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25 Dec, 2006

Thai Industry Sees No Impact Of Currency, Stock Crash

The Thai travel & tourism industry has shrugged off both last week’s turmoil in the stock market as well as the strengthening of the baht as having no immediate or short-term impact on either visitor arrivals or occupancies.

However, a number of hoteliers and other industry executives said the situation may begin to have an impact if it persists over the long run. Not a single one of the executives said they plan to lose any sleep over the holiday season.

Currency fluctuations usually have significant impact on the travel & tourism industry — from daily visitor expenditure to borrowings, investments, airline profits, marketing budgets, hotel room rates and choice of destinations.

These days, the weak dollar is keeping American travellers closer to home while attracting visitors to US shores from strong currency regions like Europe and the U.K.

Since the 1997 economic crisis, Thailand has positioned the relatively weak baht as an important component of its “value-for-money” marketing strategy, a pitch that is working well.

Suraphong Techaruvichit of the Asia Hotels Group and head of the marketing committee, Thai Hotels Association, said it was proving to be an excellent high season for Thailand, with full occupancies at nearly all the tourism centres.

“Pattaya and Phuket are all overbooked,” he said. “The baht should not get any stronger than this. Luckily, the Bank of Thailand has already acted to prevent the baht from getting stronger, so we don’t expect any major problem.”

He said he did not think any rate adjustments would be required as most of the hotels were already quoting in baht anyway.

Chatchawal Supachayanont, general manager of the Dusit Resort Pattaya said the resort was packed and his property in particular was doing very well from the U.K. market.

“Most of our visitors are from Europe and the U.K., and they don’t depend on how the dollar is doing. There is no impact on us here.”

One investment banker rued the “convulsions” that had taken place. “We knew from the moment they (the Bank of Thailand) acted what the reaction would be. And that’s exactly what happened.’

He noted that there was still some confusion about whether the restrictions that applied to investments in condominiums also applied to the hotel and accommodation sector, and anticipated that unless they were clarified, it would have an impact on investment.

“Certainly the property guys will be pissed off,” he said. “They certainly don’t want the music to stop.” He said those developers with ongoing projects would hit some uncertainty.

Thai Airways International’s Executive Vice President Wallop Bhukkanasut said he did not think it would be an issue at the annual shareholders meeting this week.

“It will definitely have some impact on the bottom-line but it looks as if (the situation) is easing a little after the Bank of Thailand intervened.”

He said the airline had calculated its budgets based on the dollar moving within a bandwidth of 37.50 to 40 baht, and if the dollar sinks any further, the airline would have to act to see how best to manage its currency mix in terms of its debt and projected earnings, the vast majority of which are in foreign currencies.

Mr Wallop noted that the overall environment for the airline industry was getting increasingly volatile, compounded by high oil prices and other problems beyond anyone’s control.

He said it would be useful if politicians and governments worldwide adopted a “more realistic approach of how we do business and realise that we are no longer a luxury but a necessity…..they need to stop accusing us of being responsible for global warming and hitting us with all these carbon taxes and charges to curb environmental damage.”

“We’re not the bad guys compared to all these other (means of transportation) blowing smoke all over the place.”

The one area that may be affected somewhat is the US dollar salaries earned by expatriate general managers and hotel executives. Some said they expected these would be up for renegotiation, depending on the overall package being earned and how well the respective properties and companies are performing.

If it persists, a stronger baht is also expected to lead to more outbound travel from Thailand, which would narrow the large gap with the kingdom’s inbound arrivals but also curb the huge surplus in overall tourism earnings.

In 2004-05, the Tourism Authority of Thailand has used the rate of 40 baht to the dollar to calculate visitor expenditure.

Based on that, inbound tourism earnings were pegged at 367.3 billion baht (or roughly US$ 9,134 billion) while outbound expenditures were calculated at 80.7 billion baht (US$ 2 billion), generating a surplus of more than US$ 7 billion.

The biggest spenders among inbound visitors are from Kuwait, Hong Kong and Austria. Outbound, Thais spent the most in Eastern Europe, Japan, the U.K., Taiwan and Korea.

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