Price War among Koh Samui hotels (March 27th, 2012)

Falling Occupancy Levels in Koh Samui


Anyone who has spent a few days looking around Koh Samui will have noticed that there are many, many hotels and resorts on the island. Every year the number of rooms increases in Koh Samui. This is to do with the commercial success of the place. It seems like a sure fire way to make money - borrow from the bank, build a resort and get the tourists in. Things are not so straight forward anymore. Koh Samui has now over-extended itself and occupancy levels are falling, threatening many small and medium-sized resorts.


Price war among hotels and resorts


The result is a price war in Koh Samui. The vice-president of the Nora Group, Vorasit Pongkumpunt, noted that the average hotel room rate on Koh Samui has dropped by 15% since last year, and several hotels are now offering promotional deals such as buy-one-night-and-stay-one-night-free.


Last year there were 444 hotels on Koh Samui with a total of 17,204 rooms. There are 513 new rooms planned to be built. 313 of these rooms will be completed this year. This means more competition for tourists later this year and next year.


The worst hit sector of the accommodation market is the small and medium-sized business. The big 5 star hotels and the brand / chain hotels have actually seen an improvement in occupancy levels - business is up 16% at the high end.


For those not dealing at the high-end of the market there is growing competition and bank loans to repay. Thai banks are notoriously unsympathetic in such situations. Other than the high-end, occupancy levels have fallen to 40%.


This means that if you are on Koh Samui you should ask for a discount or free breakfast. The consumer never had so much power.


Bannasat Ruangjan, president of the Tourism Association of Koh Samui, claims the problem is not due to overdevelopment but to high flight prices charged by Bangkok Airways and the limited number of flights per day. He claims that if Koh Samui could receive 5,000 guests a day then things would be fine. At present 3,600 people can fly into Koh Samui in one day.


This sounds persuasive but even with 5,000 people coming to Koh Samui every day it would only increase occupancy to 50%. Moreover, there are other ways of getting to Koh Samui. Lots of people arrive by boat, especially those looking for budget accommodation. And Mr. Ruangjan has failed to mention the growing popularity of the other islands in the archipelago, Koh Phangan and Koh Tao. They must be taking customers away from Koh Samui.


Better value not more rooms


What Koh Samui needs to do is offer better value. Building more and more rooms that are basically the same just leads to more and more competition. In the short term, the tourists win but in the long term a huge surfeit of rooms just makes the place look unpopular. Instead of packing the tourists in, what is needed are better facilities, better service, less avaricious taxi drivers and motorbike rental people, better roads, better zoning, and better environmental protection. Koh Samui should be paradise island, not hotel room island.


Source: Bangkok Post 27th March, 2012