POLITICAL & ECONOMIC ENVIRONMENT
As a result of the ongoing political uncertainties and confrontations (which will soon come to a climax with the imminent Constitutional Court verdict regarding the electoral fraud cases that may lead to the possible dissolution of one or more major political parties on May 30th) as well as the unresolved unrest in the deep Southern Provinces, consumer confidence in the economy continues to be eroded. Thus, sharp declines in both private and public investment spending has further slowed down the overall economic growth during the initial part of 2007 – with Q1/07 GDP growth to be approx 0.7% YoY.
This prevailing negative political and economic environment together with continued fluctuating fuel prices has caused official FY/2007 GDP growth estimates to be lowered to approximately 3.5% YoY – despite ongoing attempts by the interim Government to re-stimulate the economy through various fiscal measures and policies. However, once elections (scheduled for late 2007, after the completion of the new Constitution) is held, it is hoped that the political situation will have stabilised and the economic environment should then show signs of improvement from early 2008 onwards. This situation is reflected in the latest GDP YoY growth estimates shown below.
Thailand’s GDP - % Growth YOY
FY/2005 actual
FY/2006 Act
2007 Projected
2008 Target
4.5%
4.7%
3.5 -3.8% (4.0 – 4.5 %)
4.5 -5.0% (4.0 -4.5%)
Source: K-bank research, and other published economic data
TOURISM & TRAVEL INDUSTRY OVERVIEW
In spite of the negative political and economic backdrop, which was further aggravated by the recent bombing incidents in Bangkok in late December 2006, Thailand’s tourism and travel industry has in general remained stable but still most challenging - thanks to the positive spillover effects of the high- season from end 2006 as well as to the sustained extensive marketing promotions campaigns by both the Tourism Authority of Thailand (TAT) and key players in this industry sector.
Based on the apparent positive trends during Q1/2007(estimated at approximately 2%YoY), the TAT remains confident of achieving its FY/2007 target of 14.8 million international tourists (equal to an increase of 7%YoY from 2006). The TAT also expects similar positive trends in domestic tourists and the achievement of 82.0 million domestic travelers (an increase of 3% YoY).(Please see details in chart shown below)
Thailand’s Total International Tourists/Domestic Tourists (in millions of visitors/% change YoY)
FY/2005 Actual
FY/2006 Est/Act
FY/2007 Target
FY/2008 Projected
International Visitors
11.5 - 2.0%
13.8 + 20%
14.8 + 7% YoY
15.2 + 6% YoY
Domestic Tourists
78.0 - 78.5
79.5
82.0
84 -85.0
Source: TAT Statistics from TAT website, published data
Meanwhile, despite these immediate negative market factors (ie: political unrest, economic downturn, an adverse strong Baht parity impacting inbound international travelers), the Hotels & Travel industry sector continues to see improved Average Occupancy Rates as well as Average realised Room Rates,together with sustained major investments activities for both new hotels properties and hotels management deals by most of the major international as well as top end local hotel chains – particularly in key travel destination throughout Thailand, namely the Andaman markets, Hua Hin, Chiangmai and Pattaya. Such new hotel projects cover the top-end boutique resorts market as well as the economical mid-market properties. Further, now that the Andaman resorts have fully recovered from the Dec 2004 tsunami tragedy, a distinct shift in business patterns has been observed – with a move away from Hua Hin and Samui destinations back towards the key Andaman resorts.
FOODS SERVICE & QSR SECTOR OVERVIEW
However, the declining consumer confidence and resulting consumer spending downturn has had a more immediate – although perhaps short term - impact on the Foods Services & QSR market sector, which continues to be highly competitive as major players continue to necessarily expand their outlet networks in new key strategic commercial locations, to develop and launch new menu offerings, and to maintain their respective aggressive marketing campaigns. Overall, this market sector is estimated to be still growing at a (more modest) 10 -12% annually – fueled mainly by continued outlets expansion and additional new entrants into the market.
Information about Centara Hotels & Resorts in Thailand:
