Introduction
In the contemporary world, the rise of travel and tourism industries has shown a tremendous resilience, which has been among the main contributors to the growth of hotels real estate in various countries. Thailand is among the countries that have been significantly affected by the geopolitical tensions and economic instability. In 2008, Thailand experience violent clashes that resulted in approximately 9 percent decline in average tourist spending. This also resulted in the closure of the international airports, which consequently decreased tourists and investors' confidence. However, over the past few years, the country has experienced tremendous growth in the tourism and travel sector, and hence growth in the hotels real estate. According to World Travel & Tourism Council (2015), travel and tourism industry has contributed US$ 72.2 billion on GDP, US$7.2 on capital investment, and US$40.3 billion on visitor export. Consequently, the country has been ranked number 18 globally on the Travel and Tourism's total contribution to GDP.
Market Area Characteristics
Demographic Base
Population
Bangkok is the capital city of Thailand and has a population of about 8 million, which was anticipated to grow to 10 million by 2015. The overall population of the country is approximately 65.5 million according to the Census conducted in September 2010. Regarding gender, the female population in Thailand is about 33.4 million and male population constitutes 32.1 million, which makes 51 percent of female and 49 percent of the male. The sex ratio of the population on the scale of male per 100 females was 96.2. Thais community makes the largest community in the country by constituting 62.3 million compared to 3.2 million of non-Thais (National Statistical Office, 2010).
In Thailand, the Age Dependency Ratio shows the ratio of the dependent group of young people who are less than 15 years and older people above 64 years to working-age group of people aged between 15 and 64 years. The statistics show that 2030 population projections will decline in the share of youth group by 11.1 percent and working-age population by 4.5 percent. The current share of the youth population and population of working age is 11.9 percent and 25.1 percent respectively (International Labour Organization, 2013). In addition, the ratio of the elderly population to total population is anticipated to increase by 2030 by almost 25 percent from 9.4 percent in 2010. This is anticipated to increase the dependency in the country, which adversely affects the economy. This information indicates that Thai economy is expected to be affected by the increasing ratio of elderly dependency. Suggested strategies include enhancing accessibility to decent heath care and pension to help the residents cope with the increasing change in demographic patterns (International Labour Organization, 2013).
Literacy
According to International Labour Organization (2013), the literacy refers to a skill that enables an individual to write and read simple sentence concerning everyday life. The illiteracy rate measures the proportion of a population above the age of 6 years who cannot read. In a survey conducted in 2008, the female illiteracy rate dominated the male literacy across every region in Thailand. For instance, in the northern area, 10 percent of the women population were illiterate in 2008 (International Labour Organization, 2013). However, the 2008 survey indicates that Bangkok had the smallest share the smallest share of the individuals who are illiterate. As a result, this contributes to the cultural resources, which contributes significantly on the driving the travel and tourism competitiveness in the city. According to the World Economic Forum Report, cultural resources such as literacy levels creates enabling an environment for the growth of the hospitality real estate (Blanke & Chiesa, 2015). In addition, the Thai government has facilitated short skill courses through subsidies, which significantly increased from 67, 477 trainees enrollment in 2006 to 169, 285 trainees in 2009 (International Labour Organization, 2013).
Competition Information
Competitive set
The hospitality real estate in Thailand constitutes a stiff competition from the hospitality industry, increasing the growth of restaurant industry, and shopping malls. The hospitality sector has experienced a tremendous growth due to the increase in the tourist arrivals approximate to 22.3 million in 2012. Irrespective of slow global economic growth, the hospitality industry reached a record of 31 billion baht, which reflects s a 24 percent increase from the previous year (Sirikeratikul, 2013). This illustrates that the existing hospitality industry has achieved a significant growth indicating that the competition is stiff.
In 2014, the competition was expected to increase due to the emergent of the international hotel chains in the country and positive economic conditions. For instance, the international chains, compared to 80 percent portion operated by the independent operators in 2013, operate about 20 percent of the Thai hotel room (Sirikeratikul, 2013). The hotel business is constantly thriving and evolving in regions such as Phuket, Bangkok, Hua Hin, Chiang Mai, Pattaya, and Samui. Because of the increasing entrance of the international hotel chains into Thai's market, the prevailing hotels have readjusted their strategies to concentrate more on revenues from beverage and food sales. In 2010, the growth in food and beverage market was expected to increase by 10 percent indicating increased concentration of hotels in the market, and hence stiff competition.
