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11 Sep, 2006

Thais Show Their Proficiency in Risk Management

From currency appreciation to tsunamis and oil prices, the Thai tourism industry is coming to grips with the growing list of ‘risks’ that it knows can strike anywhere and anytime.

Speaking last week at an Executive Management Forum on the subject of “Hospitality Management in Crisis,” Mr. Wallop Bhukkanasut, Executive Vice President Commercial Department, Thai Airways International, said the airline was no longer operating on a six-month planning cycle but down to three months.

“We are watching situations like you watch the stock market.” Factors being watched in what he called a 24-hour war-room operated like a cockpit management system include competitor pricing, inventory, currency exchange rates and oil prices.

He said the airline is being affected by the currency appreciation which is affecting exports and hence cargo movements. Markets are also shifting as Middle Eastern travellers head for Asia as against Europe and North America in the past. However that is not translating into a significantly larger gain for THAI, as the Arab carriers have also stepped up their marketing strategies.

Mr Wallop said Thai Airways has had a VP for risk management for the last two years. Risks are being planned for every day, all the way from what happens if the booking systems fail, or the power fails, or if fuel prices keep rising. At one stage, the company had identified 209 risks of which luckily “only 19 were considered critical.”

He said the airline had anticipated losing traffic to the UK after the recent incidents there. In fact the opposite happened, as passengers shifted away from airlines they felt to be unsafe. The cabin factor in August was 80%, up from early 70s in August last year.

Mr Wallop said THAI was exercising rigorous space control to ensure that large tour operators get seat allotments in direct proportion to their performance.

He said in the past the operators would block the seats and then fill only 20 to 30%, releasing the unused block only a few days before the flight and leaving the airline with little time to fill them. This is why passengers who call to book seats are often told that the flight is full, and then upon boarding, find many seats empty.

Now he said, all tour operators are rigorously checked to ensure that “they have utilisation rates which are acceptable” and on the basis of which, they get future allotments. “We have been keeping pretty good records for the past three years. With a good database comes good judgement.”

He said the tour operators were also told to pay the GDS booking fees in advance. This is because the GDSs charge airlines per reservation, which have to be paid even in the event of cancellations. The tour operators were told to pay the fees upfront which would then be deducted upon materialisation.

“We got a lot of resistance, there were a lot of angry tour operators but at the end of the day they buy it,” he said.

Mr Victor Sukseree, general manager of the Dusit Resort in Hua Hin, said the Dusit group was following a similar policy. “Room allotments are no longer given on request but on performance.”

Another strategy is not to rip tour operators off when one man’s crisis turns to another’s opportunity. That happened when the tsunami in south Thailand led to major shifts in bookings to places like Hua Hin and Cha-am. The hotels could have taken advantage of the situation to raise their rates, but didn’t and are now benefiting from the reputation they gained of fair play.

He said the Dusit has now created a risk management division with a full time coordinator. Although the general impression is that ‘risks’ are always in the form of crisis, Mr Victor said the Dusit feels that it is a bigger ‘risk’ to lose its trained staff to new hotels.

Mr. Auggaphol Brickshawana, Executive Director Policy and Planning Department, Tourism Authority of Thailand said the TAT’s strategy was to prepare for crisis by better mixing and matching its markets to ensure a balanced geographical and seasonal spread of visitors all through the year, and taking advantage of short-break holidays and long-weekends in source-market countries.

“We have to the get the right message to the right market via the right medium at the right time.”

Mr. Sangiam Ekachote Honorary Secretary General Association of Thai Travel Agents, said the Thai political situation was also a ‘risk’ and noted that the country could do with some more peace and quiet. He noted that tourism had now become a cut-throat industry and needed a more fair way of doing business.

He agreed that the ‘zero-cost’ tours could be considered a ‘risk’ to the image of Thailand but indicated that the industry had resigned itself to the situation. “It’s bad in one way and good in another,” he said, noting that zero-cost pricing still helped bring visitors to Thailand, and they did spend money in the country.

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