourpong, the president of the THA, was one of the more pessimistic of the industry leaders in regard to the reception that Thai hotels received at the show from European buyers stating that, “Buyers were asking some Thai travel agents and hotels to revert to 2008 rates and hold them until March 2011. Some five-star hotels faced the prospect of selling a room at Bt400 per night, down from what they thought was a bargain Bt1,400 a night.”

ATTA president, Mr. Apichart Sankary added that European travel agents were asking for bigger discounts to stimulate bookings, but in the case of the UK market there is evidence that tour operators are cancelling summer programs to Thailand as the numbers have dropped below breakeven. He also suggested that the government should focus its tourism marketing efforts on local media in each targeted country and concentrate on niche segments such as the family market. He recommended cuts on regional media spending, citing wasteful advertising in CNN and other TV channels that spread across continents but lack depth in individual country markets.

Mr. Duffel of PATA had similar thoughts in regard to the marketing efforts that should be adopted by Thai hotel operators stating that niche marketing will be very important this year. He also felt that repackaging of the hotels’ products was something that should be done and that a more forceful sales effort in general was going to be needed. He noted the increased recruiting of hotel sales people as a positive sign that hotels were aware of these factors and willing to do something to address them.

In the short term Mr. Duffel also felt that while the numbers do not look good now that could change as the year goes on, one reason being that travelers are now booking their holidays in a much shorter time frame with many now waiting until only a couple of months at the most before making a commitment. Traditionally, travelers book much further in advance especially for long-haul destinations which is what Thailand is for European tourists. He felt that there were several reasons for this, including currency fluctuations which might cause people to wait for a better exchange rate as well as overall fears about the economy.

However much doom and gloom has been forecast for the immediate future the long-term outlook for travel in general is good and for the Asia-Pacific region it is very good. Mr. Duffel also attended the recent International Hotel Investment Forum in Berlin which ran from March 9 to 11 and there were some positive indications from that gathering. Most importantly, the ongoing hotel projects in the region are almost all proceeding as planned although some projects have been slowed to a small degree. New projects are a problem as bank financing is difficult to arrange but this is not affecting the ongoing developments.

Additionally, although RevPar is down in the region by 30-40% right now it is matching 2006-2007 levels so overall profits should not be greatly affected. Another positive sign in the region is the growth of low-cost airlines which will spur intra-region travel and is what is generally agreed upon as being one of the most necessary elements that is needed to offset the large losses being suffered in the European markets.

So the way forward looks to be one of some difficulty but with a light at the end of the tunnel. More hard work will need to be done in the sales arena, more niche markets will have to be discovered and exploited, hotels will have to repackage their offerings and re-energize their sales forces and government agencies will have to work more closely with hotel operators and national airlines. If all of these efforts can be maximized then 2009 will not be a disaster and 2010 should be a solid year for the Asia-Pacific hospitality industry.

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