THAILAND INDUSTRY OUTLOOK 2022-24

HOTEL BUSINESS

November 2022

Krungsri Research
 Author

Puttachard Lunkam
Analyst
puttachard.lunkam@krungsri.com
+662 296 2986

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content. Information, opinions and estimates contained in this report are our own,
which are not necessarily the opinions of Bank of Ayudhya Public Company Limited
and its affiliates. It reflects a judgment at its original date of publication by Krungsri
Research and are subject to change without notice.
 EXECUTIVE
SUMMARY
The hotel business will enjoy a steadily improving outlook
over the next three years. However, recovery will remain
only sluggish through 2022 given the limited number of
tourist arrivals, and in particular the continuing depressed
state of the Chinese market, where the government is still
strictly implementing Zero-COVID policy. In addition, the
global economy is facing significant headwinds as a result
of the outbreak of Russia-Ukraine war, and this too is
weighing on the industry. Nevertheless, the number of
foreign arrivals should build at an accelerating rate through
2023 and 2024, and by 2025, the industry is expected to
return to its pre-COVID level of 38-40 million arrivals
annually. Alongside this, the domestic market will also
continue to strengthen on government policies to stimulate
internal tourism. On the supply side, large hotel operators
are expected to continue with their expansion plans,
though possibly at a slower rate than initially intended. As
such, the national occupancy rate will remain somewhat
underwhelming, hitting an average of just 45% in 2022 and
then improving to around 55% in 2023 and 65% in 2024.
Thus, the significant oversupply of accommodation seen in
all parts of the country will combine with the slow recovery
in arrivals to impose a tight limit on how much space
operators will have to raise room rates.

Krungsri Research view

 Hotels in the major tourist areas of Bangkok, Pattaya

and Phuket: Because hotels in these cities are
dependent primarily on foreign tourists, conditions will
remain depressed in 2022, but the outlook will improve
in 2023 and 2024 on greater demand from both Thai
and international visitors. By the end of the period,
occupancy rates should be back to around 65-70%,
compared to 79% in 2019.

 Hotels in regional centers and other popular tourist

areas1/: These hotels will see ongoing recovery.
Because most of these establishments serve the
domestic market, they will benefit from the
government’s policies to stimulate the tourism sector,
but occupancy rates are expected to climb to just 50-
52% over the next three years, some way off the 66%
recorded in 2019.

1/ Chiang Mai, Chiang Rai, Phitsanulok, Kanchanaburi, Chonburi, Rayong, Chachoengsao,

Nakhon Ratchasima, Khon Kaen, Udonthani, Ubon Ratchathani, Phetchaburi,
Prachuap Kiri khan, Songkhla, Krabi, Phang-nga and Suratthani (Koh Samui).

Krungsri Research 3
  Hotels in other provinces: For these hotels, recovery will remain a slow and protracted affair, and
although government efforts to support the tourism sector will help, travelers in these provinces
are in fact often on their way to provincial centers or tourism sites elsewhere. Given this, recovery
in income and occupancy rates will tend to lag that of the two groups described above.

In all parts of the country, hoteliers will have to contend with a rise in competition that will be stoked
by an oversupply of short-term accommodation from both hotels and other types of daily
accommodation. This will be worsened by the only slow recovery in demand, and because of this,
average occupancy rates will remain at just 45%, 55%, and 65% over 2022, 2023, and 2024 (down
from 71.4% in 2019). This will then place a tight cap on how far operators are able to raise room rates.

4 Krungsri Research
 OVERVIEW
The hotel business (which here covers hotels, resorts, and guesthouses) is directly connected to the
wider tourism sector, of which it forms an important part. In terms of its contribution to the Thai
economy, over 2017-2019, short-term accommodation services accounted for 2.5% of Thai gross
domestic product (GDP), but the outbreak of COVID-19 was a severe body blow to the industry and its
contribution to GDP slumped to 1.0% of the total in 2020 and then to just 0.6% in 2021 (Figure 1).
Naturally, hotel revenue comes mainly from room charges, and these account for approximately 65-
70% of all hotel income. A further 25% comes from sales of food and drink, though the percentage
varies with the type of hotel, and four- and five-star hotels will typically derive a greater portion of
their income from food and drink than will smaller hotels. Income from other sources, such as
providing washing and ironing services and collecting rents from shops operating on hotel premises,
will usually contribute an additional 5-10% to total receipts.

Figure 1: GDP Origination from Accommodation Sector

THB, m Value % Growth (RHS) % Growth

600 28.1 40
17.9 18.0
17.3 13.4
500 9.1 20
1.9
400 0

300 -20
-42.4
200 -40

100 -60

0 -64.5 -80
2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: Office of The National Economic and Social Development Council (NESDC)

The central role of the industry within the overall economy is explained by the fact that Thailand is
regarded as one of the world’s foremost tourist destinations, and this is partly because of the world-
class tourism attractions that are spread throughout the country, in particular the world-class
destinations such as Bangkok, Pattaya, and Phuket. In addition, the country benefits from the
competitive pricing of its accommodation and the low cost of living, which provides tourists with
considerable value for money compared to other countries. Beyond this, the domestic travel industry’s
potential is further enhanced by the country’s extensive and comprehensive transport networks,
national infrastructure that is constantly being upgraded, and the steady rise in the number of low-cost
carriers serving the local market, and these factors have helped to give Thailand an edge over its
competitors. Indeed, the 2021 Travel and Tourism Development Index, compiled by the World
Economic Forum and published in May 2022 (the most recent data available), places Thailand 36th out
of the 117 countries surveyed and 3rd in Southeast Asia, sitting behind just Singapore and Indonesia
(Figure 2). Within the Travel and Tourism rankings, relative to other countries in the Asia-Pacific
region, Thailand scores particularly highly with regard to its price competitiveness and tourist service
infrastructure, and comes after only Singapore and Indonesia on safety and security.

