Q+A: Will Bangkok violence hit Thai tourism and the economy?

By Ploy Ten Kate

BANGKOK (BestGrowthStock) – An anti-government protest in Thailand threatened to spill over into a central Bangkok business district on Monday and troops moved in to defend the area.

At least 25 people died as a result of clashes on April 10.

There has been an immediate impact on tourism, and a recovery in the $264 billion economy, Southeast Asia’s second biggest, may be set back. Tourism accounts for 6 percent of GDP and directly employs 1.8 million people out of a population of 67 million.

Comparisons with data last year are tricky.

Tourism was dealt a blow in April 2009 by that year’s “Songkran riots,” involving the same “red shirt” group. The sector was only just recovering from a blockade of Bangkok’s airports by a rival political group in late 2008.

WHAT IS THE IMMEDIATE IMPACT?

The Tourism Authority of Thailand (TAT), a state agency, is sticking to its target of 15.5 million tourist arrivals this year, against 14.1 million last year. It said 4.6 million arrived in the January-March quarter, up from 3.6 million last year.

Other organizations are far more pessimistic.

“There are no new bookings coming in, none,” said Anek Srishevachart, president of the Thai-Japan Tourism Association.

“I don’t think the TAT’s target of 15.5 million tourists this year is going to be possible. It may be even less than 15 million now, all because of this political mess,” Anek said.

Surapol Sritrakul, president of the Association of Thai Travel Agents (ATTA), said the number of tourists arriving for Songkran, the Thai New Year from April 13-15, slumped.

“Tourist arrivals have been cut in half basically to just 3,000-4,000 per day in April from 6,000-8,000 in the first quarter,” Surapol said on Friday.

The ATTA expects 14.5 million tourists this year.

Representatives from the Thai Chamber of Commerce, the Thai Bankers’ Association, the Federation of Thai Industries and other private sector organizations that met with the government on Monday expect only 12-13 million tourists.

Kasian Watanachaopisut, secretary-general of the Thai-Chinese Tourism Alliance Association, said last week that 100 charter flights from China and 10 from Hong Kong bringing in tourists to celebrate Songkran had been canceled.

“Last year there were 1-1.2 million Chinese visiting Thailand, but this year we may hope for only 700,000 — if the situation returns to normal quickly.”

Shares in national carrier Thai Airways shed 1.75 percent on Monday, while Airports of Thailand slumped 7.4 percent. They have fallen 19.6 percent and 15.5 percent respectively since the clashes.

WHAT ABOUT SHOPS AND HOTELS?

Retailers and mall operators suffering from the 16-day occupation of Rachaprasong shopping district met on Monday to assess the impact of the protests.

“Shops and department stores in the red zone have now lost about 1 billion baht ($31 million) a day,” Thanapol Tangkananan, president of the Thai Retailers’ Association, said.

Central World, the second-largest shopping complex in Southeast Asia, and other big malls remained closed.

Shares in Central Pattana, which runs Central World, fell 2.7 percent on Monday after dropping 5 percent last week.

Thanawat Polwichai, a director at the University of the Thai Chamber of Commerce, says damages from the protests could total between 50 billion and 70 billion baht if they continue until May 15, when UDD leaders have said they would surrender to police.

Reservations at hotels in the upmarket Rachaprasong area have dropped sharply, operators say.

Central Plaza said occupancy at its Centara Grand at Central World — in the middle of the occupied district — had dropped 30 percent due to cancellations by Asian visitors in particular and the scrapping of business events.

Minor International has said it had far fewer guests than normal at its Four Seasons Hotel, with a “low single digit” occupancy rate. “As regards cancellations, it can’t get much worse,” said Rainer Stampfer, its general manager, on Friday. “It’s terrible but there’s nothing we can do about it.”

Streets near Bangkok’s Khao San Road, a magnet for budget tourists, saw some of the worst violence. Many tourists checked out quickly and around 80 shops closed, media said, although the calm that returned over Songkran persuaded many to return.

HOW MUCH WILL THIS AFFECT THE ECONOMY?

The government has forecast 4.5 percent growth this year. Finance Minister Korn Chatikavanij told Reuters that, after all that has happened, he would not be disappointed if that was the outcome.

The private sector predicts growth this year could be cut by 0.3-0.5 percentage point if the protest goes on for three months, Puttipong Punnakan, a government spokesman, told reporters after a meeting between the government and business groups on Monday.

Amata Corp, Thailand’s biggest seller of industrial land and a bellwether for foreign investor sentiment, said some Japanese clients had delayed signing land deals because of the unrest and it might have to revise down its 2010 sales forecast.

Consumer confidence fell in March, when the “red shirt” rally began.

Investment bank Morgan Stanley calculates economic growth this year could be cut by 0.2 percentage point due to the impact on tourism and there would be a bigger hit of up to 0.6 point if consumer confidence slumped further.

The central bank says politics is becoming a bigger factor in deciding whether to raise interest rates. [ID:nSGE637097] Its next policy meeting is on April 21 but, even before the latest events, most economists had not expected an increase until the meeting after that in June, if not later.

Stock Market Today

($1=32.22 Baht)

(Additional reporting by Orathai Sriring and Pisit Changplayngam; Editing by Alan Raybould)

Q+A: Will Bangkok violence hit Thai tourism and the economy?