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Why hoteliers can’t afford to stand still in a period of oversupply

By Bradley Haines, Regional Vice President - Asia Pacific, SiteMinder

  Posted in Opinions



Prior to the year that’s been, Thailand’s tourism sector had experienced decades of unprecedented growth to become one of the 10 most visited countries in the world, ahead of the UK, Japan and Hong Kong.

A booming industry, the rapid rate of growth was a huge win for the economy. Yet, as we near the end of 2020, we know now that the rapid rate of growth also, indirectly, helped to set the stage for the current oversupply of accommodation.

Valuing both the opportunity and the resilience of the local market, investors from all around the world have chosen to build in Thailand, flooding the country with properties that have naturally impacted the experience of local operators. 

For many, despite the record-breaking growth of international tourism pre-2020, things have become more difficult in recent years, with increased competition forcing the need for local accommodation providers to constantly evolve. 

Tracking Thailand’s growth to understand the oversupply

Going back to 1960, when the local tourism industry was in its earliest days, the number of international arrivals was just over 80,000, or a figure approximately 0.3 percent of the country’s then population.

Expanding quickly due to greater globalisation, improved technology and more affordable transport options, foreign tourists reached one million for the first time in 1973, 10 million by 2001, and almost 40 million by 2019 which is approximately 57 percent of the country’s population now.

Recent years have seen rapid change, and a huge opportunity for both investors and the local government, in an industry that last year was worth almost two trillion baht from international visitors alone. 

However, the growth in stock has outpaced the level of demand. Even despite a six percent dip in revenue per available room in 2019 across the country (10 percent in locations such as Phuket and Koh Samui), an additional 50,000 rooms were planned over the next five years, prior to COVID-19.

For hoteliers, greater competition has put downward pressure on their room rates, and localised price wars have ensured that their margins remain razor thin.

How to thrive in the competitive Thai market

Can hoteliers thrive in such a market?

The answer is fortunately: yes. However, it’s vital for hotels to keep evolving and updating their business, even as travel has slowed. Four practical ways to achieve this are:

1. Maintain your offering: In the case of Thailand’s older hotels, they face the challenge of maintaining their upkeep and technology, to ensure they don’t lose business to newer alternatives in a time of oversupply. This is particularly true for the country’s established five-star hotels that run the risk of becoming something less than their rating, in the eyes of their guests.

2. Invest in your staff: The oversupply has resulted in a shortage of skilled hospitality staff at all levels, as newer hotels aggressively recruit from established ones. The sheer volume of properties is testing the number of qualified individuals available. As a result, it’s important for businesses to invest in their staff through upskilling programs, to ensure that they feel valued, are constantly improving their craft and remain loyal to the business. It’s ultimately a hotel’s staff that impacts the overall guest experience, so reducing turnover, however possible, is crucial.

3. Differentiate however you can: With an oversupply can come a lack of differentiation in the product that’s being offered, and this is particularly true for properties that are below five-stars in Thailand and are competing heavily on rates. For these hotels, it’s important to create a unique selling point and, from that, build brand loyalty and a positive sentiment towards the property, both by word of mouth and online.

4. Know your competition: Through recovery and beyond, it will be important for local hotels to know how other businesses in their area are approaching the market, and part of that is ensuring that they are priced correctly to be competitive, but aren’t underselling themselves. A tool such as SiteMinder Insights is hugely valuable in this regard, allowing hoteliers to keep a close watch on their competition and adjust accordingly.

Evolving your operations and preparing for the return of travel will be vital in the months ahead, and will help to create a business that builds loyalty in both your staff and guests. Decades of tourism growth have been a blessing for hoteliers, but as we all face the prospect of a smaller travel industry in the future, among the bountiful supply of accommodation, there is no room for those who stand still.

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