Krungsri Research 5
 Figure 2: 2021 Travel & Tourism Development Index
(Overall Rankings of ASEAN Countries, Covering 117 Countries)

Overall score Ranking

1
9 32 36 38 52 75 79 93
-
Singapore Indonesia Thailand Malaysia Vietnam Philippines Camobodia Lao PDR

Source: Travel & Tourism Development Index 2021 by World Economic Forum
Note: Index results represent the latest data available at the time of collection (end of 2021)

Figure 3: Share of Tourism Receipts

2019 2021

Foreigners Foreigners
65 % 15 %

Thai 35 % Thai 85%

Source: Ministry of Tourism and Sports (MOTS) , Krungsri Research

In normal circumstances, the tourism sector is a major driver of the Thai economy, though because
their hotel stays are longer and they tend to spend more per head, the market is heavily dependent
on foreign arrivals, which in 2019 accounted for 65% of total income to the sector (Figure 3). By
originating area, the most important market is East Asia (i.e., China, Japan, South Korea, Hong Kong,
and Taiwan), which pre-Covid contributed 42% of all overseas arrivals and 41% of spending by foreign
tourists. However, the extended COVID-19 pandemic meant that over 2020 and 2021, the number of
tourists visiting Thailand crashed, so in 2020 income from foreign tourists slumped to 41% of all
receipts from tourism and then to just 15% in 2021, or to THB 330 billion and THB 40 billion,
respectively. As such, the industry pivoted to a much greater reliance on the domestic market, with
the THB 220 billion in spending by Thai travelers providing 85% of income in 2021, up from 35% in
2019 (Figure 3). The shape of the overseas market has also changed. In 2021, Europe’s 59% market
share established it as the largest segment, followed in importance by the Americas, with 11% of the
total. This change is attributable to the favorable international view of Thailand’s management of
COVID-19 and the resulting high level of confidence in the country’s tourism industry, coupled with the
relaxation of controls on international travel in these regions. However, continuing restrictions on
outbound tourism in China means that the East Asian market has dropped in importance, and with just
9% of tourists coming from the region, it has slipped to third place in the rankings (Figure 4).

6 Krungsri Research
 Figure 4: Share of Foreign Tourist Arrivals to Thailand
(by region)

% of total arrivals

2019 2021
70
60
50
40
30
20
10
0
East Asia ASEAN Europe The South Oceania Middle Africa
Americas
Americas Asia East

Sources: MOTS, Krungsri Research

In 2019, prior to the outbreak of COVID-19, the most important markets were China, Malaysia, India
and Russia, and together these accounted for 47.2% of all tourist arrivals. The pre-pandemic situation
for these markets is thus described below.

China: With 11 million Chinese tourists coming to Thailand in 2019 (28% of all foreign arrivals) and
income from these totaling THB 540 billion, China was Thailand’s most important market for tourism
(Figure 5), but this dominance is a recent development and the Chinese market has expanded more
than ten-fold since 2007. Chinese visitors were also the most important segment in many of Thailand’s
major tourism destinations (Figure 6). A number of factors had combined to encourage Chinese
visitors to come to Thailand in ever greater numbers, including: (i) the relaxation of regulations on
outbound tourism2/ ; (ii) the rapid growth of the Chinese economy and the equally rapid expansion of
the Chinese middle class from 80 million in 2002 to 700 million in 2020 (source: Statista); and (iii) the
increasing number of low-cost carriers and direct flights linking Thailand and China. Several ‘pull’
factors had also affected the market, including: (i) Thai government policies to promote tourism, for
example the waiving of fees for issuance of visas on arrival (VOAs) for Chinese citizens; and (ii)
marketing efforts by the Thai authorities that aimed to encourage visits by Chinese tourists, such as
the ‘road shows’ in Chinese cities and the presence of Tourism Authority of Thailand (TAT) offices in
Beijing, Shanghai, Kunming, Chengdu, and Guangzhou.

Figure 5: Share of Foreign Tourist Arrivals by Nation

2019 (Pre-COVID) 2021

Germany 11%

China
28% UK 9%
Malaysia 10%

USA 9%
Others India 5% Others
47% S.Korea 5% 58% Russia 7%
Lao PDR 5%
East Europe 6%

Sources: MOTS, Krungsri Research

2/ In November 1983, the Chinese government first allowed Chinese citizens to travel to Hong Kong and Macau in
order to visit family members. The process of travel liberalization was accelerated by China’s entry to the WTO
in 2001, and the requirement that China operate under WTO regulations regarding tourism. The result of this
has then been to increase the number of Chinese tourists traveling abroad (Bank of Thailand, June 2014).

Krungsri Research 7
 Figure 6: Foreign Arrivals at Accommodations (2019)

Bangkok Pattaya

UK 3.9%
China Russia 12.2%
India 4.4% Others 29.0%
South Korea 4.3 % 41.3%
India 7.1%
Japan 7.8%
China Others South Korea 7.0%
38.3% 40.5%
Germany 4.2%

Chiang Mai Phuket

Japan 5.0% Russia 9.4%

France 5.3% Others China Germany 6.6%

37.2% 32.2%
UK 6.6% Australia 5.0%
UK 3.5%
USA 7.8% China Others
38.1% 43.3%

Sources: MOTS, Krungsri Research

Malaysia: Malaysia had been Thailand’s second most important tourist market pre-COVID, and in
2019, income from Malaysian tourists alone totaled THB 110 billion (10.5% of the total), compared to
THB 140 billion from all CLMV tourists combined. Indeed, until it was overtaken in importance by China
in 2012, Malaysia had been Thailand’s most important tourism market. Tourism from Malaysia has been
helped by the strength of cross-border Thai-Malaysian trade and the opening of travel lines
connecting the two countries (e.g., the Kuala Lumpur-Chiang Mai air route) (Figure 7).

