HAMA AP, HotStats Rating of Phuket Sandbox Performance

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The launch of the Phuket Sandbox on July 1, 2021 is an important step on the road to recovery from COVID-19 and a measure that many other Asia-Pacific travel destinations could soon emulate.

Working with HotStats, HAMA AP performed a preliminary performance analysis in the first two months of sandbox operation.

HAMA AP applauds the efforts of those who launched this initiative, but from an asset management perspective, we caution owners not to overturn similar launches until some very specific criteria are met; otherwise, the costs of opening too early may outweigh the benefits.

According to the Thailand Tourism Authority, Phuket has seen just over 28,000 international arrivals since the sandbox was launched. Almost half of them traveled from the island to other provinces around Thailand. Of the total arrivals, returning Thai nationals accounted for approximately 14%, with a similar number from the US and 12% from the UK. Other nationalities that have played prominent roles are Israel, France, and Germany. It appears that a major reason for doing business has been Thai nationals and Thai expats returning to Thailand using Phuket as a more relaxing quarantine option.

At this point in time, the original goal of 100,000 visitors by the end of the third quarter seems to be clearly missing. Thailand’s struggles with the COVID delta variant in recent months have likely also had an impact on consumer sentiment and willingness to travel.

According to HotStats data, usage increased compared to the same period last year (16.1% vs. 4.8%), but the rate has decreased ($ 67 vs. $ 88). This suggests that any incremental business is being run at discount prices. This is not an ideal scenario and we recommend hotels avoid the discount as the renovation rate takes time.

As a result, RevPAR (Rooms Revenue Per Available Room) and TRevPar (Total Revenue Per Available Room) have improved over the same period last year when borders closed and the destination relied on domestic travel. The RevPAR was $ 11.36 in 2021 compared to $ 5.01 in 2020.

Nevertheless, the hotels remain in the negative profit range. The gross operating profit per available room (GOPPAR) improved from the same period last year: $ 11.69 versus $ -25.90.

One important point to note is that the payroll per available room (PayPAR) is controlled and is actually lower than last year ($ 15.37 vs. $ 22.04), suggesting that hotels may have salaries or staff related to the Opening the sandbox did not increase.

An initial assessment is that the sandbox has not been as successful as originally expected and there are still fundamental questions that need to be addressed before mass tourism can resume in a Southeast Asian destination.

The Phuket Sandbox was a bold experiment that needs to be continued, but before other destinations consider following suit, there are a few key issues that need to be addressed, which we summarize as follows:

1. Airlift is crucial

Without the support of the airlines, all opening plans cannot be successful. Destinations need to work with airline partners and, if necessary, encourage them to bring aircraft with them. Considerable lead time is required to design and market this elevator, and therefore the goals require coordinated efforts.

2. Recognition from country to country (two-way vaccination certificate) is essential

Several countries have put Thailand on their warning lists or red zones, with the UK requiring those returning from Thailand to stay in a quarantined hotel on their return, adding additional cost and time to any vacation planned. For any sandbox-style structure to be fully functional, unrestricted travel must be possible from both directions.

3. Cost control

Hotels and resorts need to be very careful about ramping up costs; especially payroll. If travel destinations want to be opened, they run the risk of losing more money than they are currently doing in half-sleep mode.

4. Advance planning and marketing required

Merely revealing the boundaries will not result in a return to 2019 sales levels overnight. Destinations need to invest in marketing strategies and compete for business around the world.

5. Vaccination limits must be adhered to

Destinations must meet certain vaccination targets (70% or more) before they can legitimately consider opening up completely.

6. COVID protocols need to be developed

Traveling with COVID will become the new normal through 2022 and beyond. Strict protocols must be developed in all destinations, ranging from the international recognition of vaccination records to capacity limits in the accommodation and measures to be taken in the event of infections.

About HAMA – Asia Pacific

HAMA-AP members are involved in the asset management, acquisition, financing and disposition of hotels and resorts and are directly responsible for decisions related to capital investments, renovations, asset repositioning, operating policies and management selection. Its nearly 45-member Asia-Pacific chapter represents more than 270 hotels and resorts of all major brands, with over 65,000 hotel rooms across the region. To learn more, please visit www.hamagroup.org.

About HotStats

HotStats provides monthly benchmarking of profit and loss data and market insights for the global hospitality industry. It collects detailed financial data on more than 7,500 hotels worldwide, representing more than 100 brands and independent hotels, on a monthly basis. HotStats provides more than 500 different KPIs that cover all operating income and expenses, including payroll, cost of sales and ultimately the departmental and overall profitability of the hotel. More information is available at http://www.hotstats.com.


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