Bangkok--20 Apr--TRIS Rating
TRIS Rating, today, expressed concerns over the tourism, hotel and airline businesses to be mostly affected by the prolonged political turmoil. TRIS Rating’s rated clients in the tourism-related businesses would have another bearish year in 2010 after suffering from a series of political turbulences since late 2008.
Dr. Santi Kiranand, President of TRIS Rating Co., Ltd., the first Thai credit rating agency, said that after the Suvarnabhumi Airport seizure in 2008, the Thai tourism has yet to fully recover. The chronic political unrest has ruined the tourism environment throughout 2009. Total hotel occupancy in 2009 was 49%, a 7% drop from the previous year, with the Bangkok area posting the highest decline of 12%. The average room rate also declined in 2009, falling by 5.4% year-on-year, the first drop since 2003. Room occupancy slightly picked up in the first quarter of 2010. However, the eruption of violent response from the red-shirt protesters on 10 April 2010 intensified political battleground. Tourism prospects for the rest of the year are questionable.
Thailand has been striving to capture tourists from emerging markets, i.e., Chinese, Indian, Russian, and Middle Eastern, to absorb vacancies left from declines in European and American tourists impacted by the global financial crisis. However, the failure to resolve the red-shirt mayhem and the emergency decree announcement have caused a number of nations, prospective markets included, to raise travel warnings to Thailand to the highest level. Consequently, the number of foreign tourist arrivals could drop further. Although local tourists could mitigate the lost business, the length of stay and per capita spending of local travelers are much less than those of foreign tourists. Moreover, the occupancy rate and average room rate seem unlikely improve as the competition will intensify since there is an excess supply of rooms. The rated hotel operators, i.e., Central Plaza Hotel PLC (CENTEL), MBK PLC, and Minor International PLC (MINT), are likely to face another challenging year in 2010.
Dr. Santi also stated about the airline business that Thai Airways International PLC’s (THAI) operating performance has just recovered from the 2008 global financial crisis and the political turmoil occurred in December 2008 and April 2009. The cabin factor improved to around 75% in the second half of 2009 and jumped to 80% in the first quarter of 2010, up from only 66% in the second quarter of 2009. However, the emergency warnings of several countries to their citizens about travelling to Thailand are expected to negatively impact THAI’s operating performance this year. In addition, the company has had to cancel around 10 flights per day to Europe since 16 April 2010 due to the volcano eruption in Iceland. The company expects to lose around Bt100 million per day from the flight cancellations. Currently, flights to Europe account for around 30% of total passenger revenue.
However, Dr. Santi said, any additional political violence could further worsen the prospects of the tourism-related and airline businesses. TRIS Rating will closely monitor the actions and developments of each rated company and expects them to carefully manage liquidity to survive in a down cycle. The impact to each operator will vary and will be individually evaluated depending upon the business profile and diversification. Currently, the ratings TRIS Rating assigned to tourism-related and airline businesses stay unchanged; CENTEL at “A-/Negative”, MBK at “A-/Stable”, MINT at “A/Stable”, and THAI at “A/Stable”. Once the impacts are significant, TRIS Rating will take prompt rating actions immediately, said Dr. Santi.
Current ratings of tourism-related and airline companies in TRIS Rating’s portfolio:
1. Central Plaza Hotel PLC (CENTEL)
Company & Issue Ratings: A-/Negative
2. MBK PLC (MBK)
Company & Issue Ratings: A-/Stable
3. Minor International PLC (MINT)
Company & Issue Ratings: A/Stable
4. Thai Airways International PLC (THAI)
Company & Issue Ratings: A/Stable