The Thai Hotel Industry Tourism Essay

The Redshirt Protests were a series of political protests aimed against Thailand ‘s current authorities enduring over two months in Bangkok, the capital metropolis. The dissenters, dressed in Red shirts, massed in big Numberss and occupied a figure of countries and later blocked them off. Military personnels were sent in to maintain dissenters at bay. With the tensenesss constructing up, Bangkok became a unsafe metropolis which made the state as a whole less appealing to tourers.

Tourism is an of import portion of Thailand ‘s economic system, and with the protests detering touristry the impact was important. Thailand ‘s hotel industry is one dependant on touristry and as a consequence suffered greatly. The industry has already faced several adversities such as the “ putschs, the fiscal crisis in 1997, and the encirclements of Suvarnabhumi and Don Mueang airdromes by the yellow-shirts dissenters in late 2008 ” . Losingss faced by the hotels “ from the 2008 airdrome ictuss were lower than those caused by the recent agitation ” , demoing that the hotel industry is confronting its worst crisis as of yet.

Thailand ‘s Hotel Industry

Tourism is of great importance to the Thai economic system accounting for an estimated 6.7 % of the state ‘s entire GDP in 2007, larger than that of other Asiatic states. Tourism has risen aggressively since turning from about 7.76 million reachings into the state in 1998 to 14.54 million in 2008.

The redshirt protests caused an estimated 7.5 billion baht loss in touristry gross for the months of March and April.

Thailand ‘s hotel industry is really dependent on the touristry industry, and has been able to spread out due to the overall sustained growing of tourers come ining the state.

Thailand ‘s hotel industry is composed of a big assortment. Hotels come in different sizes, types, and ownership. SilQ for illustration is a little hotel owned in private by a local Thai proprietor, whereas JW Marriott hotel is portion of the “ Marriot International ” franchisor based in the United States.

Methodology

A combination of primary and secondary research will be conducted in order to reply my Research Question, with focal point being on the latter.

For primary research, I will set together a little questionnaire and behavior interviews with the hotels. This may be done personally, via electronic mail or phone call ( depending on what the hotels prefer ) . Hotels will be contacted prior to carry oning interviews. I intend to interview at least 20 hotels as this should be a sufficient sum.

For secondary research, I will do usage of the cyberspace and besides newspapers. This is because as the Redshirt protest was a really recent event, the newspapers are bound to incorporate information on its economic impact and may even include information on Bangkok ‘s hotels. Secondary research will besides be used to roll up background information on the Redshirt protests. I will besides do usage of text editions and my ain notes for any theory involved.

The information will be analysed, comparings between hotels will be made. In the terminal, I will be able to build an overall image of the state of affairs and come up with an overall decision which should reply my RQ.

Voluntary Leave

Voluntary leave is when the staff are given the pick of whether to take leave, frequently without wage. Often, a concern will supply this option to its workers in times of fiscal battle as they need to cut down costs. As it is voluntary, staff have the pick but they will be encouraged to make so every bit while there is a fiscal deterrence there is a non-financial inducement. This factor will depend largely on how much they value money. Some people will go on working because they need to keep their income either to pay their ain costs or merely because they want to. However there will be other people who will see the benefits in non holding to work, chiefly free clip for them to make other things, and may non see money as that of import. They may experience that the can make without wage for a certain sum of clip and take this chance while they can.

During the protests, Dream Hotel “ asked [ the staff ] to voluntarily go forth temporarily [ without wage ] ” in an effort to cut down its costs. Despite that it was without wage, a certain sum of staff did take voluntary leave. What made this work was that it was voluntary, intending that the staff had the pick of whether to go forth or non. Some staff stayed as they would hold needed the money for their ain grounds. However others may hold decided to travel on leave for a assortment of grounds. They may hold seen this as an chance to take a interruption from work, as this basically meant that they could hold more yearss off albeit without wage.

What besides made it work was that it offered occupation security. The leave was non merely voluntary, but besides impermanent. This meant that they were n’t laid off or made redundant and they knew that they would finally be able to return to work once more. Maslow ‘s Hierarchy of Needs argues that one of the demands people have are security demands. Security demands are desires necessary to do people experience safe and stable. The staff knew that the option of impermanent voluntary leave was an effort to cut costs, and they would hold felt that if they left they ‘d be assisting maintain the hotel in concern and finally salvaging their occupations.

After the protests, most of the staff from Dream Hotel returned and resumed their occupations. As of 21 June 2010, all but three had returned.

Market Cleavage

Market cleavage is the procedure of dividing a market into distinguishable groups of purchasers in order to better run into their demands. This is done because while all clients demand the same merchandise, they may hold little distinction in footings of penchants. For illustration person with a higher income may desire a epicurean suite, while a individual with a lower income may merely desire an low-cost room to kip in.

The decrease in tourers sing Thailand consequences in a autumn in tenancy rates. As hotels are unable to pull more tourers, they will necessitate to pull different types of clients. Apart from tourers, business communities and locals are other possible clients for hotels. Hotels may place these as different market sections and may be given to these 1s.