Figure 7: Foreign Tourist Arrivals to Thailand

Persons, m
China (RH) Malaysia

12 India Russia

10

0
2007 2009 2011 2013 2015 2017 2019 2021

Sources: MOTS, Krungsri Research

8 Krungsri Research
India: With a 5.0% share in 2019, India was Thailand’s 3rd biggest market. Before the pandemic, this
segment had been growing strongly and for the five years from 2015-2019, the Indian market
sustained double-digit growth, generating annual receipts of THB 86 billion in 2019. This growth has
been supported by several factors. (i) India’s economy has been performing well, and with this the
middle class is expanding. The Indian National Council of Applied Economic Research (NCAER)
estimates that as of 2016, 267 million Indians qualified as middle class, and this is forecast to explode
to 547 million by 2025-2026. (ii) Growth in the market has been helped by the expansion in services
provided by low-cost airlines, and flying between Thailand and Indian cities including Delhi, Mumbai,
Chennai, and Bangalore takes just 4-5 hours. (iii) Indians, and especially the wealthy, prefer to hold
marriage ceremonies in Thailand due to its cheaper accommodation and overall lower costs compared
to India or elsewhere.

Russia: Before the pandemic, the Russian market generated THB 100 billion in income and accounted
for 3.7% of all foreign arrivals in 2019, making it the most important component in the European
segment. Thanks to a combination of several factors, the Russian market also has potential for
continued growth. (i) Unrest in the Middle East had the effect of encouraging Russian tourists to switch
from travel destinations such as Turkey and Egypt that had previously been popular to travelling to
Thailand instead. This was especially the case during 2010-2013, when the number of Russian arrivals
jumped by an average of 46.1% per year, compared to annual growth of 22.5% between 2006 and
2009. (ii) The Thai government has promoted Thailand as a tourist destination to Russians by signing
an agreement with the Russian government to allow visa-free tourism between the two countries for
periods of up to 30 days (with effect since April 2007) and by putting on TAT roadshows in Russia. (iii)
There had been an increasing number of direct and charter flights between Russia and Thailand.

Figure 8: Thai Tourists (Domestic Tourism)

Trips, m Trips Growth (%) (RHS) %

180 300

150 250

200
120
150
90
100
60
50
30 0

0 -50
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 9M22

Source: MOTS

As regards domestic tourism, over the years from 2012-2019, annual growth averaged 5.5% in terms
of the number of trips made within Thailand by domestic tourists, and this total had reached 144.8
million by the end of the period (Figure 8). Growth in the domestic market had been supported by:
(i) ongoing efforts to encourage tourism, including the government’s introduction of tax allowances for
expenditure on domestic tourism and the private sector’s promotion of domestic tourism through
annual travel fairs; (ii) the expansion in the services offered by low-cost airlines and the upgrade and
development of provincial airports; and (iii) easier access to tourist sites for independent travelers
thanks to improvements in national communications networks, especially the road system. However,
with the outbreak of COVID-19 and the resulting imposition of lockdowns, curfews, and prohibitions on
travel between provinces, domestic tourism contracted by -43.6% per year over 2020 and 2021.

Krungsri Research 9
 Figure 9: Number of Rooms by Region

Others 6 major tourism provinces

Room, k
1,000 Chiang Mai Suratthani
Chonburi Phuket
Bangkok
800

36%
600

13%
400 5%
5%
8%
200 12%

21%
0
2016 2017 2018 2019 2020
Source: Real Estate Information Center (REIC), MOTS, Krungsri Research
Note: 6 major tourism provinces include 1) Prachuap Kiri Khan 2) Petchaburi 3) Rayong 4) Krabi 5) Phang Nga and 6) Song Khla
Others include other provinces except 6 major tourism provinces

The pre-COVID expansion of the tourism sector fed into growth in the number of hotels and a rise in
the number of rooms in the major tourist centers. Foreign tourists tend to be concentrated in Bangkok,
which is both a center of tourism in its own right and the national travel hub, and the world-famous
seaside resorts of Phuket and Pattaya (in Chonburi province). However, over the recent past, official
policy has been to push through the development of tourism across the country (for example, in
second-tier tourist centers) and to improve the standards of regional airports and the national
transport network. This has then attracted inflows of private-sector investment to hotels in regional
centers and in tourist areas such as Chiang Mai, Krabi, and Ko Samui (in Suratthani province). The net
effect of this was then to increase the national supply of hotel rooms from 682,824 in 2016 to 799,894
in 2020, which represented average annual growth of 4.3% (Figure 9), down slightly from the 5.5%
maintained over 2012-2015. However, through 2018-2020, growth in the supply of hotel rooms slowed
to 2.5% per annum, compared to 10.6% over 2015-2017 as prices for land rose and sites suitable for
development became harder to find. Given this, rooms provided by both Thai and international hotel
chains continue to be concentrated in the major tourist areas (Figure 10), and as of 2020, 65% of all
hotel rooms in Thailand were found in the 11 most important province3/. The greatest concentration of
these was in Bangkok, which was home to 165,870 rooms (21% of the total), followed by Phuket with
93,348 rooms (12%), Chonburi with 71,748 rooms (9%), Suratthani with 41,067 rooms (5%), and Chiang
Mai with 38,741 rooms (5%).

Figure 10: Large Hotels in Thailand

Thai Hotel Chains

International Hotel Chains

Source: Krungsri Research

3/ The 11 most important tourist provinces are: Bangkok, Chonburi, Phuket, Suratthani, Chiang Mai,
Krabi, Phang-nga, Songkhla, Phetchaburi, Prachuap Khiri Khan, and Rayong.

10 Krungsri Research
Occupancy rate (OR) fell sharply in 2020-2021. Over 2007-2019, the normal occupancy rate (OR) for
the country as a whole tended to run in the range 60-70%4/. However, this was also subject to the
influence of external circumstances, such as the political crisis that rocked the country over 2009-2010
when the occupancy rate hovered around 50%, the coup in 2014 when it dipped to 55%, and the
COVID-19 crisis in 2020 when it crashed to 29.5%. Worse, the occupancy rate then slipped further,
hitting just 14.2% in 2021 as both domestic and international tourists disappeared from the market
(Figure 11).

