Flower show leads to Chiang Mai price war

Business News - Monday December 17, 2007

Bangkok Post

TOURISM MARKETING

Flower show leads to Chiang Mai price war

CHADAMAS CHINMANEEVONG

Hoteliers in Chiang Mai foresee no end to the price war that has resulted from an oversupply of rooms that arose ahead of the Royal Flora Ratchaphruek 2006 exposition. The northern province currently has an estimated 25,000 hotel rooms, compared with 17,000 before the three-month international horticultural exposition opened in November 2006. Most of the rooms are budget and middle-scale hotels, according to data from the Tourism Authority of Thailand (TAT).

Another 500 to 600 rooms are due to open in the first quarter of next year with the completion of new five-star hotels, according to Phairoj Suksundee, the director of sales for the Holiday Inn Chiang Mai.

He said the problem was compounded by the conversion of some serviced apartments to accommodate daily guests and thus functioning like hotels.

The oversupply is expected to continue, and as result, hoteliers are slashing prices to draw business. Room rates at three-star hotels range from 1,500 to 2,300 baht per night this year and would be at least 1,600 to 2,500 baht next year, said Mr Phairoj.

To cope with the problem, Mr Phairoj said Holiday Inn was focusing on the international meetings, events, exhibitions and conferences market and niche markets such as corporate and incentive domestic travel to expand its Thai customer base from 20% to 25% next year.

The hotel also is wooing visitors from the Middle East, who are finding it more difficult to travel in Europe because of security issues, and are turning to Southeast Asia. Middle Eastern visitors tend to travel from June to September, which could help fill rooms during the low tourism season in Thailand.

Mr Phairoj said the main rivals to Thailand for Middle Eastern tourists were Singapore and Malaysia.

He said next year hoteliers would face more heavy competition, particularly among mid-market and budget properties. At the same time, five-star and upscale hotels must cut unnecessary costs and be alert to new rivals.

In the low season from May to September of this year, the hotel occupancy rate in Chiang Mai averaged below 50%. The rate is expected to average 70% in the high season from October to next April, said Junnapong Saranak, the director of the TAT's Northern Region 1 office.

This year, he expects that Chiang Mai will welcome a total of 4.2 million visitors, with an increase to 4.5 million next year. He forecast that by the end of this year, tourism-related business will generate revenue of 40 billion baht for the province, up from 39 billion last year.

Mr Junnapong said that two five-star hotels operated by big global hotel chains would open next year. They will help to promote the province through global networks.