Outlook for the Thai tourism sector: Let it be

Nai Harn Beach, Phuket.
Nai Harn Beach, Phuket.

Krungsri Securities expect occupancy at hotels in the EU will outform Thai hotels. Don’t expect Thailand to follow China, where tourists are back in hotels and in the air.

“While this offers a glimmer of hope for the tourism sector, we remain cautious that Thailand might not see a similar recovery because of greater dependence on international inbound tourists”, according to analyst Ekasit Kunadirekwong.

Global commercial flight capacity tumbled in March after Covid-19 was declared a global pandemic. In February, the 7-day average capacity was 104k flights per day. By April 18, it had tumbled to 27.9k (-73%).

“We expect a more robust recovery in global flight capacity as more countries expect to lift restrictions on domestic/intra-region travel in June-July and long-haul travel by late-3Q”, according to Krungsri Securities in a new report headlined “Let it be”.

Occupancy rates at European hotels dropped to 11% in April compared to 2% for Thailand hotels. There is a glimmer of hope. Since China started to ease travel restrictions, the number of commercial flights has gradually recovered to 35.8k (-66%) on May 30.

In China, occupancy has been recovering since the government started to ease travel restrictions. By mid-May, lower-tier hotels were leading the recovery with 60% occupancy. Luxury & upper-scale hotels are close to 40% occupancy (slightly above breakeven) supported by highincome travelers who are taking domestic trips instead of travelling overseas.

Krungsri maintains underperform on the tourism sector. Their top pick is AOT, thanks to its net cash position.

“While the China and Airbnb recovery story offers a glimmer of hope to the sector, we remain cautious that Thailand might not see a similar recovery because tourism here depends largely on inbound travelers. Additional stimulus packages to boost domestic tourism valued at Bt200b will lift sentiment towards the sector, but we expect minimal impact because that accounts for only 6% of total tourism receipts (international and domestic travelers) before the pandemic.”, according to the Bangkok-based financial institution.