Figure 11: Occupancy Rate

% %

40 80

20 70

0 60

-20 50

-40 40

-60 30
% Growth of Foreign Tourists
-80 Occupancy rate (RHS) 20

-100 10
2005 2007 2009 2011 2013 2015 2017 2019 2021

Sources: MOTS, Bank of Thailand (BOT)

4/ Interviews with hoteliers and an evaluation of data by the Bank of Thailand indicates
that an occupancy rate of 65-70% is considered satisfactory by operators.

Krungsri Research 11
 SITUATION
For hotel operators and players in the tourism industry, the crisis that began in 2020 with the
initial outbreak of COVID-19 extended into 2021. Over these two years, governments around the
world continued with their attempt to control the spread of the virus by implementing lockdowns
and imposing restrictions on international travel. Because of this, the number of international
tourists globally fell -72% in 2021, having already slumped -73% in 2020 (Figure 12). This decline
was particularly intense in Chinese market due to the Chinese government’s decision to maintain
tight controls on international travel from the start of the pandemic onwards, and the effects of
this were especially noticeable in the Asia Pacific region. In these countries, the absence of
Chinese travelers (on whom local tourist industries are generally highly reliant) led to a -94%
collapse in the market (Figure 13). Individual countries affected by this thus included Malaysia
(foreign arrivals were down -96.9%), Japan (-94.0%) and Singapore (-87.9%).

Thailand did not escape this general trend, and the global situation meant that the local market
for tourism and hotel industries remained severely depressed over 2021.

 In 2021, tourist arrivals crashed -93.6% to just 0.43 million, having already contracted -83.2%
to 6.7 million in 2020 (Figure 14), and this then generated receipts of just THB 38 billion (-
88.6%). However, the figures for arrivals began to improve in the second half of the year as
the government relaxed some COVID-19 controls by cutting the number of days that arrivals
were required to stay in quarantine, allowing tourists to travel to a greater number of
destinations, and instituting a number of schemes to help hotels and to attract tourists back to
Thailand. This included the Phuket Sandbox (from July 1, 2021), the Samui Plus Model (from July
15, 2021), and the Phuket Sandbox 7+7 Extension Program (from August 16, 2021). At the same
time, vaccine rollouts were making considerable progress and many countries were loosening
controls on outbound tourism and so this too boosted the Thai tourism sector. In terms of
individual countries, Germany was the most important market in 2021 with 11% of the total (or
46,000 visitors), followed by the UK (9%), the USA (9%) and Russia (7%) (Figure 15).

 The domestic segment also suffered badly in 2021, and across the year, Thai tourists made
just 53.0 million trips domestically, a drop of -41.4% (Figure 8). Unfortunately, income was
down even more, falling -60.6% to THB 220 billion. The contraction was sharpest in the third
quarter, when an average of just 1.1 million trips were made each month, compared to the 8.1
million trips/month made during the third quarter of 2020. Naturally, this was attributable to
the severity of the pandemic and the introduction of lockdowns and curfews, and the
postponing or cancelling of inter-province travel. The situation began to improve in the last
quarter of the year with the loosening of these controls and the introduction of policies that

Figure 12: Growth rate of International Tourist Arrivals by Region (%)

(2019-2021)

2019 2020 2021

4.0 6.8 2.0 3.8 4.2 1.5

-63 -62
-68 -68
-73 -79 -77 -74 -73 -72
-84
-94
Asia and the Middle East Africa World Europe Americas
Pacific

Source: UNWTO, Krungsri Research

12 Krungsri Research
 Figure 13: Mainland Chinese Tourists as Share of Total Tourists, 2019 (%)

Hong Kong 78
Macau 71
Cambodia 36
South Korea 34
Vietnam 32
Japan 30
Russia 28
Thailand 28
Taiwan 24
Laos 19
Singapore 19
Philippines 18
Australia 16
Indonesia 14
Malaysia 12
USA 4
Italy 3
France 2

Source : CEIC, The Economist Intelligence Unit

Note: Data for the first 11 months of 2019 were used for South Korea, Singapore, Taiwan, Australia and Canada
Data for 2018 were used for Malaysia, Indonesia, Italy, France, Russia and Laos

aimed to stimulate the domestic market (e.g., phase 4 of the ‘We Travel Together’ program, which
ran from October 1, 2021, to January 31, 2022). For the quarter, Thais therefore made an average of
8.5 million domestic trips per month.

 The average national occupancy rate also crashed to a historic low of 14.2% in 2021, down from
the already low 29.5% seen in 2020 (Figure 11). The situation was even worse in major tourist areas
such as Phuket, Suratthani, and Krabi, where operators are especially reliant on overseas visitors. In
these areas, the occupancy rate fell below 10%. By contrast, provinces such as Phetchaburi,
Prachuap Khiri Khan, Kanchanaburi, and Nakhon Ratchasima are more dependent on the domestic
market and so in these areas, occupancy rates typically remained above 20% (Table 1).

Table 1: Occupancy Rate (%) by Province

Province 2018 2019 2020 2021

Bangkok 82.4 82.2 28.2 13.0

Chonburi 79.6 80.4 28.9 11.5
Phuket 76.0 75.2 19.5 7.7
Suratthani 72.1 68.2 20.0 5.4
Chiang Mai 76.0 74.3 41.8 20.5
Krabi 69.2 68.5 18.6 6.0
Phang Nga 66.3 64.6 21.9 11.9
Song Khla 73.5 71.5 21.2 6.5
Prachuap Khiri Khan 66.7 64.3 35.7 21.2
Petchaburi 70.5 69.0 41.5 24.6
Rayong 70.9 69.9 28.6 20.2
Kanchanaburi 69.6 69.3 42.5 22.6
Nakhon Ratchasima 66.8 66.8 39.4 25.0
Udonthani 72.1 72.4 42.0 15.5
Buriram 60.2 61.0 29.7 19.9
Chiang Rai 55.0 54.9 38.3 22.8
Nationwide 71.2 70.1 29.5 14.2

