Bill Barnett
Bill Barnett

Phuket struggles to curb illegal hotels

Tourism July 19, 2017 01:00


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PHUKET’S golden beaches attract millions of travellers to the island every year, but many of them could be staying in unlicensed hotels, a research report shows.

Less than a quarter of the 1,724 hotels in Phuket - 429 - are licensed, the report by hospitality consulting group C9 Hotelworks found.

This issue was brought into sharp focus late last year when Phuket’s then governor Chokchai Dejamornthan announced plans for a crackdown on unlicensed hotels in the province. At the time, Chokchai urged visitors not to stay in unregistered hotels. But despite a deadline of January 31 having been set for offending hotels to become registered, C9 Hotelworks found that, six months later, the situation remains challenged.

C9 Hotelworks managing director Bill Barnett said that with the proliferation of unlicensed hotels in the city, local infrastructure is not receiving funding from an accommodation tax. And while the private sector is building more hotels, the government-funded infrastructure projects are not benefiting from the inflow of tourism, he said. 

“In the end, the island and its residents are penalised by tourism growth in terms of the lack of better roads, utilities, parking and parks - something has to change,” Barnett said. “We should look at how the issue has been addressed in other markets in the world.

He added that AirBnb has more than 200 tax agreements with individual cities globally. The online reservations platform collect hotel tax on bookings and remits it to local governments. In Paris, AirBnb is required to collect a tourism and administration tax. Thailand is missing out on collecting tax on unlicensed hotels.

Data from Phuket’s Provincial Administration Office shows that of the 1,295 unlicensed hotels identified in Phuket, only six have had their licenses approved. A further 1,001 are pending approval, while 288 have not yet applied.

Barnett said that the main challenges for the process are the strict regulations associated with the nationwide Building Control and Hotel Act. As a result of these mandates, the province is considering reviewing the legal requirements.

Local authorities are under pressure to tackle this issue, as strong demand from emerging economies continues to drive a sharp increase in tourism arrivals to Phuket. 

Russian passenger traffic at Phuket International Airport jumped 17 per cent in the first five months of 2017, while arrivals from mainland China rose 8 per cent. With 17 Chinese airlines now flying into Phuket, mainland China accounts for two-thirds of Asian traffic at the island’s airport.

The safety of tourists, especially considering the recent spate of news over marine-related deaths, is a major issue challenging the government and local authorities in Phuket. 

“Tourists are one of our most treasured assets and their safety and security are key elements to success,” said Barnett, who has more than 30 years' experience in the Asian hospitality and real estate sectors. He has held executive roles in hotel operations, development and asset management. 

Hotel development in Phuket also continues to gather pace; according to C9 Hotelworks’ pipeline analysis, there are 33 hotels being developed across the island, which will add 5,738 more rooms to Phuket’s inventory. These include global brands such as Sheraton, JW Marriott, Best Western, InterContinental, Park Hyatt, Kempinski, Ramada and Rosewood.

 With so many new hotels due enter the market in the coming months and years, Phuket’s authorities are mandated to ensure regulatory processes are stringent and effective. At the same time private sector investment into the hotel industry is racing ahead of the public sector.

Barnett points out that many of Southeast Asia’s surging mass tourism resort markets face a similar issue to Phuket. One case in point is Bali, where the registered number of hotels stands at 317, with 33,599 rooms according to the Indonesian government’s Badan Pusat Statistik. In reality, inventory stands well above that of Phuket. Government regulating bodies have to understand the close relationship between hotel licensing and tax issues in order to not be left out in the cold, Barnett said.