The outlook for the hotel remains negative


Suvarnabhumi Airport is almost deserted due to the lack of travelers. Hotels are expected to continue to suffer from the pandemic as travel restrictions remain in place to curb the spread of Covid-19. Somchai Poomlard

Tris Rating maintains a negative outlook for the hospitality industry in Thailand, with performance remaining under extreme pressure from the slow recovery in travel and tourism demand.

As a result, hotels are likely to offer discounts and overpriced promotions to attract customers, resulting in intense competition, while also focusing on cost management to minimize losses. Some companies may face a serious liquidity crisis due to a sharp drop in revenues.

The hospitality industry experienced an unprecedented decline in business volume in 2020, reflected by the 60-70% year-over-year drop in revenue per available room (RevPAR) to an average of 331 baht per year. night all over the country. The average occupancy rate slipped to 29.5%.

We believe hotels will continue to suffer the severe consequences of the pandemic as travel restrictions will likely remain in place until the end of 2021. Most hotels may need other sources of funding to deal with the issues. liquidity. Therefore, the weakening of financial conditions is expected to continue.

Tourism in 2021 is expected to recover slowly, mainly due to domestic travel. International arrivals are expected to reach between 1.5 and 3 million in 2021, depending on the deployment of vaccinations and their effectiveness around the world.

The tourism industry is one of the most important economic sectors in Thailand, with tourism receipts accounting for 18% of GDP in 2019. Receipts from foreign visitors amounted to 1.9 trillion baht, or 64% of the total. , with Thai travelers accounting for the remaining $ 1.1 billion. one thousand billion. Of international tourism spending in 2019, accommodation represented 28% and catering 21%.

In 2020, tourism receipts plunged 72.8% to 810 billion baht, including 500 billion Thai travelers. International arrivals slumped to 6.7 million – almost all in the first quarter – from 39.9 million a year earlier. Travel by Thai travelers also fell 46.4%.

We believe that the number of foreign visitors will slowly recover in the fourth quarter of 2021. The deployment and effectiveness of vaccinations will be critical factors. We estimate that vaccine coverage in advanced economies and major Thai tourism source markets will reach around 30% in the second half of 2021. Immunization coverage in Thailand is expected to reach 45% of the population in the last quarter of 2021.


Prior to 2020, inbound and outbound tourism was on a growing trend, aided by promotions in major destination countries and the emergence of low cost airlines. To meet global demand and outbound tourism in new overseas destinations and to diversify in terms of location, major operators based in Thailand such as Minor International (MINT), Central Plaza Hotel (CENTEL) and Dusit Thani Plc (DTC) have expanded their hotel chains into regional and global markets.

Between 2017 and 2019, Thai operators benefited from an increase in hotel and hotel-related services revenues. The hotel and hotel services revenues of the 13 hoteliers listed on the Thailand Stock Exchange totaled 136 billion baht in 2019, up 65% from 82 billion in 2018. In 2020, total hotel and hotel services revenues contracted from 63% to 50 billion baht.

Among the 13 listed hoteliers, MINT leads the pack with a market share in hotel turnover of 65.4% in 2020, followed by Asset World (AWC) at 5.8%, CENTEL (5.7 %), DTC (5.2%) and Erawan Group (ERW) at 4.6%.

MINT’s market share increased from 38.8% in 2017 following its acquisition of NH Hotel Group SA at the end of 2018. MINT is ranked among the top 20 hoteliers in the world.

Cyclicality is integral to the hospitality industry, driven by changing economic conditions, the discretionary nature of demand, and unpredictable safety and security circumstances such as natural disasters, disease outbreaks, violence politics and other events.

These cyclical factors tend to weaken consumer confidence and tourism demand, leading to a bearish cycle. However, in most cases in the past, a bearish cycle would last over a more or less predictable period, before a rally set in when the negative effects wore off.

To be successful over the long term, savvy hoteliers need resilience to deal with the adverse effects of a down cycle. The other challenges are the high initial investment costs and the high selling and administration costs.

To mitigate inherent risks and improve stability, hoteliers have diversified into more stable income-based recurring businesses, such as food and beverage, retail space rentals, real estate for use. mixed, beauty and health care and other consumer related activities in the retail trade. sector.

The two-year average revenue structure for 2018 and 2019 of the 13 SET-listed hotels included 66% of hotel and associated revenue, 20% of food and beverage, 8% of sales and production, and 6% of other revenue. .

