Holiday season in crisis as Thai tourism drops

updated 3:27 p.m. ET Dec. 16, 2008

SAMUI, Thailand - The palm-fringed island of Samui normally fills up for the holidays, but what stands out these days is its emptiness.

The sprawling Tongsai Bay resort, where guests are shuttled around in golf carts, has reduced hours for staff and even installed lower-wattage light bulbs to reduce electricity bills to cut costs amid the slowdown, said assistant manager Chonlatee Nakamadee.

"We can't believe how quiet it is here," said Karen Jack, a 37-year-old secretary from London. "There's been a couple of nights when we've been the only people in the restaurant."

The hangover from political unrest including an eight-day blockade of Bangkok's airport is not going away: Cancelations are pouring in from around the world — just as the high season is starting and the economy is slowing amid the global financial meltdown.

Tourism authorities predict business will be worse next year than after the tsunami in December 2004. Airlines and luxury hotels have slashed rates, some offering two nights for the price of one. High-level staff at one Bangkok hotel have taken 25 percent to 30 percent salary cuts.

The slowdown could push Thailand's economy into recession. The government forecast a contraction of up to 1 percent in the first quarter of 2009 and zero growth in the second quarter. Tourism brought in about $16 billion in revenue last year, about 6.5 percent of the country's gross domestic product.

Unseen beauty
Bangkok, the capital city, is especially hard hit.

The loudest sound in the elegant lobby of The Peninsula is a toy train chugging through a gingerbread village near a 28-foot (8.5-meter) Christmas tree. The hotel has temporarily closed its bar and two of its six restaurants.

"The decorations are beautiful. It's just a pity there aren't more people to see it," said Charles Morris, general manager of the 370-room hotel, where the occupancy rate sank below 10 percent earlier this month.

The lebua hotel, where occupancy is 16 percent compared to 80 percent this time last year, has stopped all advertising until June. "All expatriate staff working here have taken 25 to 30 percent salary cuts — all of us," said Deepak Ohri, chief executive of the luxury hotel.

Thai hotels typically average 85 percent occupancy during the holidays, but many in Bangkok are less than 20 percent full, said Juthaporn Rerngronasa, a deputy governor at the Tourism Authority of Thailand.

Two-part strategy
Her agency has devised a two-part strategy to revive Thailand's image as a laid-back paradise.

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First: a big apology. The tourism authority is compiling a list of e-mail addresses of stranded passengers, collected from airlines and hotels. It plans to send a message "to express our regrets," Juthaporn said.

Second: big discounts. The authority has asked hotels and airlines to reduce high season rates and fares. Its "Amazing Thailand" campaign is being redubbed "Amazing Thailand, Amazing Value."

Southeast Asia's top budget carrier AirAsia is collaborating with an offer of 100,000 free tickets to Thailand under a regional marketing campaign — "Get Your Baht to Thailand."

Thai Airways and Bangkok Airways, which were crippled by the airport closures, are offering domestic roundtrip fares in the $100 range to the country's most popular beaches — Phuket, Krabi and Samui — and the northern city of Chiang Mai, famed for its elephant treks and Buddhist meditation retreats.

Huge falloffs
The tourism authority estimates the number of tourists will decline over the next six months by 2.5 million, costing the industry 100 billion baht ($3 billion).

That's in addition to 1.9 billion baht ($54 million) spent by the government to lodge and feed stranded tourists during the airport shutdown — and the millions lost by airlines and exporters.

The biggest falloff is among Asians, who accounted for more than half of the 14.8 million visitors to Thailand last year. Some 90 percent of Japanese and Chinese travelers have canceled upcoming trips, said Apichart Sankary, president of the 1,300-member Association of Thai Travel Agents.

Many hotels are trying to lure domestic travelers to fill some of the gap by halving room rates.

"While overseas tourists aren't coming, our strategy is to have more promotions for Thai people and residents," said Juthaporn of the tourism authority.

Andrew Herdman, director of the Malaysia-based Association of Asia Pacific Airlines, remains optimistic for the long-term, noting Thailand has bounced back from the tsunami and other earlier crises.

"We've seen dips in the past and Thailand has always come back very strongly, because there is an underlying reservoir of trust and good feeling about Thailand," he said.

But as the sun set over the island of Samui recently, happy hour faded to dinner time without a single customer at the Lunar beach bar. Even moving happy hour up to 2 p.m. hasn't brought in business, said the bar's owner, Pannipa Sritawan.

"It's supposed to be the high season," she sighed.

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