Chiang Mai Tourism: Same Same, But Gone?

Posted: 25 Jun 2011 | 6:00 am

Thailand's northern tourism destination Chiang Mai needs to take a cue from Donald Trump regarding brand reinvention. "The Donald", as he is known, has become renowned for the continued revitalization of his image over the years, despite going through a series of ups and downs.

There have been recent media reports that the Northern Chapter of the Thai Hotels Association (THA) has announced market-wide occupancy levels have plunged below 40 per cent, causing widespread concern throughout the industry.

To this, perhaps the most pertinent comment comes from Dusit Thani CEO Chanin Donavanik, who recently said in The Nation. "We have nothing new in Chiang Mai. We sell old products and activities."

Welcome to the world of destination fatigue, where an over-reliance on cultural travelers who have since fled to emerging destinations such as Bhutan, Siam Reap and Luang Prabang has hit the doldrums.

A lack of synergy between the increasing number of private-sector hotels and the absence of mega projects and government-sponsored infrastructure has led to the current dilemma. Supply and demand fundamentals are only becoming worse in the short term as new properties continue to hit the pipeline.

Thailand's government has fallen asleep at the wheel of the tourism industry over the past two years, resulting in a lack of critical investment and controls for overbuilding.

At the recent No Vacancy conference in Bangkok, Jonas Ogren of STR Global reported that average room rates in Chiang Mai and Chiang Rai declined by over 10 per cent last year.

Meanwhile, occupancy rates for January to April this year have dropped off nearly 15 per cent compared with last year.

Those who think Phuket is immune to the same affliction may be in for a harsh road ahead. As Thai investors continue to flock and build a series of mid-scale hotels, which some may say lack character or are "vanilla" in appeal, the government has been slow to invest in much-needed infrastructure.

A long delay over the Phuket international Convention and Exhibition Center has most local hospitality players skeptical over when construction will start.

Growing concern is increasingly being voiced about Phuket's over-reliance on "mono-mass markets", such as Russia and China. Leading Scandinavian operator TUI Nordic expressed their opinion on the matter in a recent Bangkok newspaper, in which they urged Thai hotels to diversify their client base and said that too large a share of any one particular group could make some guests from other countries uncomfortable.

Phuket needs to take these words to heart, as any Wall Street analyst can show you, no boom can be sustained indefinitely.

While Chiang Mai and Phuket have distinct separate issues, they are strange bedfellows in an industry investing in hotel rooms with little forward thinking about new demand generators and sustainable growth.

Every boom will bust and thoughtfully placed restrictions by the government on new hotels and zoning are a key priority.

Destination fatigue remains a clear and present danger for Phuket tourism, and it's high time this becomes the focal point of our industry.

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