Sources: MOTS, BOT

Krungsri Research 13
 Figure 14: Foreign Tourists to Thailand

Persons, m % Growth
Number % Growth (RHS)
50 50

40
0
30

20
-50
10

- -100
2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: MOTS

Figure 15: International Tourist Arrivals by Country (Top 10)

2021
2021 2020
2020 % Growth

12
South Korea -95.4%
260
13
China -99.0%
1,250
14
Israel -52.2%
29
17
Sweden -84.7%
112
23
France -90.1%
237
27
East Europe -87.5%
217
31
Russia -94.8%
587
38
USA -82.1%
211
39
UK -82.5%
221
46
Germany -80.1%
231

0 500 1,000 1,500

Persons, k

Source: MOTS

14 Krungsri Research
 Average daily rates (ADRs) across the country dropped -18.5% to THB 914, and this then helped to
slash revenue per available room (RevPAR) by -60.9% to THB 129, down from THB 311 in 2020
(Figure 16).

Figure 16: OCC, ADR and RevPAR

THB %
ADR RevPAR OCC (RHS)
2,500 80

2,000
60
1,500
40
1,000
20
500

0 0
2015 2016 2017 2018 2019 2020 2021

Sources: Bank of Thailand (BOT), MOTS, Krungsri Research

Note: RevPAR = OCC x ADR

 Returns were therefore depressed for hoteliers throughout the period, and for the five hotel
operators registered on the Thai stock exchange, net profits dropped -54.1% in 2021, which came
on the heels of a -40.7% contraction in net profits a year earlier (Figure 17). However, the impacts
of this difficult business environment varied from one business to the next depending on the
structure of companies’ income streams and the extent to which their businesses were diversified.
Thus, because Central Plaza Hotel (CENTEL) and Minor International (MINT) were able to generate
additional income from other sources (e.g., sales of food and the distribution of fashion goods),
their bottom line was less severely affected than was that of other players.
 In response to these difficulties, businesses were forced to overhaul their operations by cutting
room rates, revising their service operations, slashing their overheads, and developing alternative
income streams. Thus, many hotels began to offer ‘work from hotel’ packages to meet the sudden
uptick in working from home, and to work with food delivery apps to develop their ability to sell
food prepared in their own kitchens, though this was largely restricted to 4- and 5-star hotels. In
addition, many hotels in the Bangkok Metropolitan Region partnered with clinics and hospitals to
offer ‘alternative state quarantine’ (ASQ) services, while hotels in Phuket, Suratthani (i.e., Ko Samui),
Chonburi (i.e., Pattaya), Prachinburi, Buriram, Chiang Mai, and Phang-nga moved to set up
‘alternative local state quarantine’ (ALSQ) services. Both the ASQ and ALSQ services were targeted
at foreign travelers coming to Thailand who were required by law to quarantine on arrival.
Unfortunately, many smaller and medium-sized businesses were not able to adapt in these ways
and faced with unprecedented difficulties, a significant number were left with no option but to shut
their operations.

Figure 17: Net Profit Margin of Selected Hotel Operators

listed on the Stock Exchange of Thailand
%

50

CENTEL
0
DUSIT
-50 MINT ERW
LRH
-100 CENTEL = Central Plaza Hotel Pcl.
ERW = The Erawan Group Pcl.
MINT = Minor International Pcl.
-150 DUSIT = Dusit Thani Pcl.
LRH = Laguna Resorts & Hotels Pcl.

-200
2017 2018 2019 2020 2021 1H21 1H22

Source: SET, Krungsri Research

Krungsri Research 15
 The situation has continued to improve over the first 9 months of 2022, and signs of recovery are
becoming increasingly evident in the tourism sector. Details of this recovery are given below.
 The number of arrivals has continued to strengthen since the start of 2022 (Figure 18) and as of
9M22, 5.7 million arrivals have been recorded, up from just 85,845 a year ago. The market has been
stimulated by: (i) the relaxation of COVID-19 restrictions by the Thai government, including the
ending of the Test & Go system for fully vaccinated arrivals from May 1, 2022; (ii) the ending of
restrictions on outbound travel in many originating countries; and (iii) the creation of a ‘travel
bubble’ connecting Thailand and India in March 2022, which since April has helped to steadily
increase the number of arrivals from India (Figure 19). In addition, thanks to the April-1 opening of
the land crossing Between Thailand and Malaysia, Malaysia has been the most important originating
country for arrivals to Thailand since June (Figure 19). Thus, for 9M22 in total, 0.97 million Malaysian
tourists have come to Thailand, representing 17% of all foreign arrivals, and followed in importance
by India and Singapore respectively (Figure 20).
However, despite this broadly positive outlook, the outbreak of war in Ukraine in February has
severely restricted the Russian market, and instead of the 7% share of all arrivals seen in 2021,
Russians accounted for just 2% of foreign tourists coming to Thailand over 9M22. Likewise, China’s
continuing pursuit of its Zero-COVID policy means that the 28% share attributable to the Chinese
market in 2019 had shrunk to just 3% by 9M22.
 Thai tourists took a total of 103.4 million domestic trips in 9M22, which represented an increase of
274.2% YoY. This was largely attributable to the easing of pandemic restrictions and the
continuation of government measures that aimed to stimulate domestic tourism, including the
extension of phase four of the We Travel Together program (July-October 2022) (Figure 18).

