Covid-19 outbreak expected to derail Thailand hotels' recovery in Q2 and Q3 2021

THAILAND hotels are expected to see more losses in the second quarter, with further declines in the third quarter, as the Covid-19 epidemic in the kingdom worsens.

As such, operators' recovery prospects may depend on how their overseas properties fare instead, said UOB Kay Hian analyst Peerawat Dentananan, who favours the diversified portfolio of conglomerate Minor International (MINT).

Though occupancies have improved across the board from the low base of a year-ago lockdown, industry revenue has yet to stabilise, according to his forecasts. He estimated that the average occupancy rate rose to 23 per cent in Q2 2021, from 16 per cent in Q1 2021 and 6 per cent in Q2 2020.

Operators Asset World Corporation, Central Plaza Hotel, The Erawan Group and MINT are expected to post a combined net loss of six billion baht (S$244.7 million) in Q2 2021 - narrowing from 8.2 billion baht in Q1 2021, but still negative.

Revenue per available room, or RevPAR, across these four major listed players is expected to slip to 381 baht in Q2 2021, down by 42 per cent from 660 baht in Q1 2021.

Mr Peerawat also projected a "grim outlook" for the third quarter, based on the duration of a fresh lockdown that began on July 12 - with local political unrest another concern.

His comments came as Maybank Kim Eng analyst Yuwanee Prommaporn noted that the quarantine-free tourism "sandbox" on the resort island of Phuket has hit a stumbling block on the temporary closure of domestic transport services, as virus cases rise.

Ms Yuwanee wrote on July 30: "We think the full reopening plan in October is challenging but achievable due to the sufficient vaccine procured. The key risk is the delay in the vaccination plan which could prolong social-distancing measures."

Still, Mr Peerawat reiterated that Thai hotel operations should normalise in 2023 on a global vaccine roll-out, as pent-up demand for travel drives an earnings turnaround.

"Despite short-term pressure from the impact of the new wave of Covid-19 infections and uncertainties surrounding the vaccination process in Thailand in the medium term, we reiterate our optimistic view on the sector's outlook over the longer term," he wrote, maintaining a "market weight" call.