All three sections serve as a client base for hotels, nevertheless their specific demands and wants will still differ from one another. For illustration, a man of affairs with a really high income would be more likely to pay for a epicurean room than a tourer.

Market sections are utile as it allows houses to understand their consumers better and seek to appeal to the demands of certain types of clients. With the protests detering tourers from going to Thailand, hotels could still remain in concern by seeking to appeal to different market sections. SilQ hotel had managed to remain profitable without the tourers as they had opted to run into the demands of business communities who were still going to Bangkok.

Another utility of market cleavage is that it allows concerns to implement monetary value favoritism, which can assist a concern become more profitable.

Finance

Extinguishing unneeded costs

There are many costs a hotel faces, and one manner to better its profitableness would be to extinguish unneeded 1s. For illustration, the add-on of a swimming pool to a hotel in order to better installations will come with a big cost. The hotel may make up one’s mind to set this move on clasp for a ulterior clip when their hard currency flow improves

Pricing Schemes

Lowering Monetary values

In order to seek and hike their net income border many hotels offered price reductions, which ranged from 20 % – 60 % .

One ground why this was done was due to the jurisprudence of demand, which states: As the monetary value of a merchandise falls, the measure demanded of the merchandise will increase. See the diagram below.

Q

Q1

Calciferol

P1

Phosphorus

Monetary value of Hotel Rooms ( tical )

Measure of Hotel Rooms

The jurisprudence is straightforward and makes sense. It merely means that if a merchandise is cheaper, demand expands as non merely will it go more low-cost but people will be more willing to purchase it. For illustration, a hotel room provides a 20 % price reduction from a room bing 2,130 baht/night. The new monetary value will be 1704 baht/night. For person who earns about 100,000 baht/month, each dark would account for 2.13 % of their income. However, the new monetary value will merely account for 1.704 % of their income. This allows them to bask the same service while cut downing chance cost ( the forfeit of the following best alternate when an economic determination is made ) as they will be able to salvage more of their income and pass it on other things. It besides means that they may desire to devour more of the merchandise, intending that they may desire to pass more darks at the hotel.

Despite this, a lessening in monetary value does n’t needfully take to an addition in gross. For illustration if 100 people would be willing and able to pay for 2,130 baht/night before the protests, the entire sum of gross coming in each dark would be 213,000 tical. However during the protest the sum of people willing to and able to pay for the current room rate fell to 50, gross would fall to 106,500 baht/night. The hotel may so diminish room rate to 1704 baht/night, but so merely 60 people would be willing and able to pay for the suites at that rate. This would intend that the hotel would so merely do 102,240 baht/night. Clearly it is seen that take downing the monetary value in this instance has really led to a decrease in gross despite an addition in demand.

What hotels must take into consideration before altering monetary values is the Price Elasticity of Demand ( PED ) . PED measures the reactivity of demand to a alteration in monetary value. A merchandise can either be inelastic ( less than 1 ) , unitary elastic ( equal to one ) or elastic ( more than one ) . For illustration, allow us cipher the snap of the scenario mentioned in the old paragraph.

With the known informations we may stop up it into the expression and so find PED:

We have determined the value of PED to be 0.3, which is less than 1. This shows that PED is inelastic, intending that a alteration in monetary value would take to a proportionately smaller alteration in demand. Inelastic PED is good for increasing monetary values as it will take to an overall addition in gross. However for take downing monetary values it is bad as in this instance it would really take to a decrease in overall gross. If PED was absolutely elastic so there would be no point in altering monetary value as gross would stay unaffected, and if PED was elastic so it would ‘ve increased gross if the monetary value was lowered.

The restriction of PED is that, while easy to cipher, acquiring dependable and accurate informations may turn out slightly of a challenge. Besides, due to the redshirt protests, the nature of PED may hold really changed. Therefore utilizing past informations may turn out to be undependable as PED may hold been different back so.

Monetary value Discrimination

With this cognition, hotels may execute monetary value favoritism as they can bear down optimum monetary values within each section. For illustration, if business communities is more willing to pay a higher monetary value, they may bear down higher monetary values for business communities than an mean household. With tourers no longer able to come here

Businessmens going to Thailand will necessitate a topographic point to remain for the darks, merely like tourers would. However the sum of business communities would n’t diminish every bit much as the administrations would find if they travelled to Thailand. Despite the protests, many business communities were sent to Thailand. SilQ was able to remain profitable without the tourers as they were still able to provide for business communities.

Third-Degree Price Discrimination takes topographic point when consumers are identified in different market sections. With the tourers gone, hotels would offer publicities and room price reductions in hopes to excite demand for hotel suites in other market sections, such as business communities and locals. They will be able to afford the suites at cheaper monetary values nevertheless when the tourers return the hotels will convey the monetary values back up shortly afterwards.

Different market sections will frequently hold differing Price Elasticity of Demand, intending that demand for one section may be more inelastic than the other. Hotels may establish monetary values utilizing this cognition.

