minor sees hard months ahead

The Nation

Minor International has revised its 2008 profit growth rate from the hotel business from 25 per cent to 10 per cent due to the drop in the hotel

business, which last year contributed 42 per cent of the company's revenue.

In the fourth quarter alone, the hotel profit is expected to drop 40 per cent on a year ago, said chairman and chief executive officer William Heinecke.

He noted that maintaining the company's growth were strong sales in the food business, which in 2007 contributed 49 per cent of revenue. Heinecke said that this year the revenue ratio from the food business would certainly be higher.

In 2007 the company's net profit was Bt1.6 billion. In the first nine-months of this year, the net profit was Bt1.48 billion.

Still, despite the drop in the hotel business, the company vowed not to lay off any of its 8,000 workers, though their work days are cut and other cost-cutting measures like energy-saving will be enforced more seriously. An early retirement programme is on the cards if the situation does not improve.

It is expected that the Bangkok airport closures will drive 3 million tourists away from Thailand during December and March, and this could affect the employment of 1 million workers.

Shaken by the instability, tourists from several key markets such as the UK, the US and Japan have disappeared. For Heinecke, China is the only hope for Thai tourism. To cope with the situation, hotels are focusing on more short-haul markets like South Korea and Taiwan. Promotions are also offered, for instance a free night for three-night stays. Still, room rates are being maintained, despite news that some overseas agents have pressured for discounts.

Despite the calamity, Heinecke insisted that hotels should not survive through discounts, as Thailand's position as one of the world's best destinations would be compromised.

Low rates will not draw back tourists so long as the factors of concern are not cleared up, he said, adding that Thai hotels in the South suffered from low occupancy rate after The tsunami in 2004 even with low room rates. Moreover, the average hotel room rate in Thailand is already cheaper than in neighbouring countries: 50 per cent lower than in Singapore and Hong Kong for instance.

"Thailand is not the place for bargains," insisted Heinecke.

Heinecke urged the Board of Investment to extend tax incentives to existing hotel operators who are suffering extraordinarily low occupancy rates despite the high tourist season. The Finance Ministry could also offer tax allowances to employers who decide to retain their existing workforce or recruit new employees. Meanwhile, to reduce their operating costs, suspending social contributions for three years is recommended.

Tax incentives should also be offered to existing hotels with renovation plans, and small operators also need soft loans, while Airports of Thailand should reduce fees levied on airlines so that more flights could be operated in and out of Thailand, and Thai Airways International, as the national carrier, should take the lead in lowering fares.