Thailand struggles with plunging tourism

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 staffers and even installed lower-wattage light bulbs to reduce electricity bills to cut costs amid the slowdown, assistant manager Chonlatee Nakamadee said.

“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 airports, is not going away: Cancellations 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 staffers at one Bangkok hotel have taken 25% to 30% salary cuts.

The slowdown could push Thailand’s economy into recession. The government forecast a contraction of up to 1% 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% of the country’s gross domestic product.

Bangkok, the capital, has been hit especially hard.

The loudest sound in the elegant lobby of the Peninsula is a toy train chugging through a gingerbread village near a 28-foot 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% this month.

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

Political unrest led to the weeklong seizure of Bangkok’s two airports by antigovernment protesters last month, stranding about 300,000 tourists and costing the Thai economy tens of millions of dollars a day.

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

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

First: a big apology. The tourism authority is compiling a list of e-mail addresses of passengers stranded by the airport blockade, 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 renamed “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.” The Thai currency is the baht.

Thai Airways and Bangkok Airways, which were crippled by the airport disruption, are offering domestic round-trip 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.

The tourism authority estimates that the number of tourists will decline over the next six months by 2.5 million, costing the industry $3 billion.

That’s in addition to $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 the 14.8 million visitors to Thailand last year. About 90% of Japanese and Chinese travelers have canceled upcoming trips, said Apichart Sankary, president of the 1,300-member Assn. 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 Assn. of Asia Pacific Airlines, remains optimistic for the long term, noting that Thailand has bounced back from the tsunami and other 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.