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Hoteliers Fret over Rising Operation Costs, Wage Hike

By on Jul 27, 2016 in Hotel-Tourism

Despite a tourism boom, hoteliers are worried they will face higher operation costs, especially from a possible minimum wage rise next year.

The concern has been expressed by the Thai Hotels Association (THA), even though hoteliers are enjoying good business this year after a decade of political problems.

THA president Supawan Tanomkiatipume said prices of food and other raw materials are expected to rise significantly next year, and if the minimum daily wage is increased from the current 300 baht, operation costs are expected to go up by at least 15%.

Hotels find it very difficult to raise their room rates given the fierce competition in the country, especially in major cities, because the number of illegal rooms has soared in the past few years and caused an oversupply.

These factors may force hoteliers to increase rates by 10-15% next year.

“If the government raises the minimum wage, it will certainly have a severe impact on tourism. Today, we pay at least 9,000 baht a month for a junior employee’s salary plus service charges. Of course, a minimum wage hike will force us to raise the pay scale,” she said.

The room rate constraint has led to intense competition. Moreover, foreign tourists especially those from Europe are concerned about safety and terrorist attacks. Besides, Britain’s exit from the EU has affected the British tourist market because the exchange rate is highly volatile.

THA adviser Surapong Teharuvichit said concerned parties should monitor the British tourist market in the second half of the year. Britain is an important market for Thai tourism, generating 69 billion baht last year.

China is also worth attention as it is the biggest tourist market for Thailand, contributing 30% of total visitors. Chinese travellers started to have hard feelings towards Thais after several video clips circulated on social media criticising Chinese tourists’ behaviour. THA representatives and Tourism Authority of Thailand officials in the North are discussing the impact of these clips.

It was recently reported that Chinese tour firms are cutting Chiang Mai from their tour programmes and some Chinese tourists will not travel to Thailand.

There are concerns that other provinces will be excluded from the tour programmes for Chinese tourists in the near future.

Ms Supawan predicted that the overall hotel business would be good in the second half in line with the positive outlook for Thai tourism. Forward bookings in August showed the hotel occupancy rate at 75% on average. The rate this year should stand at 75-80% compared with 70-75% last year.

The brightest locations should be in the South and the North. The occupancy rate in the South is predicted to be 80-85%, up from 75% last year, and 80% for the North, up from 70% last year.

The occupancy rate in the East may drop from 70-75% last year to 65-70% as Russian tourists have not returned. The rate in Bangkok is likely to be 75-80% this year, up from 70-75% last year.

The Federation of Thai Industry is still optimistic about the tourism industry, expecting it to remain a major mechanism that would help drive the economy in general.

Nora has been in the Corporate Communications arena for a number of years. Nora's role is to communicate all newsworthy items that are of a PR nature.

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