Destinations Asia

Starwood May Downgrade Forecast Because of Thailand Turmoil

Dec 30, 2013 6:00 am

Skift Take

There’s been so much bullish talk out of Thailand on how the political situation won’t have a great impact on tourism, but now the numbers crunches are injecting a note of reality.

— Dennis Schaal

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Starwood Hotels and Resorts WorldWide Inc may cut its projected growth of average revenue per available room (RevPar) next year due to the impact of political turmoil.

Lothar Pehl, senior vice-president for Asia-Pacific operations, said the hotel chain had projected RevPar growth of 5.7%.

But the lingering political problems will not make the hotel business run as usual in the first five months of next year before a rebound starting in May.

“We may revise our 2014 RevPar growth early next year. We will closely monitor the situation to see when the political crisis will end,” he said.

After the sector bounces back, Starwood expects partners such as travel agents and airlines to negotiate room rates again. Then prices will come down to support the recovery.

“Whenever there is a disruption, you need to do heavy marketing and promotion to build volume. When you have volume, then you build the price as the second wave, and this is what we see will happen in 2014,” Mr Pehl said.

Starwood does not want to cut room rates but the market will dictate how things develop. It’s not a question of what hotels want to do but what the market is willing to pay.

Nine lifestyle brands under Starwood aim to create unique experiences for which customers are ready to pay premium prices.

In 2013, Starwood did not sign any new management agreements. It now represents 22 hotels in Thailand and eight out of its nine brands are in Bangkok.

Mr Pehl said the company faces area restrictions, especially in Bangkok’s Sukhumvit Road area where there are many hotels. Starwood has Westin, Sheraton, Aloft and Four Points by Sheraton hotels in the area, while Le Meridien and Plaza Athenee are nearby.

However, Starwood is very keen to explore new opportunities. It is holding discussions on new contracts outside Bangkok. At least three agreements should be secured.

Mr Pehl said the heart of Bangkok is very much full for Starwood. Outer Bangkok is still open, but not many companies are interested in investing in hotels in the area, as there are no skytrain or subway connections.

Starwood is still enjoying fast growth in Asia-Pacific. China is its fastest-growing market, followed by India, Australia, Indonesia and South Korea. In China, Starwood signs about 35 management contracts annually.

Thailand, Indonesia and the Philippines are the three major beach resort destinations for Starwood.

For its Thai hotels, the biggest customer growth market is China, with 20% growth in 2013 and a projected 20% in 2014.

The second-biggest growth market is Russia at 10-20% per year. The Indian market is expected to grow by 9%, driven by weddings. The European market is pretty much stagnant.

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