Figure 18: Number of Tourists in Thailand

Persons, k Trips, m
International tourist arrivals

1,500 Thai tourists (RHS) 15

1,200 12

900 9

600 6

300 3

0 0
Jan-21 Mar May Jul Sep Nov Jan-22 Mar May Jul Sep

Source: MOTS

Figure 19: Foreign Tourists by Nationality (Monthly)

Persons, k

Malaysia
350
Thousands

300

250

200

150 India

100
Singapore
50 China
Russia
0
Jan-22 Feb Mar Apr May Jun Jul Aug Sep

Source: MOTS

16 Krungsri Research
 The occupancy rate has continued to strengthen, and this reached 42.0% in 9M22, up from just
9.9% in 9M21 (Figure 21). The occupancy rate has improved across the country thanks to the
increase in the number of both Thai and overseas visitors (Figure 22). However, compared to the
pre-COVID period, the occupancy rate remains very weak (i.e., over 9M19, the national occupancy
rate was 71.1%). Average room rates also increased by 9.7% YoY, and this pushed revenue per
available room to THB 417 compared to just THB 90 in 9M21.
 For the five hotel operators registered on the SET, income grew but net profit margins continued
to fall, though at a slower rate than previously (Figure 17). In the first half of 2022, combined
income for these five companies jumped 82.8% YoY to THB 67 billion on recovery in tourist
numbers, though the scale of the increase is attributable to last year’s low base. Average net profit
margins remained negative at -12.0%, though this was an improvement on 1H21’s -70.0%.

Figure 20: Foreign Tourists by Nationality in 9M22 (Top 5)

Malaysia 17%

India 10%
Others
58%
Singapore 6%
Vietnam 5%
UK 4%

Source: MOTS

Figure 21: Occupancy Rate (Monthly)

%

80

60
2022

40
2020

20
2021
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sources: MOTS, Krungsri Research

Figure 22: Occupancy Rate by Province (%)

9M21 9M22 59.7

56.3
49.1
43.9
40.5 41.2
33.7

19.3
13.8 15.5
9.4
3.9 5.1 4.2

Bangkok Chonburi Phuket Suratthani Chiang Mai Petchaburi Prachuap

Kiri Khan
Sources: MOTS, Krungsri Research

Krungsri Research 17
 OUTLOOK
The hotel industry will see an accelerating rate of recovery over 2022 to 2024 as it emerges from
two years of deeply depressed conditions. Recovery in the overseas segment is predicted to be
complete by 2025, by which time the number of foreign arrivals should be back to its pre-COVID
level of 38-40 million annually. The domestic segment is rebounding more rapidly, helped in part
by the effect of ongoing government stimulus packages, and it is now forecast to return to the
pre-pandemic level of around 185 million trips annually in 2024. Operators of larger chains are
also expected to move forward with their investment plans, though progress may be slower than
initially imagined. Given this, the national occupancy rate is expected to reach an average of just
45% in 2022 before climbing to 55% in 2023 and 65% in 2024.

 The number of foreign tourists coming to Thailand will increase at a quickening pace
over the next few years. Krungsri Research therefore expects 10.4 million arrivals in 2022,
and although this would be a sharp improvement on 2021’s total, it will still be significantly
below the pre-COVID norm. This is because China, Thailand’s most important market for
tourism, is still pursuing its zero-COVID strategy. In addition, weakness in the global economy
caused by the war in Ukraine is also dragging on the tourism industry. The situation should
improve over 2023 and 2024, when foreign tourist arrivals are forecast to increase to 22.7
million and 35.3 million, respectively (Figure 23). This recovery will be helped by the following
factors.
1) The full reopening of Thailand on July 1, 2022, clearly helped to boost tourist arrivals, and
this was especially noticeable in the main tourist destinations of Bangkok, Pattaya, and
Phuket.
2) The successful rollout of vaccination programs has meant that most countries have now
relaxed controls on international travel, and this has then rebuilt confidence in the tourism
sector.
3) China, Thailand’s most important tourist market, is expected to begin relaxing controls on
outbound travel in mid-2023 (Figure 24).
4) The government is continuing to use policy tools to stimulate the tourism sector by, for
example, creating a travel bubble linking Thailand with major markets such as China and
India, and running roadshows targeting new high-end markets, including in Saudi Arabia.
5) Thailand’s unique charms continue to support high levels of interest among travelers and to
maintain the country’s position on the world stage as a widely admired tourism destination.
The most recent Visa Global Travel Intentions study 5/ found that Thailand was the world’s
fourth most attractive tourist destination, coming after only the US, the UK and India, while
TAT Newsroom (May 2022) reports that Bangkok, Phuket, Chiang Mai, and Hua Hin are
among the world’s most googled travel destinations.

Figure 23: Number of Foreign Tourist Arrivals Forecast

Persons, m % Growth
Number % Growth (RHS)

50 2,500

40 2,000

1,500
30
1,000
20
500
10 0

- -500
2019 2020 2021 2022F 2023F 2024F

Source: MOTS, forecasted by Krungsri Research

5/ The research was carried out over January-October 2021, and was based on keyword searches by tourists in 62 countries.

18 Krungsri Research
 Figure 24: Outbound Destination Preferences for Chinese Tourists

France

Australia

Germany

Singapore

Thailand
Thailand
South Korea

USA First time

Japan Repeat

0 20 40 60 80 100

Source: Dragon Trail Research, Chinese Traveler Sentiment Report, April 2022
Note: Between 9-14 March 2022, Dragon Trail Research surveyed 1,011 mainland Chinese travelers
about their travel preferences and behavior, including appraisals of outbound destinations

 The domestic segment will also continue to strengthen. Because the number of foreign tourists
will remain significantly below normal levels for all of 2022, businesses offering hotel and tourism
services will remain dependent primarily on the domestic market. Krungsri Research sees Thai
tourists making a total of 125 million domestic trips in 2022 and rising to 145 million in 2023 and
185 million in 2024, which would be somewhat higher than the 166 million trips recorded in 2019
prior to the outbreak of COVID-19 (Figure 25). This outlook is supported by the following:

1) Government measures to encourage domestic tourism will continue through 2022. This includes
the ‘We Travel Together’ scheme, which has gone through various iterations since 2020 and is
now in an extension to phase four of the program, and the designation of additional public
holidays. These programs have proven to be very valuable for players in the tourism and hotel
industries and will remain so as long as overseas markets are still depressed.
2) The development of national infrastructure will help to underpin an expansion in the tourism
sector. Upgrades and expansions to provincial airports, and improvements to road and rail
networks will be particularly important in achieving these ends, and one outcome of this will be
to boost tourism in second-tier destinations.