Shut Down

If the hotel continues to do a loss in the long-run, it may be rendered wholly unprofitable. If nil can be done to work out this issue, the lone option left to take would be shuting down the hotel wholly. While this may non be a solution to maintain the hotel in concern, it would be good to the proprietor who would ‘ve accumulated a batch of debt. Keeping the unprofitable hotel in concern will merely roll up more debt for the proprietor, which will do it harder on them to pay off.

Eventuality Planing

Eventuality Planning is about being proactive to alterations hotels may confront. Basically, this is when a hotel programs for any possible dazes before they really happen.

For about the last 5 old ages, Thailand has been traveling through terrible political instability. There is heated tenseness between Yellow Shirts and Red Shirts and both groups have staged legion protests. For illustration, in 2008 Yellow Shirt dissenters efficaciously shut down both Suvarnabhumi and Don Mueang airdrome which besides harmed the touristry industry. The Red Shirts besides staged a protest in Bangkok in 2009 where they shut down Paragon, a big section shop. While the may non hold affected touristry straight, the accretion of protests and other politically-motivated events act as a deterrence for tourers to come to the state. While the redshirt protests may hold ended, the political tensenesss have remained which could intend that future events may happen which can besides hold damaging effects on the hotel industry.

As this is a possibility, it is strongly of import that hotels should get down be aftering for them before they occur. Since the protests ended, the Landmark Hotel in Bangkok has held meetings in order to find how to cover with employees, the imperativeness and clients should an event like this happen once more. This is because while eventuality planning will non forestall anything, better readying may better efficiency as the hotels will hold a better thought of what to make when they happen. For illustration if it happens once more the hotels may instantly promote voluntary leave without wage for their staff alternatively of argument and think of what should be done during the daze. This allows the hotels to cut the costs sooner instead than let them to roll up while they decide what to make. This reduces any harm done to the hotels and will increase their opportunities of endurance.

New Marketing Schemes

Due to the dynamic nature of any concern environment, the markets will ever alter. For illustration, in this instance the market sections for hotels changed. They realised that with touristry drastically reduced, they had to seek and appeal for different market sections more to do up for this.

While the state of affairs is presently back to normal, it is advised that a concern continue to prosecute new selling schemes to better or eve addition its client base. This will take to hotels holding less dependence on one section and in bend cut downing the impact on the industry should a daze occur.

Decision

While each hotel was affected in a somewhat different manner, it is safe to state that they were all so affected by the Redshirt protests.

From my interviews, most hotels were claimed to be retrieving from the protests and were optimistic about the hereafter. The Chatra Court ‘s tenancy rate “ return [ erectile dysfunction ] to normal ” despite “ doing a loss ” during the Redshirt protests. Didy, the Front Office Manager of Sacha Hotel Uno, stated the state of affairs was “ bettering ” and expected things to return “ back to normal ” within “ 2 or 3 months from now ” . However, Khun Wattana from the CitiChic Hotel stated that “ tenancy [ was ] still low ” and that he was “ still trusting for betterment ” but was instead “ unsure ” as the hotel was still doing a loss after more than a month since the terminal of the Redshirt protests.

Overall nevertheless, the impact of the redshirt protests is most likely short-run and hotels may hold a great chance to retrieve during the high season, which is around November-December.

Recommendations

There are many solutions which can be implemented during times of dazes such as the ruddy shirt protests. Indeed I feel that in times of a crisis, a combination of legion steps should be taken instead than merely one as this will be the best and most effectual manner to work out any jobs faced by hotels.

First of all, I would urge hotels to see pricing schemes which may be implemented in order to increase their net income borders.

Second, I recommend hotels to come up with a stricter budget in order to fasten control over their hard currency flows.

While the industry has returned back to normal, I feel that the hotel industry should take full advantage of this by be aftering for possible dazes they may confront in the hereafter. The ground why I recommend this is because Thailand has been politically unstable for a long clip, peculiarly within the last four old ages. For illustration, in late 2008 the Yellow Shirts laid protests at both Suvarnabhumi and Don Mueang airports. This excessively had an impact on touristry, as it efficaciously restricted anybody coming into and traveling out of the state. This prevented a big figure of tourers coming to Thailand, who therefore would hold made booking off and therefore bing the hotels a batch of money as it would hold slashed gross. The redshirts besides staged protests back in 2009, with one of them ensuing in ramping an ASEAN conference held in Thailand. What this basically means is that due to the political state of affairs and the figure of protests holding occurred within the last few old ages, the redshirt protests of 2010 may non be the terminal of it merely yet. There is a possibility that more dazes may so happen, and with this in head hotels may be capable to frequent dazes. This stresses the importance that they need to be prepared in the hereafter.

See pricing schemes

Budgeting

Eventuality Planing

Thailand politically unstable within the last few old ages

Suvarnabhumi Airport Late 2008

Numerous Yellow Shirt Protests

Red shirts shut down Paragon 2009

More dazes may happen