The restaurant industry also exhibits stiff competitive edge on the Thai hospitality market due to the increasing number of restaurants. In 2013, the restaurant and hotel sectors in the country expanded by 15.1 percent, which is a significant increase compared to the previous years. The Ministry of Commerce in Thailand has registered approximately 8,450 restaurants by November 30, 2013 (Sirikeratikul, 2013). Increased sales in the restaurant sector to US$4.7 billion in 2012 (a 23 percent increase from the previous year) also reflects the tremendous growth in the restaurant industry (Sirikeratikul, 2013). In addition, the increasing urbanization, trend toward eating behaviors, and higher consumer disposable income projects the growth of the restaurant industry. The main categories of the restaurants in Thailand include Quick Service Restaurants (QSR), International/High-end Restaurant, and Small Restaurants or Small Medium Enterprises. The small restaurants constitute 80 percent of the restaurants, which are influenced by hypermarkets and food courts in the shopping mall (Sirikeratikul, 2013).
Economic Base
Labor cost in Bangkok
Currently, Bangkok is under transition from the previous regime of the national minimum wage rate, which in 2013 was set at 300 Baht or about US$9 per day (Fernquest, 2015). The minimum wage rate is anticipated to be set according to the changes in the cost of living in various provinces. This change is anticipated to increase the employment rate and competitiveness in the Bangkok and the entire country because it will minimize the wage disparities and condition of workers. Consequently, the increase in the minimum cost of labor will influence the labor force in Bangkok because the employees have to improve their productivity and skills to remain competitive (Fernquest, 2015).
Unemployment rate
According to the study that analysis the unemployment rate for the period between 2002 and 2009, the unemployment rate in all regions is decreasing irrespective of the economic slowdown. While only Southern region had a higher unemployment rate, other regions achieved sustainable rage. Compared to the other region, Bangkok shows a moderate decline in an unemployment rate. according to the Labor Force Surveys in 2001 to 2010, an unemployment rate in Bangkok was rated second by achieving below 1.0 percent in 2010 compared to the Southern region, and central region, which had an unemployment rate of over 1.0 percent (International Labour Organization, 2013).
Accessibility
In the previous years, Bangkok and the entire county has experienced challenges in the travel sector, which has consequently affected business environment in the country. According to the World Economic Forum, the political shock facilitated by military crackdowns and coup has temporarily closure of some airports such as Bangkok's Suvarnabhumi International Airport (Blanke & Chiesa, 2015). However, the government formulated incentives such as "Amazing Thailand Grand Sale" to encourage tourism after the military coup in 2014 (World Economic Forum, 2015). In addition, the massive road congestion and limited availability of land have adversely affected the Bangkok Metropolitan Region (BMR) transportation. However, Prasertsubpakij and Nitivattananon (2012) suggest that policy should be formulated to emphasize on safe access for people, cost efficient systems that connect metro lines, time allocation, and socioeconomic influence.
GDP
Although the Thai's GDP has experienced slow growth due to the global economic crisis in 2009, it had achieved a quick recovery to achieve an average growth of 7.8 percent in 2010. The quick recovery was anticipated to boost the GDP per capital to about 7.1 percent in 2011 from -2.9 percent in 2009. According to the International Urban Development Association (INTA, 2016), the main economic activities in Bangkok includes agriculture, History, businesses, and Touristic attractions. People living in Bangkok contributes to 29 percent of the country's Gross National Product in 2010 (INTA, 2016). Bangkok is the center for all economic, cultural, social, politic, and transportation activities, which gives the city economic advantage over the other cities. It has become a center of commerce, economic, industry, agriculture, administration, and tourism. The antiquities, historical sites and arts and cultures like local wisdom are the centers of tourism attraction, and this made Bangkok be ranked as number one tourism destination in the Asian region in 2008 (INTA, 2016).
PEST Analysis
Political Environment
Over the previous years, the country has faced the political shock facilitated by military crackdowns and coup. However, the country's bilateral relation with Cambodia has minimized the risk of conflict.
The government has also developed incentives such as "Amazing Thailand Grand Sale" to encourage tourism and other business in the region.
Economic Environment
Although the Thai's GDP has experienced slow growth due to the global economic crisis in 2009, it had achieved a quick recovery to achieve an average growth of 7.8 percent in 2010
The quick recovery was anticipated to boost the GDP per capital to about 7.1 percent in 2011 from -2.9 percent in 2009
Main economic activities in Bangkok such as agriculture, History, businesses, and Touristic attractions contribute to 29 percent of the country's Gross National Product in 2010 (INTA, 2016).
