Lowering room rates will not save Bangkok's lost hotel revenue

Bangkok has hit hard times lately, with the outbreak of political protests that began in November and have carried into 2014. According to HVS Bangkok, the protests have ben taking their toll on hotels during this period, which is typically Thailand's high season. Occupancies are down by 20-40 percent on average. 

"Past conflicts have shown that the market is resilient and that occupancies tend to recuperate to normal levels within three to four months of conflict resolution," HVS Bangkok director Christian Pucher tells HVS Bangkok. "As the situation prolongs over time, the immediate threat is that some hotels will be challenged to meet their financial obligations, which in turn would have a short-term negative impact on employment in the Bangkok hotel market." 

The long-term threat has to do with the reduction of market-wide average hotel rates. Bringing back business after the situation returns to normalcy will be the hotel industry's focus, through promotional offers. In the past, however, rates were dropped across the board instead of launching temporary offers, and this proved to be a mistake. 

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"It is very hard to rebuild rates once they have been lowered, affecting returns over a longer period," Pucher adds. 

Bangkok has seen its fair share of travel threats over the past few years,from political conflicts to flooding to the slow recovery of the global economy. All of this directly affects hotel occupancies. In addition, hotel rates have been stagnant or lowered over the last few years because of a combination of all of those factors. This is compounded with escalating construction costs which deter investors from pouring money into hotel projects. 

"While the overall economic and political scenario has had an impact on multiple industries and sectors across the spectrum, it is important to remember that the hospitality industry is cyclical in nature and is typically one of the first to rebound, post downturns and crises," says Pucher. Dropping hotel rates across the board is not a solution to combat this problem, as rates tend to not recover even when the destinations do. The way to battle the current political crises and make up for lost revenue is by offering short-term promotions, not permanent reductions.

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