Unscrupulous overseas tour operators and excessive hotel development were blamed for keeping the Thai hotel industry from full recovery at a meeting last week of the Pacific Asia Travel Association (PATA).

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PATA looks at hotel problems

Chanin Donavanik, CEO of Dusit International, said hotel operators were suffering from an over-supply of new rooms. He said too many business families in Thailand see hotel development as prestigious. They build properties and then incur huge losses as rampant room over-supply cripples yield. He said that 7,000 hotel rooms would be added to Bangkok in 2011, not including serviced apartments.

“Lower rates are here to stay for a while. There are hotel owners who do not have a long-term life left,” he said.

Wayne Buckingham, vice president and area managing director (Thailand) for Starwood, said his company would open six hotels in the next six months in Thailand.

Forecasts of predicted returns have to be revised all the time, usually down. Business plans for hotels today are less lucrative than plans put into effect 10 or 20 years ago when there was much less supply, Buckingham said.

The tourism sector worldwide and in Thailand is likely to grow modestly next year

The medium-term outlook is sobering, with growth expected at 3.5 percent in 2010 and likely remaining below potential for the next three years. Because the Thai economy is largely dependent on final demand in advanced economies, a return to pre-crisis rates of economic growth (a full recovery vs. a rebound to pre-crisis levels) will require a combination of (a recovery of demand from advanced economies and a rebalancing of the sources of growth to reduce Thailand’s dependence on demand from advanced economies. Neither process is likely to be swift. Recovery from a financial crisis is a lengthy process that involves the rebuilding of balance sheets, and the IMF estimates that half of the losses in the financial system in advanced economies are yet to be recognized.

The export collapse in 2009 has been the most severe in Thailand’s recent history

The export collapse in 2009 has been the most severe in Thailand’s recent history. The magnitude of the decline has been unprecedented. Since 1957, there have been nine episodes where exports contracted for at least six consecutive months. Losses to date are more than double those in the 1997-98 Asian financial crisis and the 2001 “dot.com” bubble turmoil. Thailand’s export performance tracked developments in world merchandise trade, which dropped around four and eight percent in the 1997 and 2001 meltdowns, respectively, but 22 % so far during the current global financial crisis.