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Package or premium: Phuket must decide

Why Phuket's Record High Season is 'a Disaster'

Friday, February 8, 2008
PEOPLE all over Phuket have been wondering why the number of tourists visiting the island has been rising, yet businesses are hurting. Now we know the answer.

There are plenty of other economic incidents that have people scratching their heads, too.

Why, for example, restaurants along Nai Yang beach and elsewhere report a large drop in trade this high season.

Why more than 100 Swedes sought help from the local diplomatic mission in 2007 because they simply ran out of money.

Why local Thai guides are complaining that overseas guides are being employed instead of them.

And why the tourist industry is not pumping up local property sales on the island the way that it should.

The cause of all this pain lies in Charlie's Theory of the Phuket Economy.

This particular Charlie is Guy ''Charlie'' Lidureau, the far from cheap proprietor of Seafarer Divers, and the basic bottom line of his theory is two words: package tours.

There are simply too many of them so they gobble up the money that should by rights be permeating through the whole Phuket economy.

But the money just isn't there. ''It's a disaster,'' Charlie says. And he ought to know.

Despite the steadily increasing numbers of visitors, his liveaboard business has suffered a 40 percent drop this high season, while diving courses and day trips are so-so.

Practically the whole of the island is, as it were, in the same leaky boat.

It happened like this, so Charlie's Theory goes:

Around the middle of last year, many resorts that borrowed money under a generous Thaksin Government scheme to assist recovery after the tsunami realised that they would be shifting back in 2008 from low-interest loans to 10 or 12 percent bank interest.

To prepare for this eventuality, the resorts sold large numbers of rooms to package tour operators at 50 or 60 percent discounts.

This assured them of income for the coming high season. Huge block bookings allowed the airlines to fill their flights.

But in most cases, the customers were package tourists, people who are probably very nice but who only have the opportunity to spend a small fraction of the amount that so called individual ''quality'' visitors bring.

A package tourist will, for example, eat the substantial pre-paid breakfast at the hotel, then find a cheap restaurant outside the resort for lunch and dinner, or buy snacks from a minimart.

So the initial arrangement rebounds on the resort because the customer fails to spend money there.

Package tour guides, often not local Thais, steer their customers to entertainment places where discounts can be obtained for large groups.

They take their customers to retail outlets and on tours that provide completely-legal kickbacks.

So the whole local economy feels the squeeze, and whatever profits there are mostly flow back to the package tour companies and the airlines.

The individual ''quality'' travellers will not have rushed to book an early holiday. They know that the airline prices will rise closer to high season.

Usually, they can afford the extra. But because airlines have taken block bookings at a lower rate, they need to fly their aircraft to full capacity to make the same profit.

So they prefer to fly one flight full rather than two half-empty.

The result is that when it comes time for the individual traveller to book, the number of options has been reduced and the flights that do remain open are ridiculously expensive.

Final outcome: the ''quality'' tourist goes to the Maldives or Bali instead.

Charlie had his theory confirmed when he visited the dive show in Paris from January 11-14.

While there were plenty of great diving options available on Phuket, the would-be visitors who wanted to be here in February found that they could not get flights, except at very high prices.

The result: Most of them are swimming around coral reefs right now, somewhere other than Thailand.

We have no hesitation in repeating what Charlie told Phuketwan and the TAT: ''It's a disaster.''

It's also a vital lesson in insane economics and a mistake that is, hopefully, never going to be repeated.

The future, though, may not be all that bright.

In a recession of the kind that people are now talking about in Europe and America, the first cut people make is to leisure spending.

We'd tell you what Charlie says that could mean for Phuket in 2008-2009, but we don't want to spoil the rest of your day.

How's your business going? Does Charlie's Theory apply to you? Register as a Phuketwan reader and send us your comment

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Sunday December 4, 2022
Horizon Karon Beach Resort & Spa

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