Figure 25: Thai Tourists

Persons, m % Growth
Number % Growth (RHS)

200 150

100
150

50
100
0

50
-50

- -100
2019 2020 2021 2022F 2023F 2024F

Source: MOTS, forecasted by Krungsri Research

Krungsri Research 19
 Figure 26: Construction Permits of New Hotels

Sq.m. , k BKK Phuket Chonburi Others

3,500

3,000

2,500
-39.9%
2,000 -8.5%

1,500

1,000 -10.3% YoY

500

0
2017 2018 2019 2020 2021 1H22

Sources: REIC, Krungsri Research

Note: The data includes only new construction permits for hotels (hotels, guest houses
and dormitories) and excludes renovations and extensions. From May 12, 2005,
serviced apartments have had to apply for a hotel construction permit.

Table 2: Some New Chain Hotel Projects in Thailand

Year of
Hotel Name Location
Operation
Intercontinental Chiang Mai Mae Ping Hotel Chiang Mai 2022
Intercontinental Bangkok Sukhunvit 59 Bangkok 2022
Holiday Inn Express Bangkok Ratchada Bangkok 2022
Centara Grand Resort & Spa Jomtien Pattaya 2022
Crowne Plaza Bangkok Grand Sukhumvit Bangkok 2023
Hotel Indigo Phayathai Bangkok 2023
Holiday Inn Express Bangkok Phayathai Bangkok 2023
Sofitel So Samui Koh Samui 2023
Novotel Phuket Naiharn Phuket 2023
Sheraton Khao Lak Phang Nga 2023
Radisson Hotel Mai Khao Phuket 2023
COSI Central Phuket Phuket 2024
Kimpton Hua Hin Beach Front Hua Hin 2024
Source : Compiled by Krungsri Research, as of June 2022

 The expansion in the supply of new hotel rooms is tending to slow, as reflected in applications
for hotel construction permits (these indicate new supply that will come to market in the next 1-2
years). In 2021, the total number of these permits fell -8.5% to 1.8 million sq.m. (Figure 26), 40% of
which was for applications submitted in Bangkok totaling 0.75 million sq.m. or slipped -7.0% due to
the weak state of the market, especially in the overseas segment. Bangkok was followed in
importance by Chonburi, which had a 22% share, or a total of 0.4 million sq.m., although this was
an increase of 38.3%; investment has risen in the EEC to meet anticipated future demand resulting
from an expansion in industrial activity and tourism services in the region.

20 Krungsri Research
Investment in the industry is mostly being made by large operators in the construction of new hotels
in regional centers, tourist areas, and border zones, where demand is being boosted by greater
regional integration. These developments generally target the budget hotels and mid-range hotels
(3-4 star) segments, and examples include Hop Inn (operated by Erawan Group), Fortune D (part of CP
Land) and COSI (run by Central Plaza), although due to their continuing faith in the long-term potential
of the Thai tourism sector, both Thai and international hotel chains are investing in new operations in
the main tourist areas at all levels of the market from budget to luxury (Table 2). Investments are
especially concentrated in destinations favored by the global market, such as Bangkok and Phuket.
Data from the TOPHOTELPROJECTS construction database (data correct as of March 2022) indicates
that over the period 2022-2026, 120 new hotels will open, adding 29,861 rooms to current supply. 64
of these (with 17,666 rooms) are in the ‘first class’ category, while 56 (with 12,195 rooms) are classified
as ‘luxury’ developments (Figure 27). Considered by area, 47 hotels (12,089 rooms) are in Bangkok, 16
(3,383 rooms) are in Phuket, and 15 (4,896 rooms) are in Chonburi/Pattaya. 38 of the total are
expected to open in 2022, though the greatest number of new openings will be in 2025, when 42
new hotels will begin operations. Nevertheless, the aftereffects of the COVID-19 pandemic continue to
be felt, and this and the weak state of the world economy may combine to delay progress on some
investment projects.

Figure 27: New Hotel Projects in Thailand by Type

First Class 38 42
(64 Projects) Projects

53%

22
120 18
Projects

Luxury 47%
(56 Projects)

2022 2023 2024 2025+

Source: tophotelconstruction.com, as of March 2022

 In 2022, occupancy rates will remain at the low level of around 45%, though they will
steadily improve over 2023 and 2024 (Figure 28). However, in the main tourist areas, the
occupancy rate will likely remain below the normal level of 70-80% due to the only incomplete
recovery in the international segment. This will be due to ongoing restrictions on travel in
originating countries, the still-fragile recovery in the international airline industry, and the move by
many governments to stimulate their economies by encouraging an increase in domestic tourism.

Figure 28: Occupancy Rate (%)

80

60

40

20

0
2018 2019 2020 2021 2022F 2023F 2024F

Sources: BOT, MOTS, forecasted by Krungsri Research

Krungsri Research 21
  Over the next three years, geopolitical conflict may pose a risk to the tourism sector.
Potential problems will include rising tensions between the US and China over the fate of Taiwan
and the ongoing Russia-Ukraine war. A worsening of the former or an extension of the latter may
have negative consequences for the world economy, in particular by keeping oil prices elevated.
This would add to travel costs, which would drag on both long-haul markets (i.e., Europe and the
Americas) and domestic travel, with Thai tourists becoming increasingly careful about expenditure
on travel.

 Competition will tend to strengthen within the hotel industry, with this coming from two
separate sources.

1) Competition from other hotels will intensify as a result of investments continuing to flow into
major tourist areas and regional centers. This is coming both in the form of investments made
by hotel operators themselves and those who will appoint a third-party hotel management
team to operate the hotel (generally from large operators that are part of extended commercial
groups or that have their own chains).