On the cost side, the hotel industry is an expensive activity given the investments in property, plant and equipment, in maintaining good quality assets and standardized services, and in selling, general and administrative (SG&A) expenses. The two-year average cost of goods sold (COGS) represented 50% of total revenue, while general and general and financing expenses were 36% and 5%, respectively.

With its high-cost structure, the hotel industry generated an average two-year net profit margin of 7% in 2018-2019. It’s relatively small and more volatile compared to other types of real estate businesses.

At the local level, three listed hoteliers – MINT, CENTEL and Grande Asset Hotels (GRAND) – recorded significant contributions to non-hotel revenues of 25%, 60% and 17% respectively in 2019. DTC’s non-hotel revenues increased to 6% in 2019 from 4% in 2018, and is expected to increase further over the next three years with the completion of its mixed-use project Dusit Central Park.


The performance of hotels has been hit hard by the pandemic since February 2020. The overall revenue of SET-listed hotels slipped to 36.7 billion baht in the first quarter of 2020, down 21% year-on-year. ‘other. In the second quarter, revenue slumped more than 70% year-on-year to 11 billion baht.

Following the easing of foreclosure measures from mid-May 2020, revenue nearly doubled to 21.7 billion baht in the third quarter and gradually increased to 23.2 billion in the last quarter.

As a result, listed hotels recorded a loss in overall profit before interest, taxes, depreciation and amortization (EBITDA) of 2.8 billion baht in the second quarter of 2020. In the third quarter, SG&A expenses were down. decreased by 47%. However, the overall EBITDA remained negative at around 600 million baht. In the fourth quarter, aggregate EBITDA fell to 1.8 billion baht.

Increase strongly: The level of hotel debt increased due to the substantial drop in EBITDA. The weighted average debt adjusted to EBITDA climbed to 79.9 times in 2020, down from 5.3 times in 2019. We expect debt to remain high in 2021, as profits from the Most hotels should slowly recover.

Reduced liquidity and cash flow: As the impact of Covid translated into sharp declines in income and cash flow, the inevitable results have been spikes in debt and liquidity ratios which indicate weakening financial profiles.

In 2020, the weighted average interest coverage ratio of Ebitda fell to 0.3 times, compared to 3.2 times in 2019. The ratio of funds from debt operations fell to -1.3% in 2020, well below the 2016-19 average of 14%.


During the period of travel restrictions, the cost burden of hotels remained high even though revenues fell. Operators focused on aggressive cost management to reduce their financial burden and minimize losses.

Many have minimized personnel costs by downsizing, reducing wages and hours, and integrating service functions. Some outsourced services like security guards or cleaners have been cut back. This helped to reduce the total SG&A expenses of the 13 listed operators by 44% in the second quarter and by 47% in the third quarter of 2020.

Strategic marketing: Hotels have also launched strategic marketing initiatives to generate short-term revenue. Some hotels have offered low-cost packages to match the budgets of domestic tourists and have created special packages for the Alternative State Quarantine Program (ASQ).

Thanks to efforts to increase revenues and reduce costs, hotels were able to improve their breakeven point after the lockdown was eased in the third quarter of 2020.

Prioritized liquidity: To cope with the short-term liquidity squeeze, hotels have secured various financings to strengthen their position and mitigate short-term liquidity risk. They have prioritized cash flow by increasing revenue from short-term packages and through cost control measures. Some have raised funds on the stock market or issued debentures to inject liquidity.

Other solutions included reducing capital spending and divesting assets to places seen as unprofitable or with poor long-term prospects. Improvements in liquidity positions began to be seen in the third quarter of 2020, with hotels gradually recovering from second quarter lows.

Non-hotel income: Overall, non-hotel businesses have been relatively less affected by Covid. In 2020, the 13 listed hoteliers saw a 63.2% drop in hotel revenues but a 14.3% drop in non-hotel revenues, which combined with a 50.2% drop in revenue. total business.

Hotels with a significant proportion of non-hotel revenue did better than their peers. For example, CENTEL’s hotel turnover fell by 66.5%, while non-hotel turnover fell by 18.1%, resulting in a total turnover decline of 37.7% in 2020. The total turnover of Veranda Resort Plc (VRANDA) increased by 14.6% thanks to its property development activity.

Leave A Reply

Your email address will not be published.