Guest speakers at the Greater Phuket Chapter of the American Chamber of Commerce (AMCHAM) business seminar at the Outrigger Resort Laguna Phuket on Friday (Oct 30) delivered a stunning presentation outlining the current state of Phuket’s tourism industry.
In introducing the presenters, Bill Barnett of Phuket-based hospitality consultancy C9Hotelworks revealed that among the key challenges facing Phuket is that Chinese tourists, Phuket’s number one volume tourism source market, were staying only 2.2 days on average.
And even then, they don’t stay on the island that long. “They travel,” said Mr Barnett. “They go to Khao Lak, Krabi, and all over the area. They like variety during their stay. They are certainly ‘Beyond the Beach’,” he added.
Mr Barnett pointed out that the Chinese market had gained crucial importance to Phuket. “Russian market is static. The volume has stabilised, but the numbers have yet to come in after all the pre-bookings before the oil price slump and ruble crisis took hold,” he said.
“Phuket is going through a host of rebranding to acclimatise to this, as seen by the Twinplams-MontAzure venture announced, as well as the Rosewood change and the recent launch of the Cassia brand at Laguna Phuket,” he said.
Jesper Palmqvist (left), Singapore-based Area Director for Asia Pacific for worldwide hospitality consulting firm STR Global, revealed a data-based picture of the current state of Phuket’s tourism, rebounding after the huge hit Thailand’s tourism took last year.
“Thailand in 2014 took a huge hit, but hotels here were very good at holding room rates, so that when visitors returned, business was good,” he noted.
Mr Palmqvist plainly voiced Phuket hospitality players’ primary concern, and what everyone now knows: bookings are up, but room rates are down as a consequence of embracing the “Russia-China wholesale approach” – and he presented data to prove it.
However, he also explained that data analysis showed that luxury hotels performed excellently in peak periods, but plummeted during the troughs. “Mid-upscale hotels had peaks much lower, but were much better at maintaining room rate averages throughout the year,” he noted.
Regardless, average daily room rates (ADR) for hotels of all service levels across the board in Phuket had dropped by 6-7.5% within the past year.
Only 7% of all the hotels in Phuket showed ADR and Occupancy had increased, while two-thirds of the Phuket hotel room supply market showed a double-hit of reduced ADR and reduced occupancy.
Yet, Mr Palmqvist noted that the data was no cause for alarm.
“Don’t panic – other countries have ups and downs, and many other countries don’t have the enormous growth pattern that Thailand has,” he said.
“Phuket has about 4,500 rooms under construction or under contract right now that will come on-stream within the next few years. That is good, consistent growth,” he added.
Mark Simmons, Outrigger Resort’s Vice President of Sales and Marketing, took the data to the next level and unveiled several key strategies to unlocking the potential of the huge Chinese market, using real- life experiences from Outrigger as evidence of what works, and what doesn’t.
In his opening volley, Mr Simmons noted that Phuket should be “Thankful for China”.
“Europe is stagnant, and the Russians will be back, but in numbers, and the rates will not return to what they were before,” he said.
China outbound tourists are estimated to spend almost US$10 billion (B355.72 billion) this year. “That number is expected to triple by 2023,” Mr Simmons noted.
The top two destinations were Hong Kong and Macau, “but these are mainly domestic tourists,” he noted. Third was the US, followed by Thailand.
“Thailand – and Phuket – is very attractive for Gen X and Millennials. They have been to the key destinations and are now looking for ‘self-adventure’ individual experience holidays’,” he explained.
Other top inbound Chinese tourist market segments were honeymooners and the MICE (Meetings, Incentives, Conventions and Exhibitions) market. “Outrigger at Laguna has done very well by targeting this MICE sector,” Mr Simmons added.
Key to accessing the Chinese market was understanding the huge changes currently underway in how tourists place bookings, with travel agencies still securing 47% of bookings, but online bookings rising to 37% of the bookings market.
“China OTAs [online travel agents] is where the market is exploding,” Mr Simmons explained. “Ctrip and Baidu inked a deal that will see them corner a huge portion of the market alone. They expect a 20% boost in growth for the whole China market and at least a 35% boom in China’s vacation business sector.”
China was not alone in the explosion in online booking numbers. US-focused operators Expedia and Orbitz were aligning themselves to lure greater marketshare. “Google and TripAdvisor ganging up, too,” Mr Simmons added.
To overcome the conundrum of huge volume growth coupled with flat ADR performance realised by most Phuket hoteliers serving the China market, Mr Simmons advised simply: “Target strategies to take best advantage of peak seasons for China – not us – to make gains that will pull the average for the year up.”
He explained how Outrigger had ramped up ADR by 50% by specifically targeting Chinese tourists during the Chinese New Year holidays, and boosted ADR by 20% with campaigns aimed at tourists looking to get away during the October National Week of holidays in mainland China.
“You will get the rates if you plan accordingly,” Mr Simmons said.
Corporate strategy had to also encompass property and room specific changes to serve the Chinese market, he added. Such changes included having Mandarin speaking staff, accepting UnionPay payments, aligning Food & Beverage offers and signage, along with free WiFi, as “standards” to include.
“But to get these tourists to book, a critical step is to get a foothold in China,” he said. “Outrigger was late, but we now have an office in Beijing.
“Having an office on the ground makes a huge difference, and your web presence must be hosted in China. All your SEO will not make it through the firewall. But it’s worth it. Inside China alone, the numbers are huge. Outrigger already has 15,000 followers and the number is growing each day.”
In answering a question from the floor, Mr Simmons also delivered some good news for smaller operators in Phuket: market cycles are getting much shorter in transiting from group charters to individual travellers.
“The time delay is getting shorter all the time, and it’s happening with the Chinese market,’ he said.
In wrapping up his presentation, Mr Simmons said sagely: “China as a market ain’t going anywhere, and it’s becoming more and more important, more fragmented, and with more richer, higher-level tourists.”
“You will have to suck up the volume in the low season, but if you manage your RevPar [revenue per available room] well in the peak seasons, you will end up ahead.”