The Bank of Thailand on Wednesday (Oct 16) unexpectedly cut the interest rate by 25 basis points to 2.25%, reports the Bangkok Post.
Sanga Ruangwattanakul, president of the Khao San Road Business Association, said the reduction would help to improve the economy, and the tourism industry in particular.
He said operators now have a lower borrowing burden and can invest more to improve or expand their businesses, after being hesitant during a high-rate environment.
“People can cash out their savings to spend or invest, while more jobs can be created, resulting in growing economic circulation,” said Mr Sanga.
The baht, which has appreciated against the US dollar since last month, should be weaker as a result of the rate cut, he said, easing foreign tourist sentiment.
Suksit Suvunditkul, president of the Thai Hotels Association’s southern chapter, said the strong baht has yet to significantly impact the number of arrivals and their spending.
Tourists still view Thailand as an affordable destination, even though they have experienced price increases for goods and services here.
Mr Suksit said he believes the central bank will be able to keep the local currency in an acceptable range.
“Our currency swing should not hurt the tourism industry at the same level as when the currencies of source markets were previously affected,” he said.
For instance, hotels lost a lot of Russian tourists during the Russian financial crisis in 2014, as the ruble fell sharply.
Mr Suksit said the last time the tourism industry actually benefited from the foreign exchange rate was during the economic crisis in 1997, after the government introduced a floating exchange rate, making foreign currencies rise against the baht.
Hotels in Phuket are expecting strong occupancy of at least 80% and higher room rates in the near term, he said.
Mr Sanga said forward bookings on Khao San Road remain slower than expected, at only 40% in November.
He said the government should offer more tourism campaigns, including a larger tax reduction for hotel bookings.
To prepare for cool season celebrations, the government should collaborate with private operators to promote upcoming festivals, preparing venues, transport and security for tourists, said Mr Sanga.
POSH HOTELS TO PUMP UP RATES
High-end hotel operators are preparing to raise room rates during the high season as tourist numbers are projected to surge in the next few months, while hotels in the mid-tier and lower continue to struggle, according to the hotel operator sentiment index, Bangkok Post noted in a separate report.
Thienprasit Chaiyapatranun, president of the Thai Hotels Association (THA), said the average occupancy rate in September was 55%, down seven percentage points from August and lagging the corresponding period in 2019, which tallied 63.4%.
He said each hotel segment has a different rate of recovery, as three-star hotels and below posted only 45% occupancy in September, while four-star hotels and above recorded 58.7% occupancy.
By region, the occupancy rate of hotels in the North plunged from 50% in August to 25.7% in September, attributed to severe flooding in key areas of many provinces. Hotels in the central region posted the highest occupancy rate of 64.4%, followed by the East at 57.1%, while lodging in the South and Northeast both recorded 49%, said Mr Thienprasit.
He said most hotels will take advantage of the high season and adjust their room rates, but the growth should be less than 10%.
Mr Thienprasit said only four-star hotels and higher have the potential to increase their room rates by more than 20%, based on a more promising track record in the third quarter, particularly for hotels in the central, eastern and southern regions.
Hotel operators have recorded a 55.6% occupancy rate so far in October, estimating their guest numbers will increase by 5-10% during the fourth quarter, according to the THA.
Regarding the Chinese market, 35% of hoteliers do not expect more arrivals during the high season, while 27% believe the number will decrease by 10%. Some 38% expect Chinese guests will increase by 10-20%, mostly flocking to four-star hotels.
Hotel operators also do not hold out much hope for Thai guests, as 65% said bookings would remain flat or decrease during the quarter. Among respondents, 19% believe the decline will exceed 10%.
Mr Thienprasit said most hotel operators are concerned about the floods and would like the government to launch relief measures and stimulus schemes to help them recover in time for the upcoming high season.
He said even though flooding issues in many provinces have been solved, tourism activities cannot immediately resume with transport out of order, while many tourism companies and related supply chains have been severely affected by the floods.
“Soft loans and other measures that help reduce utilities costs are essential for tourism recovery in the fourth quarter,” said Mr Thienprasit.