With the elimination of the Thailand Pass, the ‘land of smiles’ is officially open for tourism, but where exactly are the tourists? Statistics from the previous Head of the Thai Hotels Association indicate that general accommodation businesses in Chiang Mai were thriving in the years previous to the pandemic. Occupancy across the board sat consistently around 75 – 77% in both luxury hotels and hostels.
Due to the pandemic and the closure of the Thai borders, businesses involved in the tourism industry faced numerous challenges; The accommodation portion of that industry was one of the hardest hit. For luxury hotels in 2020, capacity averaged at a flat 0% and only rose to 8 – 10% in the following year. Today, the hotel industry stats sit at an average of 25 – 35% occupancy with an average length of stay being 2.0 nights, nowhere near their stats from their most prosperous years (2018-19) when capacity reached 80% with an average stay of 3.0 nights. To account for this loss, immense changes needed to be made to the luxury business model. Gabriele Lombardo, the general manager of the Shangri-La Hotel in Chiang Mai, discussed the challenges of keeping a large luxury hotel open during the pandemic.
“We had to change everything,” said Gabriele, “We had to forget about what we used to do, our main objective was to retain and protect jobs.”
For the past two years, the grand hotel had to temporarily close restaurants and club lounges on the property such as the Kad Kafé and the China Kitchen. Since the reopening of Thai borders, business has been gradually returning but has been particularly difficult in locations like Chiang Mai which have to compete with cities like Bangkok and Phuket. Currently, the 277-room Shangri-La sits at a capacity of about 30%. Previous to the pandemic, the majority of tourists booking rooms at the Shang-ri La were Chinese. At the moment Chinese citizens are prohibited from leaving the country due to another COVID lockdown leaving the hotel without its key market.
Lombardo is preparing his staff and establishment for this continued Chinese tourist drought, as he doesn’t believe tourists will be allowed to leave for at least another year. The goal now for the Shang-ri La is to provide the same luxury quality with fewer resources, a skill that Lombardo has been practicing and refining for the past two years.
“We had to look at opportunities on how we could offer the same type of service with less resources,” said Lombardo.
But where do hostels stand? According to previous leadership in the Thai Hotels Association Northern Thailand Chapter, hostels also thrived previously to the pandemic with averages of 79% capacity with the length of stays averaging 3.0 days. Occupancy trends closely followed that of luxury hotels during the pandemic, with just domestic tourists providing business in 2021. Based on specific examples of current occupancy one might think the local hostels are surpassing the Shangri-La in financial recovery, but small businesses also had to make big changes to stay afloat.
The Suneta Hostel Chiang Mai is a small 44-bed establishment located just outside Tha Pae Gate. Owner Nappadol Suneta owns three hostel locations, one in Chiang Mai and two in Chiang Khan. The only business Nappadol received from his establishments during the pandemic was from domestic tourism, lack of income forced him to close his establishment in Bangkok. Thankfully, as soon as the borders opened up the Suneta Hostel immediately received requests for bookings. Today his hostel in Chiang Mai sits at 80% capacity but at a significant cost to the business. To acquire business during the tourist drought Nappadol had to drop bed prices by about 40%, significantly affecting the hostel’s income.
“I think the first year I will keep the price like this.” Nappadol said, “I just don’t want to hurry raising up the price.”
Nappadol noted that even before the pandemic most of his client base was European backpackers, and therefore hasn’t been impacted as severely by the Chinese border lock as luxury hotels like the Shangri-La. But as far as the future goes for tourism, Nappadol also isn’t convinced much will change in the coming months due to the conflict with Ukraine and its impact on gas prices around the world.
La-Iad Bungsrithong just stepped down from her position as the head of the Thai Hotels Association Northern Chapter, a position she held for 10 years. When looking to the future of tourist accommodation, La-Iad predicts business in Chiang Mai will return to favour luxury hotels.
“More people will go to the luxury hotels,” La-Iad said, “They prefer more hygienic [options] and more safety. They get very competitive rates for the luxury hotels compared to other destinations in Thailand.”
Only time will tell what is in store for the tourist accommodation industry in Chiang Mai, but will hopefully soon return to its former glory.