Social Environment
However, the 2008 survey indicates that Bangkok had the smallest share the smallest share of the individuals who are illiterate
The ratio of the elderly population to total population is anticipated to increase by 2030 by almost 25 percent from 9.4 percent in 2010
Thai government has facilitated shot skill courses through subsidies, which significantly increased from 67, 477 trainees enrollment in 2006 to 169, 285 trainees in 2009
Technological Environment
With the increasing urbanization, Thailand is constantly integrating the science and technology
In 1948, the county founded The Science Society of Thailand to enhance science and technology in Thailand. In 1950, the country developed Department of Technical and Economic Corporation to support projects (Naranlala School of Industrial Management and Computer Science, 2013).
The technological market in Thai is the largest in the South East Asia region and is expected to grow by 11 percent between 2012 and 2016 (Naranlala School of Industrial Management and Computer Science, 2013).
SWOT Analysis
Strengths
The country has extensive use of technology in the market.
The country has political stability
Bangkok was ranked as number one tourism destination in Asia in 2008
The country is superior in services such as tourism, entertainment, restaurants, and Spa.
Weaknesses
The country lacks language competence
Insufficient capital due to access to financial sources
Inefficient infrastructures such as transportation system
High elderly dependency ratio
Opportunities
Bigger market extension to Association of Southeast Asian Nations (ASEAN)
Thai as a destination region has a good reputation in the global market
Hotel business is constantly thriving and evolving in regions such as Phuket, Bangkok, Hua Hin, Chiang Mai, Pattaya, and Samui
Thai is in the Strategic position in the ASEAN territory and hence have a bigger bargaining power in the wider market.
Threats
High cost of living
History of Political Disability
The entrance of the international hotel chains has increased competitiveness in the market.
Takeover by strong companies from other ASEAN markets
Conclusion
The above analysis provides insight into the pro and cons of opening a hotel in Bangkok. On the pro side, the country has: 1) cultural resources such as high literacy level and skills. 2) The government has also developed incentives such as "Amazing Thailand Grand Sale" to encourage tourism and other business in the region. 3) The country has attained favorable economic condition that creates an enabling environment for business. 4) Bigger market extension to Association of Southeast Asian Nations (ASEAN) However, the con side include 1) the decline working –group population is anticipated to affect the hospitality industry negatively. 2) The country has a history of political instability 3) the country has inadequate language competence. According to this analysis, illustrate that although there are risks in establishing a hotel in Bangkok, it is wise to invest in the market because the pros outweigh the cons. In addition, some opportunities can be utilized to mitigate the adverse situations.
References
Blanke, J., & Chiesa, T. (2013, May). The Travel & Tourism Competitiveness Report 2013. In The World Economic Forum.
Fernquest, J. (2015, June 6). Minimum wage: 300 baht ends next year | Bangkok Post: learning. Retrieved from http://www.bangkokpost.com/learning/learning-from-news/584437/minimum-wage-300-baht-ends-next-year
INTA. (2016). IN-Between Metropolitan Strategies Programme. Retrieved from International Urban Development Association website: http://www.estis.net/includes/file.asp?site=chip&file=7F2CB03E-90C2-4231-883B-1567C19C43E6
International Labour Organization. (2013). Thailand: A labour market profile. Region Office for Asia and the Pacific.
Naranlala School of Industrial Management and Computer Science. (2013). PESTEL Analysis and Study of Various Sectors of Thailand (Unpublished master's thesis). Gujarat Technological University, Ahmedabad.
National Statistical Office. (2010). Executive Summary: The 2010 Population and Housing Census. Retrieved from National Statistical Office, Thailand website: http://popcensus.nso.go.th/upload/census-report-6-4-54-en.pdf
Prasertsubpakij, D., & Nitivattananon, V. (2012). Evaluating accessibility to Bangkok Metro Systems using multi-dimensional criteria across user groups. IATSS Research, 36(1), 56-65. doi:10.1016/j.iatssr.2012.02.003
Sirikeratikul, S. (2013). Food Service – Hotel, Restaurant, and Institutional Food Service (HRI) (TH4007). Retrieved from USDA Foreign Agricultural Service website: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20Service%20-%20Hotel%20Restaurant%20Institutional_Bangkok_Thailand_1-21-2014.pdf
