JLL urges hotels, retailers to cut costs, seek backups

JLL urges hotels, retailers to cut costs, seek backups

Skyscrapers fill the Bangkok skyline. JLL Thailand says hotels and retail should brace for at least a two-year recovery period. (Photo by Somchai Poomlard)

The hotel and retail sectors should prepare for stringent cost-cutting and find alternative income sources for as long as there is no coronavirus vaccine, as it will take two years for businesses to resume as usual, according to property consultant JLL Thailand.

JLL managing director Suphin Mechuchep said the hotel sector has borne the brunt of the impact of the outbreak because it is reliant on the tourism industry, particularly inbound arrivals.

“Covid-19 has created an extreme negative impact on the hotel business, which worsened in the second quarter as occupancy dipped to a very low rate,” she said. “Reopening during that time might have led to a loss.”

Though restrictions have been relaxed, the hospitality sector will take some time to reach the same average daily rate (R) prior to the outbreak, said Mrs Suphin.

She said the situation has improved, but there were some physical distancing restrictions that would limit meeting and seminar activities in hotels.

“During this difficult period, hotels should cut expenses, use staff efficiently, adopt technology and tap the domestic market and long-stay customers,” Mrs Suphin said.

Some hotels may also shift their food and beverage business to a delivery service to generate income from other sources. This can help them earn cash as travel restrictions for foreigners remain, she said.

The tourism situation in many second-tier provinces will improve as the government stimulates domestic tourism, said Mrs Suphin. However, R will remain lower than usual.

The retail sector also suffered a setback as it was forced to temporarily close during the lockdown. Many shopping malls depend heavily on foreign tourists in the same way as upscale hotels.

She said the most resilient sector was offices despite the trend of working from home.

But rental rates tended to decrease by 10-15% as some tenants shifted to remote working and others faced a business downturn.

“Offices remained attractive among investors looking for a tower with tenants as it is the strongest sector among properties, with a yield of up to 6%,” said Mrs Suphin.

However, foreign investors are unable to visit sites, making acquisition difficult.