2) Although it is illegal under the Hotel Act B.E. 2547 (2004), hotels also have to contend with
growing competition from alternative forms of short-term accommodation such as regular and
serviced apartments and condominiums that are rented out by the day, generally with rates
that undercut those of hotels. In addition, services offered by companies such as Airbnb are
having an increasing impact on the market, with bookings made via Airbnb up 20% in the Asia
Pacific region in 2021 (Figure 29). Unfortunately, because players will need to use more
aggressive pricing strategies to attract visitors, income will suffer, especially for SMEs.

Figure 29: Airbnb Demand (Nights) by Region

(Nights, m)

2020 2021
356.8

251.1

144.8
110.4
97.3
77.4 54.0
45.3 42.0
27.0
4.1 5.7

Global Europe North Asia Pacific Latin America Africa

America

Source: alltherooms.com

In the wake of the COVID-19 pandemic, a ‘new normal’ for the hotel industry is being established that
will emphasize the maintenance of social distancing and reduced physical interactions. Because of this,
returning to earlier ways of operating may not be sufficient to fully meet changing consumer needs,
and operators in the tourism and hotel industries are thus moving their businesses onto a more
sustainable long-term footing by making the following changes.

1) A greater utilization of modern technology will allow operators to respond better to varied and
diverse consumer needs. This might include making life easier for visitors by allowing them to use
technology to remotely control equipment and fittings in their room, for example by using
internet-enabled devices that could be manipulated via a smartphone. This would be attractive to
many, especially those in younger generations who use their smartphone as a central tool for
interacting with the world. This could then be extended to allow visitors to use their phone to
check in and make payments (thus avoiding the need to contact staff at the main counter), to
control heating and lighting, and to gain access to their room (i.e., by using their phone as a
contactless key).

22 Krungsri Research
2) The development of ‘green hotels’ is being spurred on by greater consumer concern with
environmental issues. This includes cutting back on energy use, ensuring that services and
products offered in the hotel are all environmentally friendly, and reducing the amount of waste
that is generated by the business. This is a difficult but important task; the ‘ULI Hotel Sustainability
Report 2019’, which analyzed the energy intensity6/ of various types of building, showed that with
an average energy consumption of 286 GWh/sq.m., full-service hotels (most of which are large
scale operations) are the most energy hungry of all the buildings surveyed (Figure 30). Hotels thus
have the largest carbon footprint of the latter. Many hotel operators are therefore now in the
process of reducing their consumption of non-renewable resources, for example by asking guests
not to request a daily change of sheets and towels (to reduce consumption of water and energy),
fitting energy-saving LED lights, and installing UV-blocking film over windows, which then helps to
reduce the load placed on air conditioners. Data from Statista shows that in 2022, 72% of travelers
intended to stay at least once in an environmentally friendly hotel in the year, up from 62% in
2016 (Figure 31) and so these measures should help to meet rising consumer demand.

3) Operators will need to pay greater attention to matters relating to health and hygiene, and even
as the COVID-19 pandemic fades, tourists will remain concerned about the possibility of
contracting a disease and how hotels and tourist attractions address these worries. Many tourists
will thus tend to avoid crowded indoor spaces. As outdoor activities become more popular,
operators will increasingly work with nearby communities to develop the local area and to keep it
safe, clean and free from the risk of infection. In the process, this will also strengthen their
corporate brand and image.

Figure 30: Global Energy Use Intensity by Property Type, 2019

kWh/M2

300

250

200

150

100

50

0
warehouse
Industrial distribution

Industrial
manufacturing
Office
Multifamily

Hotel resort
Retail warehouse

Retail high street

Retail shopping center

Industrial self storage

Hotel limited services

Hotel full service

Sources : ULI Hotel Sustainability Report, 2019 and Jones Lang LaSalle (JLL)

6/ In this context, lower energy intensity indicates that energy is being used more efficiently.

Krungsri Research 23
 Figure 31: Share of Global Travelers
that Want to Use Green Accommodations

2016 2018 2022

38% 32% 28%

62% 68% 72%

Don't intend to stay at least once in an eco-friendly or green accommodation

Intend to stay at least once in an eco-friendly or green accommodation

Source : Statista, July 2022

24 Krungsri Research
 KRUNGSRI RESEARCH

Macroeconomic Team Industry Team

Sujit Chaivichayachat Pimnara Hirankasi, Ph.D.
Head of Macroeconomic Research Head of Industry Research

Churailuk Pholsri Taned Mahattanalai

Senior Economist (Forecasting) Senior Analyst (Digital)

Sathit Talaengsatya Poonsuk Ninkitsaranont

Senior Economist (Regional Economy) Senior Analyst (Healthcare, Mobile Operators)

Thansin Klinthanom Piyanuch Sathapongpakdee

Economist Senior Analyst (Transport & Logistics)

Supasyn Itthiphatwong Narin Tunpaiboon

Economist Senior Analyst (Power Generation, Modern
Trade, Chemicals, Medical Devices)

Thian Thiumsak
Intelligence Team
Senior Analyst (Energy, Petrochemicals)
Pimnara Hirankasi, Ph.D.
Puttachard Lunkam
Acting Head of Analytics and
Intelligence Research Department Analyst (Hotels, Construction Contractors,
Construction Materials, Industrial Estate)
Nathanon Ratanathamwat
Patchara Klinchuanchun
Senior Analyst
Analyst (Real Estate)
Chinnakrit Ampornpannawat
Chaiwat Sowcharoensuk
Analyst
Analyst (Agriculture)
Parinya Mingsakul
Wanna Yongpisanphob
Analyst
Analyst (Automobile, Food & Beverages,
Electronics & Electrical Appliances)

MIS and Reporting Team Suppakorn Kornboontritos

Thamon Sernsuksakul Analyst (Agriculture)

Administrator

Chirdsak Srichaiton
MIS Officer

Wongsagon Keawuttung
MIS Officer