What new initiatives is the Rembrandt involved in here in Bangkok?
HALLIN: We just put an entirely new WiFi system in place with Docomo. We have spent THB6.5m ($220,000) to set it up. It’s about 159 routers from the States and I am happy to say it is so much better than the old system that we had. We have also redone three of our restaurants so everything is looking pretty good. We are also switching all of our lighting over to LEDs and we are replacing our chillers. This is a considerable investment and coupled with the new heat exchange system, we are saving a lot of energy. We have done a lot of things with regard to energy. We are working with the Clinton Foundation from the States to set up these projects whereby the energy savings is paying for the THB30m ($1m) investment. We are also renovating rooms and many other things, but it is always an ongoing process.
What role does tourism play in Thailand’s GDP?
HALLIN: I do not have the exact figures, but I have lived and worked out of Thailand for the last 34 years or so and there has been incredible growth. 34 years ago we were talking about half a million tourists and this year we are expecting 21.7m tourists and all of these people spending quite a lot of money. At the same time, the infrastructure that goes around tourism is enormous. If you look at the hotel rooms in Bangkok alone there are close to 120,000. If you average 1 staff member per room on average, whereas some places like the Mandarin Oriental will have as many as 8 staff per room, so if you average it out that is a lot of people. There are all of the support networks including the transport, the tours, and the people making food for visitors at restaurants. So if you add it all up, you have the people growing the food in agriculture, transporting produce, etc., it is enormous. Tourism is definitely in the top three foreign exchange income earners in the country.
What do visitors to Thailand need to know about travel warnings?
HALLIN: Travel warnings have been something that started relatively recently. From our perspective, it is something governments use to keep the press off of their backs. They are very fast, and there are some countries that are quicker than others to issue travel warnings and sometimes they are not very fair. There are riots in Paris, there are riots in Athens, and here in Bangkok there is just some small thing and immediately there is a travel warning going out. We had floods last year in Bangkok, and they were not nice. However, they did not affect any of the downtown areas, the international airport, or a lot of people’s daily lives. We often find that not only are travel warning hugely exaggerated, but news coverage is hugely exaggerated in certain areas. Sometimes these travel warnings hang over the country for a long time even though it was something that was very short term. Embassies should look a little more carefully at these types of events – even England had these types of events recently and they did not have any travel warnings about traveling to England. Bangkok is one of the safest big cities in the world to visit. Thailand is one of the safest countries to visit. Overall, we have a very good record of safety.
There have been incidents of civil strife like we had in 2010, 2009, and a little bit in 2008. However, these did not affect the larger part of the country. In the case of 2010, I can see the point of issuing a travel warning about Bangkok, but that should not affect Phuket, Samui, or our other beach destinations. We have a real problem with the indiscriminate way that travel warnings are issued and that they are often not really based on factual problems. We can gladly admit to things when they happen, as everyone should do when things happen, whether it is in the States with a storm, England with riots, or Paris, or Athens with riots. Here when these things happen it is often a lot more peaceful than anywhere else.
How competitive is Bangkok’s hotel market?
HALLIN: There is a huge supply of hotel rooms in Bangkok and it seems it just doesn’t stop. Within 500 meters of this hotel, we have 3 big hotels opening within the next 6 months. There is a new Radisson Blue opening, a new Ramada, and a new Holiday Inn. There are probably a lot of other smaller properties too. The challenge for us is not as much about customers as it is on human resources. People tend to buy good and trained people and we need good trained people in our industry. We spend a lot of money training people and then people come in and double salaries or have other traction to try to pull them away. So that for me is a much bigger challenge. For the marketing part, yes, there are many hotels that struggle and as with anywhere else, it is supply and demand. Many hotels try to get cash flow and try to buy market by dropping prices. So you often find 5 star hotels that drop their prices below 4 star and even 3 star hotels. In the short run that can fill rooms, but I am not sure that pays their expenses, especially their loan expenses.
We will not have a problem when it comes to occupancy. Where there is big pressure is that room rates are not moving up, but our costs are moving up. As I mentioned, salaries are moving up rapidly. Costs of products like food, energy, and everything else are moving up, but our income is not. I think Bangkok today is probably one of the cheapest destinations in the world when it comes to 4 and 5 star hotel prices.
It’s pressuring margins for sure. For those hotels that are not yet established or do not have a big marketing machine behind them, they will be challenged. Plus there are a lot of international hotel groups here because the banks have gone out lending to people building hotels on the provision that they get international hotel management behind them. But many of the international hotel management companies have 4, 5, 10, or 20 hotels in one city. If you have 20 hotels in one city - and there is even one company that has well above that - of course your natural market share and what your reservation system can provide into a particular hotel is of course not as big as if you have 1 or 2 hotels in the same city. I think this is a problem more for the owners than the operators.
I think Bangkok today is probably one of the cheapest destinations in the world when it comes to 4 and 5 star hotel prices.
How attractive is Bangkok with regard to hotel investment?
HALLIN: You have to remember the hotel business is really 3 businesses in one. It is the hotel business in itself, it is the cash flow business, and it is the appreciation of the property. The prices in Bangkok when it comes to land and property are still a little bit behind some of our neighboring big cities and I think many people see the investment potential here.
How do you see business travel and MICE evolving in the coming years?
HALLIN: If we look at MICE, which is meetings, incentives, conventions, and exhibitions, because of some of the problems we touched on before in 2008, 2009, 2010, MICE has not really been a big part of the Bangkok scene for the last 4 years. With all of the hotels coming online, and with many of them having capacity for conventions, and us with extremely good newly renovated facilities, I can see quite a bit of this starting to come back. People are coming to on-site inspections and I think this will be something to focus on for the next 4 to 5 years. If the business climate stays as it is today, we will have a good future on that. We have seen quite an increase in corporate business over the past 4 years.
From my perspective, we see a lot of companies transitioning to business class and economy these days and the same goes for the use of hotels. There is more financial pressure from companies to be more economical in their choice of hotels, which has created a boom for us 4 star hotels. We have seen the corporate sector growing. We are currently 40% corporate and 60% leisure and we see more and more international companies using hotels like ours. This is a very good thing, it makes financial sense for them and they still get the quality of service and the quality of accommodation without the fancy name and the mileage on the frequent flier miles.