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Charlie Lidureau, economic guru and Thai diving veteran

Phuket's Future Forecast: Darkness at Noon

Monday, October 27, 2008
Economic ANALYSIS

PHUKET'S DIVING industry can expect a high season that will be as much as 30 percent down on the last one, plus three or four years of tough going.

What's true for the diving business probably holds true for Phuket and Andaman tourism generally, too.

That's the well-informed forecast of Guy-Robert ''Charlie'' Lidureau, the MD of Seafarer Divers and the TDA Diving Association (Thailand) Representative for Phuket Province.

Every day now brings glimmers of gloom, and hope. For example, today we learn that the number of LTU flights from Germany is to increase from a single weekly flight to four flights a week from November 1, one up on last season.

At the same time, the Australian dollar has dropped to a five year-low, which means Phuket's keenest visitors will now find it more difficult to pay for Jetstar holidays.

We also hear one four-star island resort is so concerned about the outlook that its low-season discount rate is being continued through until December 19 now.

Yet it's the property industry that will feel the downturn the most. Sputtering sales are stalling.

And now big resort brands are putting on the brakes, and fast.

Expansion and new building is being reigned in. The forecast is for a grim, dour time all the way through 2009.

At the same time, any resort with a war chest full of cash is taking the opportunity to grow their business, much as billionaire investor Warren Buffett advises: when fear takes hold, take your chances.

This is particularly true of boutique management brands who will be linking up with struggling villa and private pool property developments all over Asia.

That doesn't help boost tourism on Phuket, but we thought you'd like to know . . .

Charlie Lidureau is a keen student of global economics and was spot-on with his view last season that a splurge on package tours was keeping out the independent travellers that Phuket really wanted.

One benefit from the current downturn, Charlie says, is that the package tours will not hog every seat on the planes from Europe, so more independent travellers will be able to get to Phuket.

The cash they spend here on accommodation, transport, food and adventures goes into the local economy, rather than back to the foreign package tour company.

But generally, Charlie's Theory of Phuket's Economy, Phase II, is not very positive.

He knows, I know, and the whole world knows that Phuket is a great destination, rich in appeal and hospitality at every level.

Any long-term negative effects here will be magnified in other destinations within Thailand, and around the globe.

Phuket will survive. But it's going to be a long, and probably difficult process, especially when you throw in the unpredictable and potentially damaging running conflicts of Thai politics right now.

Tell us your view on the Phuket economy. Please comment below


While the Tourism Authority of Thailand has done well to recover from the airport blockade by flying in tour agents and journalists to drive good publicity, that may not work next time.

Exceptions will come at both ends of the gamut of outcomes. Some resorts will market their products so well that the downturn will have minimal effect.

At resorts that are more like Dee Dee's Guesthouse, where marketing or niche appeal has never been a consideration, managers will scratch their heads and wonder why the customers are not coming.

And if the 2009 lower than low season is followed by a 2009-10 high season that again fails to bring customers . . . you get the picture.

''Local people will feel the pain next year,'' says Charlie, and that's just the start. ''Every statistic indicates that tourism to Thailand will drop by 20 to 25 percent.''

While it has been conclusively established that no country, including Thailand, will be immune, some countries are deeper into the mire than others.

Andaman tourism-related businesses that rely on the Korean and Japanese markets could find themselves dropping as much as 50 percent of their traffic.

Already layoffs in the US and Europe are costing people their jobs and forcing them to cancel plans for holidays. It's absolutely certain now that jobs will go here, too.

There are notions that the high-rollers will sail on, unaffected. That they will need getaways and holidays because of the additional stress of sacking staff and crisis management.

Well, we all live in hope. The economy of Thailand, Charlie says, will start to feel the pinch once the current orders for motor spare parts have been filled, and there are fewer new orders, or no new orders.

Some people believe that Phuket and the Andaman, having survived a variety of setbacks before and since the 2004 tsunami, is teflon-coated.

There is always something ominous on the horizon. And the potential for deadly box jellyfish expanding into western beach waters may be next.

We don't wish to alarm readers, but Charlie quotes a Chinese proverb: ''When the fat people grow thin, the thin people die.''

The local diving industry is ''very complex,'' Charlie says. There are a handfull of large companies, about 15 that maintain staff all year long, and scores of small corner-store models.

For a while, it looked as though the good times would just keep rolling: one company, for example, is currently finishing a day dive boat to carry up to 70 divers.

Charlie's concern is that the need fo fill speedboats and live-aboards will trigger a discounting war when the industry really needs to band together and improve its global approach.

Discounting is the big fear in the resort business, too, where the preferred option has always been ''four nights for the price of three'' promotions.

But both industries will soon face intense and long-lasting competition from other islands, and other coral reef destinations, everywhere.

Dynamic pricing on the internet is already here and will be more widely applied in a global crisis by price-sensitive travellers.

In a bad year such as 2005, after the tsunami, Thais on the island simply live off their savings and combine as a family unit to see it through.

Surviving three or four years of difficult times will not be quite that simple. That applies to individuals, to families, to corner-store dive shops, to big-brand resorts, and especially to the property industry.

We suggest applying a layer of teflon with the sunscreen now.

Day-after Update: The newsagency Reuters reports that the global economic slowdown could cost Thailand a million jobs early next year and output will be slashed, the Federation of Thai Industries (FTI) said on Monday.

'I think industries will cut their production by 20-30 percent and about 900,000 to 1 million jobs will go in the first quarter,' Thaveekij Jaturajarernkul, an FTI vice chairman, told a news conference.

'The impact on exports will clearly be felt from early next year,' he said, adding the garment, furniture and electrical parts sectors were likely to suffer because of weak consumption.

That would make it difficult for new entrants to the workforce - about 700,000 each year - to find jobs, he said.

The workforce in Thailand numbers 20 million, most in agriculture. About 5.7 million are in non-agricultural jobs.

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Comments

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Perhaps part of the problem is that Phuket is NOT the choice destination that the authorities think it is. Serious environmental issues, uncontrolled growth, very annoying traffic, etc could be part of the reason why some of the environmentally-conscious travelers are skipping Phuket.

Posted by Dave on November 21, 2008 13:14


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